bh dating - Backdating executive

Thus, an artificially low exercise price might alter the tax payments for both the company and the option recipient.

Further, at-the-money options are considered performance-based compensation, and can therefore be deducted for tax purposes even if executives are paid in excess of

Thus, an artificially low exercise price might alter the tax payments for both the company and the option recipient.

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Thus, an artificially low exercise price might alter the tax payments for both the company and the option recipient.

Further, at-the-money options are considered performance-based compensation, and can therefore be deducted for tax purposes even if executives are paid in excess of $1 million (see Section 162(m) of the Internal Revenue Code).

million (see Section 162(m) of the Internal Revenue Code).

backdating executive-8

Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.

Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.

Backdating is the practice of marking a document, whether a check, contract or other legally binding document, with a date that is prior to what it should be.

Backdating is usually disallowed and even can be illegal or fraudulent based on the situation.

(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.

However, under the new FAS 123R, the expense is based on the fair market value on the grant date, such that even at-the-money options have to be expensed.) Because backdating is typically not reflected properly in earnings, some companies that have recently admitted to backdating of options have restated earnings for past years. The exercise price affects the basis that is used for estimating both the company's compensation expense for tax purposes and any capital gain for the option recipient.

The act of dating a document before the date it was actually signed.

For example, if one signs a contract on February 1, one may backdate it to January 31.

Giving retroactive value to purchases from the earlier date.

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