Accounting & Tax

Diagnosis: Restatement

Cytyc reexamines 11 years of financials after the maker of diagnostic tests has a checkup of its stock-option practices.
Stephen TaubMarch 16, 2007

Diagnostic-test maker Cytyc will restate its financials for 1996 to 2006 following an internal review of its practices for granting stock options.

The company will take an additional noncash expense of less than $80 million.

In a regulatory filing, Cytyc explained that on several occasions from 1996 through 2002, certain incentive stock options were reported as having been exercised before all of the prerequisite actions were completed.

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After the company filed its 2006 annual report, its accounting firm, Deloitte & Touche, suggested applying variable plan accounting to certain options granted during the 1996–2002 period. Under variable plan accounting, noncash, stock-based compensation expense is recognized based on the difference between the market price of the stock for each affected period and the exercise price of the option.

After determining that variable plan accounting is appropriate for certain of those options, Cytyc expects to record additional noncash, stock-based compensation expense from 1996 through 2001 and to record a reversal of previously recognized noncash expense in 2002.

For the years 2004 through 2006, Cytyc added, adjustments will be limited to decreases in retained earnings and increases in additional paid-in capital and deferred tax assets.

Elsewhere, Citrix Systems will issue a restatement after its audit committee determined that incorrect accounting measurement dates were used for certain stock-option grants. The computer-networking company had previously announced that it had found errors in connection with grants awarded from 1996 through 1998.