Zale Corp. announced last Thursday that financial statements from fiscal year 2008 and interim periods in 2008 and 2009 contain errors and are no longer reliable.

A portion of the company’s prepaid advertising costs should have been recorded as expenses, which resulted in the required restatement. Prepaid advertising reflected in their balance sheets as of July 31, 2008 and 2007 totaled approximately $23 million and $18 million, respectively.

Additional adjustments are required to aggregate approximately $9 million on a pre-tax basis. These adjustments include charges related to an intercompany accounts receivable associated with their wholly owned insurance subsidiaries; a charge related to certain depository bank account reconciliations; and a benefit related to personal property tax reserves.

Another charge totaling approximately $4 million will be recorded in fiscal 2008 related to federal income taxes resulting from the expiration of net operating loss carry forwards.

Zales also will delay the filing of its statement for fiscal year 2009 until October 29th.

JCK