Proofreading Money: How to Massively Misstate a Material Factoid!

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I have been reading a lot of financial statements in Portuguese to English translation lately.

Why? Because, well, one option I have for trying to earn a living down here in Brazil once my permanent residency goes through is specializing in that sort of thing.

I have done a fair amount of this in the past: Financial-sector annual reports, for example.

It’s a mind-bendingly boring job to most people, but it’s not unchallenging or unrewarding, professionally. And above all, it’s a living.

Some I have read are translated very well, some are very badly translated. Most fall somewhere in between. One of the better ones I have read lately, in many ways, was the consolidated balance sheet of the Grupo Abril media holding company for 2005 and 2006.

(From 2005 to 2006, consolidated accounts receivable from distribution and retail fell 6.6%, from R$98.4 million to R$92.3 million. Advertising accounts receivable nearly doubled, however, from $R47.4 million to R$90.5 million, an increase of 90.1%.

I was just reading that Abril circulation continues to fall, like circulation at most other major publishing groups. So what is happening here? The fewer eyeballs you reach, the more you charge for advertising?

I am not reading this carefully, mind you, and am not Henry Blodget. Perhaps it sells more advertising in other media than print now.)

But it contains some really, really serious howlers.

I have a New York client that is interested in this sort of thing, so I have been trying to come up with a presentation showing, in practical terms, what kinds of editorial quality issues arise in these sorts of financial disclosures.

One major issue with the translation of the Abril report, for example, is that it tends to confuse numbers expressed in R$000s (thousands of Brazilian reais) with numbers expressed in R$ (Brazilian reais).

For example, under provisions for civil litigation:

The Company [Editora Abril] and its subsidiaries are defendants in civil claims at several legal levels and, of the amount provisioned, the amount of R$12,823 in 2006 (R$10,600 in 2005), refers to the sum of many civil proceedings related to requests for indemnification for pain and suffering and/or arising from disclosures made by the magazines of the Company. There are no individual claims of significant amount needing specific disclosure.

I have a general idea, from regularly reading Consultor Jurídico and the like, of how much civil litigation Abril publications get involved in, so it would be sort surprising to learn that its estimated potential liability in 2005 amounted to no more than roughly US$6,000.

I have read about quite a few individual cases in which its potential liability was at least ten times that. Some of which it eventually won, some of which it eventually lost. The ratio would probably be not unlike, say, a decent to very good baseball batting average.

And it is engaged in very many such cases. Diogo Mainardi, for example, told Diego Casagrande last year that he faces more than 300 such actions, possibly as many as 400. (He later stated a drastically different, much lower, number.)

So I suspect that the figures set out in the table presented under Note 14, “Reserve for Contingencies and Other and Escrow Deposits” are expressed in R$000s (thousands of Brazilian reais), but fail to tell you so.

Note to self: “escrow deposits” for depósitos jurídicos. That sees to be the best translation.

A DJ is something like a court-ordered escrow deposit. Donald Trump is suing you for a gazillion for insulting his combover. The court orders you to put a gazillion on deposit until the case is decided or settled.

In the running text of the note, however, it seems as though these numbers are expressed in simple R$.

The translator has apparently misread the table, and mistranslated, or else assumed we will understand that the figures are denominated in R$000s rather than R$ because it says so at the top of statement.

Resulting in what looks an awful lot like an understatement of the actual figure by three orders of magnitude.

In running text, you do not abbreviate amounts of money like this, as far as I know.

This occurs in a couple of other places in these financials as well.

Every financial table should have its own statement of units, such as

(in $R000s, except for earnings per share).

Conclusion: The Abril financial statements could have used a good proofreading before going out the door.

In places, for example, the translator has forgotten to translate the Brazilian currency convention ($1.500,00 rather than R$1,500.00). This is a minor point, but a good, quick, thorough proofread would catch and fix it at a fairly low cost.

In the notes on working capital, for example:

The loans in the amount of R$34.020 (R$39.000 in 2005)

Again, I would tend to guess that the balance of those loans are actually R$34.02 million and R$39 million, respectively.

Another numerical howler:

On October 23, 1998, the subsidiary Abril Investments Corporation (AICO) made investments in the foreign market in the amount of US$97,925,000, equivalent to R$209,364 … The balances of the principal, plus interest and exchange variation as of December 31, 2006, are R$275,197 and R$282,951 as of December 31, 2005.

The U.S. dollar cost between R$1.10 and R$1.20, roughly, during 1998.

That changed dramatically the following year, when the peg gave way to the float and Salvatore Cacciola of the Marka Bank went to jail, before fleeing to fight extradition from Italy.

At the current exchange rate, I make US$97.925 million out to be just about R$171.4 million.

You add in accrued interest and exchange-rate adjustment over ten years and R$275 million seems like it might be in the ballpark.

At some point in the last decade, the exchange rate was such at US$97.93 million might well have been equivalent to R$290.4 million.

Those were the days.

The all-powerful dollar of yesteryear funded a lot of really wonderful Brazilian travel for us, on the cheap.

But at no point was the real worth US$475.

If it were, the mayor of New York would be named Souza or Guimarães, and we would all be studying Portuguese, the same way that business executives went wild for Japanese when the Japanese economy was on top of the world in the Eighties.

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