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Backdating of stock options

What is OPTIONS BACKDATING? What does OPTIONS BACKDATING mean? OPTIONS BACKDATING meaning

backdating of stock options

However, if the company granted options with an exercise price below fair market value, there would be a compensation expense that had to be recognized under applicable accounting rules. If a company backdated its stock options, but failed to recognize a compensation expense, then the company's accounting may not be correct, and its quarterly and annual financial reports to investors may be misleading.

Although many companies have been identified as having problems backdate of stock options backdating, the severity of the problem, and the consequences, fall along a broad spectrum.

At one extreme, where it is clear that top management was guilty of conscious wrongdoing in backdating, attempted to conceal the backdating by falsifying documents, and where the backdating resulted in a substantial overstatement of the company's profitability, SEC enforcement actions and even criminal charges have resulted. Toward the other extreme, where the backdating was a result of overly informal internal procedures or even just delays in finalizing the paperwork documenting options backdates of stock options, not intentional wrongdoing, there is likely to be no formal sanction—although the company may have to restate its financial statements to bring its accounting into compliance with applicable accounting rules.

With respect to the more serious cases of backdating, it is likely that most of the criminal actions that the government intended to bring were brought in There is a five-year statute of limitations for securities fraud, and under the Sarbanes-Oxley Act ofoption grants to senior management must be reported within two days of the grant date.

This all but eliminated the opportunity for senior management to engage any meaningful options backdating. As of 17 Novemberbackdating has been identified at more than companies, and led to the firing or resignation of more than 50 top executives and directors of those companies.

All stemming from the practice known as “options backdating.” Options backdating occurs when a company issues stock options on one date, but reports in its.