Mattel Agrees To Pay $3.5M To Settle SEC Charges Over Financial Misstatements

  • The Securities and Exchange Commission said Mattel Inc MAT has agreed to pay $3.5 million to settle charges relating to misstatements in its third and fourth-quarter 2017 financial statements.
  • According to the SEC’s order, the toymaker understated the tax-related valuation allowance for Q3 FY17 by $109 million and overstated the tax expense for Q4 FY17 by the same amount.
  • As a result, Mattel’s Q3 and Q4 FY17 net loss and net loss per share were understated by 15% and overstated by 63%, respectively.
  • Also, the SEC’s order found that, at the time, Mattel had no internal control specifically related to calculating a valuation allowance.
  • Until Mattel’s November 2019 restatement, the $109 million tax expense error remained uncorrected, and the lack of internal control for financial reporting related to the error remained undisclosed.
  • Neither Mattel’s CEO nor audit committee was informed of the $109 million error.
  • Without admitting or denying these findings, Mattel agreed to a cease-and-desist order and to pay a $3.5 million civil penalty.
  • Separately, the SEC has initiated litigation against Joshua Abrahams, a former audit partner at PricewaterhouseCoopers LLP, or PwC, to determine whether he engaged in improper professional conduct and violated auditor independence rules.
  • The order against Abrahams alleges that he violated numerous professional standards in the Q3 FY17 interim review and the 2017 annual audit of Mattel’s financial statements.
  • The order further alleged that Abrahams failed to maintain independence by providing prohibited human resource advice to Mattel.
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  • Price Action: MAT shares are trading lower by 0.15% at $19.79 in premarket on the last check Monday.
  • Photo Via Company
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