Accounting & Tax

Option Woes: Agile Trips, Forrester Lost

Restatements at Agile Software, Forrester Research arise from misdated stock option grants.
Stephen TaubMarch 6, 2007

Agile Software will restate financial results for certain prior periods after an internal review by a special committee into its past practices for granting stock options.

The business software maker, which has a market capitalization of $340 million, reviewed option grants to all employees, directors, and non-employees from its initial public offering, in August 1999, to July 2006. According to Agile, about one-third of the option grant measurement dates preceded the appropriate measurement date, as defined under generally accepted accounting principles.

The options in question were granted primarily from August 1999 through October 2003. The total stock compensation expense resulting from the errors is about $69.6 million, the company stated.

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Agile stressed, however, that the special committee found no evidence that any of the company’s current officers engaged in intentional misdating of options, self-dealing, or manipulation of the company’s financial results. “In fact, the special committee found that the evidence suggested an effort, in late 2003, by then current management to improve and formalize the company’s option grant practices by putting in place processes that substantially eliminated the risk of these issues recurring,” added the company, in a statement.

Meanwhile, Forrester Research disclosed that its audit committee had identified stock options, granted mainly between 1998 and 2004, that had exercise prices lower than the fair value of the common stock on the appropriate accounting measurement dates.

The market research firm, which has a $600 million market cap, acknowledged that the discovery will it to record additional non-cash charges for compensation expense. However, Forrester has not yet completed its assessment of materiality for each period, the full amount of the charges, the resulting tax and accounting impact, or which periods may require restatement.

As a result, Forrester advised investors not to rely on any financials or filings from 1998 through 2006.