This blog has moved to:



AccountingOnion.com

« FSP APB 14-a: How Long Should it Take to Close a Loophole the Size of Arthur Andersen? | Main | IAS 1: The Myth of 'Fair Presentation' »

September 21, 2007

Comments

Test1

You are totally reaching here. These backdating scandals are all about employee stock options plans where new employee stock options are granted at the lowest stock price of the quarter. You have 200 employees starting, you can't handle the paperwork of a grant every single day of the quarter. people start on different days of the quarter. The solution is the comp committee picks a desirable date and dates the grant on that date. Theres your fraud, a date on a document that is not todays date but a month ago. Most of this is procedural and has been an ongoing practice for 30+ years. At some point (and I don't know when), "in the money" options needed to be expensed with variable accounting, which technically meant these employee grants where the hiredate price was higher than the grant needed to be expensed. But this was not always the case. the procedure and software that spit out the grant date forms needed to be changed to reflect the variable accounting change and this was never done at any company. Microsoft just by virtue of their size had the highest amount of "fraud" is my guess, which is probably around 2 million of non cash expense per quarter (BIG DEAL). The recent Reyes case was determined to cost shareholders 12 million over a multiyear period. Talk about an OVERBLOWN "SCANDAL".

Tom Selling

I can't agree with you, for two reasons:

1) Far too many top executives have received backdated options.

2) Research shows very conclusively that the dates picked are systematically chosen to be one of the lowest of the surrounding 30 days. If backdating did not involve top executives, then why did the practice appear to have stopped when the SEC changed the filing dates of Form 4?

Also, FYI, all of the option plans in questions are 'fixed' plans. Variable plans under APB 25 were those where either the exercise price or the number of options that can be ultimately exercised are not known at the grant date.

The comments to this entry are closed.

This blog has moved to:



AccountingOnion.com