Vipshop Holdings Ltd. (NYSE: VIPS) defended itself Wednesday morning ahead of its earnings in regards to allegations made by short sellers. According to the company, these allegations were “unfounded and contain numerous errors.” 24/7 Wall St. has touched on a few of the top allegations that Vipshop is refuting.

For a little background on Vipshop: The company is an online discount retailer for brands in China. It offers branded products to consumers in China at a discount to retail prices.

Short sellers alleged that Vipshop tampered with its accounting in regards to revenue recognition, inventory accounting, other receivables, capital expenditures and cash flow.

According to Vipshop:

The Company appropriately records its revenue on a gross basis where the ownerships, risks and rewards of these inventories have been fully transferred to the Company after it takes ownership upon deliveries to its warehouses, any loss related to damages to these inventories after the Company receives them from vendors are absorbed by the Company, and it reports these inventories on the Company’s balance sheets as its assets.

Vipshop stated that its inventory is reported at the lower of cost or market, and that its cost of inventory is determined using the “weighted-average cost” method. The company believes that this is the most appropriate way to account for its inventory considering the nature of its business. Also Vipshop claims that it had full ownership on its inventories that are recorded on the balance sheet.

Capital expenditures are claimed to have increased significantly due to the company’s expansion of its warehouses and other logistical infrastructure. More information regarding this increase can be found in Vipshop’s SEC filing.

Short sellers also allege that cash flow from operations is driven not by earnings, but by significant growth in both accounts payables and accrued expenses. Vipshop entirely refutes this allegation and refers to its SEC filing (which is linked to above).

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Other allegations are that Vipshop overpaid for its stakes in Lefeng and its parent company, Ovation. This might be up for discussion, but the company believes that the valuations were fair given the prevailing market trends.

Vipshop shares were up Wednesday about 3.2% to $26.60, in a 52-week trading range of $14.63 to $30.72. The consensus analyst price target is $30.04.

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