Zale target of SEC probe

Dallas Zale Corp. is being investigated by the Securities and Exchange Commission. The SEC probe comes after the jewelry seller said it would restate its 2008 and 2009 earnings following a review of its accounting for advertising costs.

Last month Zale delayed reporting fourth-quarter results twice to complete a review of accounting for prepaid advertising costs that surfaced during its year-end closing process.

When the company reported fourth-quarter results on Friday, it said previously issued financial statements for fiscal years 2008 and 2009 would be restated to reflect certain accounting adjustments for advertising costs and other items.

CFO Matt Appell said Friday during a conference call to discuss the results that the company conducted an "exhaustive" review of advertising accounting dating back five years and found "certain advertising costs previously recorded as prepaid were expensed in periods subsequent to the period in which the advertisement actually ran."

The company said it also found it had a material weakness in internal controls over the processes. Appell also said the SEC notified the company it has begun an investigation and requested certain information relating to the accounting review.

"At this time we do not believe that the investigation will have a material effect on our financial condition or results of operations," Appell said. "I would also like to emphasize that these matters are being addressed in a forthright manner."