Ron Kiima

SEC Schedule II — Visibility Into the Integrity of Reported Results

Few other disclosures give as much visibility into the integrity of a companyís reported results like the SECís Schedule II Valuation and Qualifying Accounts.

Sponsored by Gerson Lehrman Group®

October 4, 2007
by Ron Kiima, CPA & Former SEC Assistant Chief Accountant

Few other disclosures give as much visibility into the integrity of a company’s reported results like the SEC’s Schedule II – Valuation and Qualifying Accounts. Unfortunately, despite such schedule being required of most public companies, few companies seemingly fully comply. The absence of otherwise required data, or worse, the outright omission of the schedule in its entirety, should raise investor concerns that a company may be engaging in some degree of inappropriate earnings management.

As a matter of background for those unfamiliar with Schedule II, the vast majority of U.S. listed companies are categorized by the SEC as “commercial and industrial companies” thus making them subject to the requirements of Article 5 of Regulation S-X and its underlying rules. Rule 5-04 of Regulation S-X requires that an audited Schedule II, as prescribed by Rule 12-09 of Regulation S-X, be filed in support of valuation and qualifying accounts included in each fiscal year-end balance sheet and that the schedule cover each fiscal period for which an audited statement of operations is required to be filed [typically the latest three fiscal years]. Rule 12-09 of Regulation S-X then sets forth the form and content of Schedule II as follows … Read more at glgroup.com.

Ron Kiima is a leading expert within the Accounting Council of Gerson Lehrman Group (GLG) where he consults with GLG clients by providing his insights to investment and business decision makers. (Click here to learn more about becoming an Accounting Council Member)
Mr. Kiima is a former SEC Assistant Chief Accountant. Mr. Kiima is currently the President of Kiima Incorporated, a private consulting firm specializing in SEC accounting and disclosure issues, SEC registration statements and periodic reports, SEC investigations and enforcement proceedings, corporate governance and risk management, investor relations and communications, due diligence and investigatory procedures, and litigation support and testimony.