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.
Thus, an artificially low exercise price might alter the tax payments for both the company and the option recipient.
This made me think about the possibility that some of the grants had been backdated.
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We don’t usually thank you for anything, Facebook; however, we certainly thank you for this capability!
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.
This pioneering study was published in the Journal of Finance in 1997, and is definitely worth reading.
In a study that I started in 2003 and disseminated in the first half of 2004 and that was published in Management Science in May 2005 (available at I found that stock prices also tend to decrease before the grants.
(Create a new post / Click the clock icon / Click “Schedule post” / Choose “Backdate post” / Add year / Add month / Add day / Post) TIP #1: Facebook was founded in February of 2004, so it doesn’t make sense to backdate before, or too close to, February 2004.
TIP #2: While you CAN backdate to 1981, I don’t recommend it, because you clearly didn’t post something in 1981.
Collins English Dictionary - Complete & Unabridged 2012 Digital Edition © William Collins Sons & Co.