The accountants and the lingerie…

January 31, 2007

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Poking through financials all day isn’t usually all that titillating. But one can only imagine how the accountants at the SEC must have had fun digging through the financials at lingerie company Movie Star Inc. (MSI). The bad jokes, the repeated visits to the company’s home page and perhaps even regular clicks on the "mink leopard charmeuse thong teddy w/marabou trim".

Well, yesterday, Movie Star disclosed in this amended 10-K that SEC accountants had found — how shall we put this delicately — holes in the company’s financials. In an explanatory note, the company disclosed a comment letter it received from the SEC (which is not available on the SEC site, for some odd reason) which modified a few details having to do with the company’s financials. Among the things that weren’t disclosed was a $1.4 million insurance payment received by the company because of damage to a warehouse from Hurricane Katrina. The company also modified its accounting policies for accounts receivable and doubtful accounts.

Given that Movie Star is in the process of merging with Frederick’s of Hollywood, perhaps the accountants thought that the company needed to get its own numbers in order before getting any bigger. Or maybe they just wanted to have a legitimate reason to look at the company’s website during work hours.

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