Autodesk 2007 Annual Report Download - page 152

92
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Restatement of Consolidated Financial Statements (Continued)
Monthly Date Selection Process Grants — For the period between July 2000 and February 2005,
Autodesk generally followed an administrative process for monthly broad based employee grants that
resulted in the selection of effective grant dates that were prior in time to the final preparation of action
by written consent for such grants (the “Monthly Date Selection Process Grants”). Usually, the grant dates
selected by this process were chosen later in the same calendar month in which the applicable actions by
written consent were signed and were dates prior in time to the final preparation of such written consents
to coincide with low trading prices during the month of the applicable grant. Based on the voluntary
review, the Company determined that the measurement dates for approximately 12,000 individual grants
of the approximate total 18,500 individual grants made to broad based employees pursuant to delegated
authority must be revised because the grant dates selected by the administrative process were prior in
time to the final approval of such grants. For these grants, based upon the available evidence the Company
chose as the measurement date the date upon which the terms of the specific monthly broad based
employee grant was determined to be fixed and unchangeable. Accordingly, Autodesk has recognized
a pre-tax stock-based compensation expense of $23.1 million for such grant approvals using the intrinsic
value method of accounting under Accounting Principles Board Opinion No. 25 (“APB 25”).
1992 New-Hire Grant to Incoming CEO — In May 1992, the Compensation Committee approved a grant
to the Company’s then-incoming CEO that was measured on an incorrect date. The measurement date
used was April 7, 1992, the date the Company and the incoming CEO had reached a business agreement
on most of the terms of her employment agreement, including the number of stock options to be granted.
However, discussions thereafter continued regarding other important matters, including the structure
of, and exercise price for, her stock option grant. The essential terms of the option grant, the grant price,
number of options and date of grant, were presented to the Board on April 27, 1992, and approved by
the Compensation Committee on May 4, 1992. In connection with the grant to the then-incoming CEO,
both parties were represented by counsel. Autodesk has recognized pre-tax stock-based compensation
expense of $3.3 million from this grant based on a revised measurement date of May 4, 1992 using the
intrinsic value method of accounting under APB 25.
Anomalous Add Grants — Based on the voluntary review, the Audit Committee found that in
certain instances, additions or error corrections were made to the details of grants that had already
been approved by the CEO without obtaining additional approval (the “Anomalous Add Grants”). For the
period between December 1995 and August 2006 when the CEO delegated authority to grant options,
420 of approximately 37,100 individual option grants were considered to be Anomalous Add Grants, for
a total error rate of 1.1%, with 98% of Anomalous Add Grants occurring prior to fiscal 2003. Based on the
voluntary review, management determined that the measurement dates for the related individual option
grants must be revised. Accordingly, Autodesk has recognized pre-tax stock-based compensation expense
of $3.1 million from such grants using the intrinsic value method of accounting under APB 25.
Termination Issues — During the relevant period, two former executives and 34 employees were
permitted to vest in (and subsequently exercise) stock options to purchase an aggregate of approximately
1.4 million shares of common stock for a period of time beyond what they were otherwise entitled to
exercise under their original stock option agreement. In most cases, vesting was extended for a period
of time after the termination date and, thus, should have resulted in accounting consequences. For the
34 employees, it appears that these cases were most likely due to administrative error. Based on the
voluntary review, management determined that the accounting for the related option grants must be
revised and Autodesk has recognized pre-tax stock-based compensation expense of $2.3 million from such
grants using the intrinsic value method of accounting under APB 25.