Aarons 2015 Annual Report Download - page 91

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
None.


An evaluation of Aaron’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, was
carried out by management, with the participation of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as of the end of the period covered
by this Annual Report on Form 10-K.
During the third quarter of 2015, we concluded that we did not have effective program change management controls over our Progressive lease management
application and that this represented a material weakness in internal control over financial reporting. Specifically, we concluded at that time that the quality
assurance controls over program changes to our lease management software were not designed sufficiently to detect whether program changes had
unintended effects on data fields that are important to financial reporting. Software issues that occurred during a limited period of time spanning the second
and third quarters of 2015 resulting from this deficiency caused us not to identify a number of lease accounts as being delinquent and affected our ability to
begin prompt collections activities on those accounts. As a result, although not material to either period, an adjustment was recorded in the third quarter to
increase bad debt expense and lease merchandise write-offs by $3.2 million.
During the third quarter, management initiated a remediation plan that included the following actions:
• Improvements to our quality assurance program were designed and put in place to verify that the potential financial statement effect of all program
changes is thoroughly considered when our lease management software is updated;
• Additional resources were allocated to ensure that our quality assurance procedures are adequately designed and are operating effectively; and
• Additional review controls were put in place to enhance our existing control framework and ensure that errors of this nature are detected timely.
The plan was completed and the material weakness was remediated prior to December 31, 2015.
Based on management’s evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31,
2015 to provide reasonable assurance that the objectives of disclosure controls and procedures are met.
On October 15, 2015, the Company acquired a 100% ownership interest in DAMI for a total purchase price of $54.9 million, inclusive of cash acquired of
$4.2 million. As permitted by Securities and Exchange Commission guidance, the scope of management’s evaluation described above did not include
DAMI's internal controls over financial reporting. DAMI represented 3.7% of the Company's consolidated total assets as of December 31, 2015 and .1% of the
Company’s consolidated total revenues for the year ended December 31, 2015.

Management has assessed, and the Company’s independent registered public accounting firm, Ernst & Young LLP, has audited, the Company’s internal
control over financial reporting as of December 31, 2015. The unqualified reports of management and Ernst & Young LLP thereon are included in Item 8 of
this Annual Report on Form 10-K and are incorporated by reference herein.

There were no changes in the Company’s internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934,
during the Company’s fourth fiscal quarter of 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting, other than the improvements to our program change management controls over our Progressive lease management application
discussed above.
During the quarter ended December 31, 2015, the Company acquired a 100% ownership interest in DAMI and is in the process of integrating the acquired
business into its overall internal control over financial reporting process. The Company has excluded DAMI from the assessment of internal control over
financial reporting as of December 31, 2015.
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