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Ronald KiimaPresident Kiima Incorporated

KB HOME – STOCK OPTION BACKDATING INVESTIGATION

August 30, 2006

Analysis of:SEC Probing KB Home | www.cfo.com

KB Home acknowledges that it is the subject of a civil investigation of possible stock option backdating violations by the U.S. Securities and Exchange Commission (“SEC”). As with similar stock option backdating investigations of other companies, the SEC’s investigation will likely trigger a corresponding investigation by the U.S. Department of Justice (“DOJ”). Thus, any stock analysts that follow KB Home must hope for the best but prepare for the worst!

Ronald KiimaPresident Kiima Incorporated

MOLEX: Not Again!

August 21, 2006

Analysis of:Molex Executives Agree to Repay Gains on Options | online.wsj.com

Molex’s recent admission to misdated stock options would seem to indicate that its corporate governance and internal controls still leave much to be desired.  Accordingly, stock analysts need to seriously look beyond the metrics! 

Ronald KiimaPresident Kiima Incorporated

SEC BARS MARTHA STEWART FROM BOARD ROOM & CEO ROLE

August 7, 2006

Analysis of:Martha Stewart and Peter Bacanovic Agree to Settle SEC Insider Trading Charges | www.sec.gov

Among other civil sanctions imposed by the SEC, Martha Stewart is barred for five years from serving as a director, CEO or CFO for any public company, including Martha Stewart Living Omnimedia Inc. (NYSE: MSO).

Ronald KiimaPresident Kiima Incorporated

OPERATING CASH FLOW MANIPULATION VIA ACCOUNTS PAYABLE

July 28, 2006

Analysis of:Fast Payments Hurt Tech Firm Cash Flows | www.cfo.com

Accounts payable practices have served as the most commonly used legal means of steering into (i) the cash and cash equivalent balance to be reported in a pending balance sheet and/or (ii) the cash flow provided by (used in) operating activities to be reported in a pending statement of cash flows. Analysts must be attentive to this long-standing practice of “window dressing” and adjust for it accordingly in their respective models.

Michael CotePresidentThe Cote Collaborative

Wi-Fi Carrier Potential is Misunderstood

July 27, 2006

Analysis of:Mobile operators face wi-fi challenge | technology.guardian.co.uk

The Carrier is more than a spectrum landlord.
Even if spectrum was suddenly limitless and free the existing carriers would still have significant scale and experience providing advantages over new wi-fi startups. An analysis of North American carrier cash cost per user (CCPU) proves this.

Wi-Fi can potentially free up spectrum for carriers.
If a carrier has a number of subscribers using wi-fi in their homes that leave excess spectrum capacity in the same geographic area. 

Technology advances will overcome current limitations.
Yes battery life is an issue but it has improved 3x in the last year. Yes coverage has limitations and hand offs have been a challenge but the advances made by wi-fi and wimax vendors in the last year are encouraging.

Ronald KiimaPresident Kiima Incorporated

SEC LIKELY TO PASS ON PAST INCIDENTS OF STOCK OPTION SPRINGLOADING

July 24, 2006

Analysis of:Speech by SEC Commissioner Atkins:Remarks Before the International Corporate Governance Network 11th Annual Conference | www.sec.gov

As a former Assistant Chief Accountant in the SEC’s Division of Corporation Finance, I have expressed publicly over the last few months my belief that it is “more likely than not” that the SEC will substantially pass on historical incidents of stock option springloading. The recent public comments of SEC Commissioners Glassman and Atkins seemingly validate my suspicion that they will align with Chairman Cox, as a Republican majority voting block, and opt for a prospective remedy to springloading.

Ronald KiimaPresident Kiima Incorporated

MANY “OPERATING” LEASES TO GO ON THE BOOKS…ITS ABOUT TIME!

July 20, 2006

Analysis of:Up for Overhaul: Lease Accounting | online.wsj.com

If they do not already do so, analysts need to begin proactively adjusting their models to reflect the assets and liabilities underlying “operating” leases onto the books of the companies they follow. It is no longer a question as to whether many current operating leases will go onto the books, its merely a question of when and how many!

Ronald KiimaPresident Kiima Incorporated

Directors' Wallets Increasingly At Risk!

July 7, 2006

Analysis of:Mercury Gets Warning of Possible Charges | online.wsj.com

As a former Assistant Chief Accountant in the SEC’s Division of Corporation Finance, I believe that members of the boards of directors of U.S. public companies have always been potentially at risk for civil sanctions. The real news is that beginning with Enron the SEC has increasingly insisted as part of any settlements with directors that they agree not to request indemnification from the company or its insurers for part or all of the imposed civil monetary sanctions.

Ronald KiimaPresident Kiima Incorporated

Long Overdue Tightening Down on Loss Contingency Recognition

May 9, 2006

Analysis of:More Lawsuits May Go on the Books | www.cfo.com

Should the FASB ultimately adopt either of the two cited approaches aimed at obtaining more timely and forthright financial statement recognition of loss contingencies, numerous public companies will finally be required to remove their rose-colored glasses and provide a more realistic and transparent accounting for their various loss contingencies (e.g., lawsuits, environmental remediation exposures, etc.). And, for certain companies operating in higher-risk industries (e.g., chemical, mining, medical, tobacco, etc.), the implications may be comparable to having to fully recognize their pension liabilities.

Ronald KiimaPresident Kiima Incorporated

Zales in Crisis: Initial Thoughts From a Former SEC Accounting Official

April 11, 2006

Analysis of:Zale Faces SEC Accounting Probe Over Service Pacts and Payroll | online.wsj.com

Given that the currently available details into Zale’s accounting crisis are limited and vague, stock analysts need to proceed very cautiously here particularly in light of the recent management departures and ongoing SEC investigation. The subject WSJ article cites three primary areas of accounting currently under scrutiny: extended-service agreements (ESAs), leases and payroll accruals. Although I have not reviewed Zale’s financial statements in detail, I have drawn from my twenty plus years as a corporate auditor, former SEC Assistant Chief Accountant and SEC/Sarbanes-Oxley consultant to set forth below my initial observations, thoughts and concerns.

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