PARIS — French diversified retailer Pinault-Printemps-Redoute is among the latest groups to come under the spotlight regarding accounting practices.

Press reports circulating in Europe on Monday said PPR is not booking an expected $492.1 million of amortization charges at its Gucci Group division — in which it holds a 53.2 percent stake — up to 2005. However, Gucci, which is listed in Amsterdam and New York, books its goodwill and trademark amortization charges on its acquisitions, including Yves Saint Laurent, Bottega Veneta and Sergio Rossi, over 20 years from the time of purchase. This is in line with the U.S. Securities and Exchange Commission rulings.

For the year ended Jan. 31, Gucci booked $116 million for these charges, compared with $83.2 million the previous year. Currency conversions were made at the current exchange rate.

PPR’s practice is legal according to French General Accounting Practices, under which it reports. In 2005, PPR will switch to International Accounting Standards.

A PPR spokesman said the firm’s "way of dealing with luxury brands is no exception; LVMH [Moët Hennessy Louis Vuitton] and L’Oréal are doing the same. Gucci is an exception to the rule."

Some in the financial community are skeptical of the practice vis-à-vis Gucci, however.

Morgan Stanley wrote in a research report, dated July 17: "In some ways, it would be understandable if PPR slotted Gucci’s trademark and goodwill amortization in with its own goodwill amortization charges further down the profit and loss account. This is not what happens, though: PPR simply ignores the charge altogether, on the grounds that, since most other luxury goods companies do not amortize their brands, it is not going to reflect Gucci’s choice to do so in its own accounts. This strikes us as slightly reckless; moreover, it means on a fully consolidated basis, Gucci’s contribution to PPR’s net profits would be significantly higher than the net profits reported by Gucci itself."

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