SEC Charges Fortune 200 Company for Accounting Deficiencies

Posted by Teresa Bockwoldt on June 12, 2013

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The SEC claims PACCAR’s internal control procedures were ineffective and kept the company from adhering to various accounting rules.

PACCAR is a Fortune 200 company that designs, manufactures, and distributes trucks and related aftermarket parts that are sold worldwide. The company has failed to separately report the operating results of its aftermarket parts business from its truck sales business, which went against the segment reporting requirements. Investors gain the same insight as executives when it comes to PACCAR’s financials, but the report was falsified. PACCAR has overstated a respective loan, lease profile originations, and collections at two foreign subsidiaries in its statement of cash flows.

In 2009, PACCAR showed an annual report of $68 million in income, when that was their total in tax. In the truck segment, PACCAR had a $474 million loss and a profit of $542 million in the parts business to arrive at the net income before taxes. By at least 2008, PACCAR should have been reporting aftermarket parts as separate segment in its SEC filings, but failed to do so until year-end 2012.

PACCAR and PACCAR Financial Corp. understated the amounts of their impaired receivables and the specific reserve associated with the receivables in footnotes to their respective 2009 Form 10-K filings. PACCAR understated the amount of its impaired receivables by 65 percent and the amount of specific reserves associated with the receivables by 78 percent. PACCAR Financial Corp. understated the amounts by 64 percent and 37 percent. These deficiencies resulted in inaccurate statements to the SEC’s Division of Corporation Finance regarding its processes for calculating the specific reserves on its impaired receivables.

SEC charged PACCAR with violations of the reporting, books and records and internal control provisions of the federal securities laws, and charges PACCAR Financial Corp. PACCAR did not admit or deny the charges and agreed to pay a $225,000 penalty.

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Tags: Securities and Exchange Commission, SEC, SEC fines