SEC Charges PACCAR Inc. With Hundreds of Accounting Deficiencies

SEC v. PACCAR INC. and PACCAR Financial Corp, Case No. 2:13-cv-00953 (W.D. Wa.).  On June 3, 2013, the SEC announced it charged commercial truck manufacturer PACCAR, Inc. and a subsidiary, PACCAR Financial Corp. with hundreds of accounting deficiencies that lead to misleading financial statements in the midst of the financial crisis.  According to the SEC, from 2008 through the third quarter of 2012, PACCAR failed to report the results for its parts business as a separate segment from its truck sales as required under Generally Accepted Accounting Principles (“GAAP”).  For example, PACCAR’s 2009 annual report showed $68 million in income before taxes for its truck segment.  In reality, however, there was a significant loss in the trucks business, while the parts business had a profit.  PACCAR should have been reporting the parts as a separate segment in its SEC filings, but failed to do so until year-end 2012.  In addition, PACCAR and PACCAR Financial Corp. did not maintain accurate books and records regarding their impaired loans and leases, which caused them to misidentify and disclose loans and leases for impairment which resulted in an understatement of the amounts of their impaired receivables.  Because of these deficiencies, PACCAR also made inaccurate statements to the SEC’s Division of Corporation Finance regarding its processes for calculating the specific reserves on its impaired receivables.  Without admitting or denying the charges, PACCAR agreed to be enjoined from future violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13; and PACCAR Financial Corp. agreed to be enjoined from future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act.  The Defendants also agreed to pay a civil monetary penalty of $225,000.  According to the SEC, the settlement takes into account that PACCAR and PACCAR Financial Corp. have implemented a number of remedial measures to enhance their internal accounting controls and improve their compliance with GAAP.

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