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Mattel, the maker of the globally popular Barbie dolls and Fisher Price toys, is settling its financial misstatement charges related to its earnings in 2017. The toymaker is paying $3.5 million to settle with the U.S. Securities and Exchange Commission (SEC).
The SEC said last week that Mattel breached a number of “professional standards” by posting lower tax-related valuation for the third quarter of its financial report in 2017. The commission said that the amount was undervalued by $109 million.
Moreover, Mattel was said to have inaccurately reported its losses in the third and fourth quarters of that same year because of errors identified in the tax reporting. The SEC stated that the mistakes were not corrected until November 2019, plus the absence of internal control for financial reporting pertaining to the said error remained undisclosed.
“The SEC’s order against Mattel finds that it violated the negligence-based antifraud provisions and the reporting, books and records, and internal controls provisions of the securities laws. Without admitting or denying these findings, Mattel agreed to a cease-and-desist order and to pay a $3.5 million civil penalty,” the securities commission stated in a press release. “The SEC’s order also notes that, in determining to accept Mattel’s settlement offer, the Commission took into account the company’s cooperation with the SEC’s investigation and its remediation.”
The officials are initiating separate legal case litigation against PricewaterhouseCoopers LLP, Mattel’s former audit partner. This is to check if the group engaged in improper professional conduct and if it breached the auditor independence rules.
The SEC alleged that PWC’s auditor Joshua Abrahams knew about the uncorrected $109 million error but he failed to confirm that this was documented. He also failed to maintain auditor independence by making recommendations to Mattel's then-chief financial officer about who must be selected for a senior position in the company.
In any case, Reuters reported that Mattel’s chief executive officer and the audit committee were not informed of the error in the financial statements. The company’s spokesperson said that Mattel is pleased to finally put the matter to rest with the settlement with SEC.
