Backdating to

Most shareholder approved option plans prohibit in-the-money option grants (and thus, backdating to create in-the-money grants) by requiring that option exercise prices must be no less than the fair market value of the stock on the date when the grant decision is made. For example, because backdating is used to choose a grant date with a lower price than on the actual decision date, the options are effectively in-the-money on the decision date, and the reported earnings should be reduced for the fiscal year of the grant.(Under APB 25, the accounting rule that was in effect until 2005, firms did not have to expense options at all unless they were in-the-money.Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.An example illustrates the potential benefit of backdating to the recipient.

According to a study by Erik Lie, a finance professor at the University of Iowa, more than 2,000 companies used options backdating in some form to reward their senior executives between 19.This is backdating that memorializes, something the United States Court of Appeals for the Seventh Circuit has recognized as a legitimate practice.For example, if parties clearly reach an agreement on Dec.The thing I liked about the Journal's treatment of the Alexander case was how the reporter managed to be respectful toward the Namibian legal system while at the same time hinting to readers that not every society has the same attitude toward Option backdating scandals: how management accountants can help: backdating of employee stock options can have a significant negative effect on a public company.Drafting and executing a document after an event occurs, but in a manner that accurately reflects the date on which the event transpired, is a permissible form of backdating.