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Apple Investigated Over Stock Options
blamanj writes "Apple has joined the list of over fifty companies (most in Silicon Valley) that possibly mishandled stock options by backdating them. The technique is not illegal, but it can cause a company to improperly deduct employee compensation expenses and result in an underpayment of taxes. So far, Apple is conducting the investigation itself, but it has notified the SEC."
Boring....
Religion for nerds. Stuff that really matters
Slashdot headline creation in a nutshell...
MustardMan decides to take his dog to the vet to check for diseases.
Slashdot headline: MustardMan's dog being investigated for deadly pathogens!
This headline is complete BS. Apple's own internal auditors found something that might be an issue, and Apple reported it to the SEC themselves.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
In any case, the self-investigation does seem strange -- how could the company not know if it had been done? If they really don't know, I'd say that's an issue in itself.
What I'm listening to now on Pandora...
Apple is one of 57 companies being investigated. Who are the other 56 companies? No links, no nothing.
Stock options in the Valley are definitely a problem, and if Apple screwed up, they deserve whatever they get. However, they did inform the SEC, so it seems a bit early to get out the stakes and holy water.
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deserves to be on slashdot.
what next, a deep look inside Apples accounting practices? Followed by an investigative report on which urinal cakes Apple uses?
None of that is News for Nerds, or stuff that matter..
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And you know what they say about a cowboy with slight hands, don't you?
Sigh...a six-word subtitle, and it contains a typo. (It's sleight. sleight of hand, not slight of hand.)
Viper is the preferred editor of the Emacs operating system.
If this were IBM, Microsoft or even Red Hat, all the usual slashdot mac-zealots would be calling for their heads.
No, if any of those companies found a problem in the course of their own audits and reported it as Apple has, it would be just as much of a non-event as this is.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
I'm a linux fanboy, and even I know this is something that just has to happen for a lot of companies.
Apple, Goole and others lobbied hard against the new FASB rules that makes this step necessary; without them, these companies could continue to artifically inflate their bottom lines.
How it works:
The old FASB rules didn't force a company to expense stock options. As such, they didn't come out of their bottom lines.
Meanwhile, whenever an option was exercised, the company would get a tax break for the 'expense'.
In other words, a company could spend money without noting it, and get a tax break if it was converted to cash. Nice little loophole there. It's essentially tax fraud without the illegalness. It was a great boon for the internet startups of the mid to late 90's, since they could have a very large pile of capital they could pay their emplyees with without it looking like they were diminishing their capital.
Under the new rules, stock options must be written down as an expense. The tax break still exists, but now it doesn't inflate the stock price, leaving it more balanced.
Option is expensed. Stock price goes down.
Option is exercised. The added demand and tax break brings the stock price back up.
110100 1101000 1101000 1100110 0 1101111 1101000 1100011 1
When the employee exercises a stock option they are paying the company for the share. If the company back-dates an option to lower the strike price for an employee, the employee pays less for it.
Scenario:
The employee makes a bigger profit, the company loses. This is the worst
side-effect of back-dating stock options. You're cheating the other shareholders.