datinglistings com - Benefit backdating rules

If the company sets the prices of the options grant well below the market price, they will instantaneously generate an expense, which counts against income.

The backdating concern occurs when the company does not disclose the facts behind the dating of the option.

(For more information, see .) The executives of companies involved in backdating scandals may also face a host of other penalties from a range of governmental bodies.

Another potential ticking time bomb, is that many of the companies that are caught bending the rules will probably be required to restate their historical financials to reflect the costs associated with previous options grants. In others, the costs may be in the tens or even hundreds of millions of dollars.

In a worst-case scenario, bad press and restatements may be the least of a company's worries.

This means that corporations will have less time to backdate their grants or pull any other behind-the-scenes trickery.

It also provides investors with timely access to (grant) pricing information.

(To learn more, read .) In short, it is this failure to disclose - rather than the backdating process itself - that is the crux of the options backdating scandal. To be clear, the majority of public companies handle their employee stock options programs in the traditional manner.

That is, they grant their executives stock options with an exercise price (or price at which the employee can purchase the common stock at a later date) equivalent to the market price at the time of the option grant.

For example, in early November 2006, United Health reported that it would have to restate earnings for the last 11 years, and that the total amount of restatement (related to improperly booked options expenses) could approach, or even exceed, 0 million. While reports of past indiscretions are likely to continue to surface, the good news is that companies will be less likely to mislead investors in the future. Prior to 2002, when the legislation was adopted, an executive didn't have to disclose their stock option grants until the end of the fiscal year in which the transaction or grant took place.

However, since Sarbanes-Oxley, grants must be filed electronically within two business days of an issue or grant.

In order to lock in a profit on day one of an options grant, some executives simply backdate (set the date to an earlier time than the actual grant date) the exercise price of the options to a date when the stock was trading at a lower level. In this article, we'll explore what options backdating is and what it means for companies and their investors. Most businesses or executives avoid options backdating; executives who receive stock options as part of their compensation, are given an exercise price that is equivalent to the closing stock price on the date the options grant is issued.

This means they must wait for the stock to appreciate before making any money.

On the surface - at least compared to some of the other shenanigans executives have been accused of in the past - the options backdating scandal seems relatively innocuous.

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