Fleming has joined the ranks of food retailers currently under SEC investigation, following the announcement of a formal probe into its accounting practices. With memories of the Enron debacle still fresh, such activity is spurring concerns that a widespread revamping of accounting standards might be imminent.

Mark Hansen, chairman and chief executive of Fleming, the biggest wholesale food distributor in the US, has resigned amid news that the Securities and Exchange Commission (SEC) has been probing the company's accounts. The SEC inquiry has recently been upgraded to a formal investigation.

Already reeling from the bankruptcy of its biggest customer, Kmart, the announcement sent Fleming's stock plummeting 40%. The company is planning on cutting jobs to reduce debt and combat current problems.

Fleming is not the only one feeling the heat of the SEC's sudden, post-Enron assertiveness. Ahold, the Dutch retail giant, is currently under investigation for a US$500m overstatement of income, and food distributor and retailer Nash Finch is also under scrutiny. All three are audited by Deloitte & Touche.

All three are also under investigation over the same issue - how certain allowances, discounts and rebates to vendors were treated in their accounts. Vendor or promotional allowances, along with volume related discounts and rebates, are the financial incentives offered by manufacturers, distributors and grocers to stock and promote certain items.

Vendor allowances have been a widespread practice in the industry for many years. Until recently, their treatment and understanding was left to the arcane world of accounting concepts. Kmart's recent misfortune, however, has brought these practices under severe criticism, as industry experts believe that some retailers or distributors might be overbooking allowances so as to overstate income.

It's all worryingly reminiscent of last year's high profile accounting disasters at firms like Enron and WorldCom. Before the Enron scandal, unauthorised deductions were a common business practice. Today, they are viewed as potentially illegal.

The recent barrage of investigations is bound to spur change in the retailing industry. At the very least, a change in industry practices appears inevitable. At most, the Enron-like collapse of some of the giants of the food industry could change the market forever.

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