In a filing Friday with the U.S. Securities and Exchange Commission (SEC), Apple said 114,695 options issued between 1997 and 2002 were erroneously assigned grant dates that preceded the finalization of those grants. As a result, the exercise prices of these stock options were lower than they were supposed to be. Because of the error, affected options exercised after 2005 are subject to federal income tax plus a 20% penalty and interest charges. Those who elect to have their options re-priced at a higher level will avoid that tax liability, Apple said. Employees have until April 16 to ask for the re-pricing, but Apple directors and top executives are not eligible to participate in the offer.
Apple is one of more than 100 U.S. companies conducting stock options internal reviews or being investigated by the SEC for options accounting irregularities, or both. In most cases, stock options were backdated to a date when the price was lower than on the date they were actually granted, giving the holders an instant profit. SEC regulations don't prohibit backdating, but there are rules for how backdating must be accounted for and disclosed. The SEC and the U.S. Attorney's Office in San Francisco continue to investigate Apple's stock options practices.
News source: InfoWorld