Beruflich Dokumente
Kultur Dokumente
Committee
011
ON INVESTIGATIONS
Carl Levin, Chairman Norm Coleman, Ranking Minority Member
EXHIBIT
LIST
EXECUTIVE STOCK OPTIONS: SHOULD THE IRS AND STOCKHOLDERS BE GIVEN DIFFERENT INFORMATION?
June 5, 2007
Hearing On
1.
Executive Stock Option Compensation - Book versus Tax Return Differential For Exercised Stock Options, chart prepared by the Permanent Subcommittee on Investigations Sta:ff. Executive Stock Option Compensation - Book versus Tax Return Differential For Exercised Stock Options (detailed version), chart prepared by the Permanent Subcommittee on Investigations Staff.
2.
3.
KB Home Executive Stock Option Compensation - Book versus Tax Return Differential, chart
prepared by the Permanent Subcommittee on Investigations Staff.
4.
Occidental Petroleum Executive Stock Option Compensation - Book versus Tax Return Differential, chart prepared by the Permanent Subcommittee on Investigations Staff. Cisco Systems Executive Stock Option Compensation - Book versus Tax Return Differentia" chart prepared by the Permanent Subcommittee on Investigations Staff. UnitedHealth Group Executive Stock Option Compensation - Book versus Tax Return Differential, chart prepared by the Permanent Subcommittee on Investigations Staff Safeway Executive Stock Option Compensation - Book versus Tax Return Differential, prepared by the Permanent Subcommittee on Investigations Staff. Monster Executive Stock Option Compensation - Book versus Tax Return Differential, prepared by the Permanent Subcommittee on Investigations Staff. chart
5.
6.
7.
8.
chart
9.
Mercury Executive Stock Option Compensation - Book versus Tax Return Differential, chart
prepared by the Permanent Subcommittee on Investigations Staff.
10.
Com verse Executive Stock Option Compensation ~Book versus Tax Return Differential, chart prepared by the Permanent Subcommittee on Investigations Staff. chart
11. Apple Executive Stock Option Compensation - Book versus Tax Return Differential, prepared by the Permanent Subcommittee on Investigations Staff. 12. Note To Charts Prepared By The Permanent Subcommittee On Investigations Staff.
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EXHIBIT #11
STAFF
The preceding charts represent the Subcommittee's effort, with the assistance of the named corporations, to' demonstrate the effect of the new accounting rules for stock options in Financial Accounting Statement 123R, which has only recently gone into effect. Because the options exercised in 2006 and prior years (and deducted on the corporate tax returns for those years) were in almost every instance granted in years before FAS 123Rwas effective, it was not possible to present actual cases in which the book treatment under FAS 12JRCQuid be directly compared with the deductions allowed under the Tax Code, and such a direct comparison will not be possible until option grants made in 2005 and 2006 are exercised, in perhaps two or three more years. Accordingly; the Subcommittee asked the identified companies to calculate what the book expense would have been ifFAS 123R had been in effect at the time the options recently exercised were granted and to compare those hypothetical book expenses to the tax deductions actually claimed. Several of the companies who assisted the Subcommittee with these calculations had been involved in the backdating of options during the relevant period andhave restated earnings, and will in some instances be filing amended income tax returns. In some instances the amended returns will reduce the compensation deductions taken because the factthe backdated options were: "in the money" at the time they were actually granted resulted in the receipt by executives of compensation subject to the $1 million cap of Internal Revenue Code section 162(ni}. These facts complicated the process of comparing FAS 123R book to tax figures for those companies. In these situations, the Subcommittee requested the corporations to calculate the FAS 123R expense based on theactual date of the stock option grant (the measurement date) and to assume that the strike price was the market price on that date, even if the actual strike pricehad been set on a different date when the stock price was lower. Using these assumptions, the option grants would be "at the money" and would not have an intrinsic value on that date that would inflate the Black-Scholes value above what the fair value would be in a FAS 123R calculation 011 a typical option grant. In addition, the grant would havenointrinsic valne 011 that date that would subject any part of the grant to the deduction Gap under tax code section 162(m). For this reason, the Subcommittee Staff believes that it is appropriate to compare the calculated FAS 123R expense to the tax deduction originally claimed On the Corporate tax return, even though a corporation's restatement of earnings may result ill the filing of an amended tax return with different deduction amounts.
EXHIBIT #12