Citrix 2006 Annual Report Download - page 67

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Citrix Systems, Inc.  Annual Report
amount granted to each recipient was not final and/or the
Compensation Committee had not approved the grants by
the intended grant date.
The Company also made grants to the employees of
companies it acquired in connection with acquisitions.
Grants made in conjunction with acquisitions were typically
authorized at the time of the Board’s approval of the
acquisition. The exercise price of such grants was typically
set at the closing stock price of the Company’s common
stock on the closing date of the acquisition. During the
investigation, the Company noted one grant date where the
grant was approved by its Board of Directors in conjunction
with the acquisition; however, the Company had not
completed the required granting actions by the stated grant
date and the measurement date was revised to the date
that the evidence indicated that the Company completed
its allocation.
The Company also grants options to the non-employee
members of its Board of Directors, or the Board Grants,
pursuant to a stockholder approved plan, as amended
from time to time. The timing of the grant date and amount
of such awards was granted pre-determined pursuant to a
formula set forth either in the terms of the plan or via board
resolution. Certain Board Grants were issued on a date
other than the automatic grant date prescribed by the plan
or differed by nominal amounts from the option amount
pre-determined by the plan formula.
Prior to the restatement discussed below, the Company
used the grant dates as set forth above as the
measurement date for financial accounting purposes.
Accordingly, in each case the exercise price did not exceed
the closing stock price of the Company’s common stock
on that date, and the Company did not record stock-based
compensation expense in connection with these grants. In
the restatement, the Company revised the measurement
dates for many grants and recorded stock-based
compensation expense when the revised measurement
date resulted in intrinsic value which the Company
accounted for in the restatement.
Adjustments to Measurement Dates Arising from Errors
Identified by Audit Committee Investigation
Based on the facts obtained as a result of the Audit
Committee’s investigation, the Company identified certain
grants for which it used an incorrect measurement date for
financial accounting purposes, as defined under Generally
Accepted Accounting Principles in the United States, or
GAAP. To determine the correct measurement dates for
these grants under applicable accounting principles, the
Company followed the guidance in APB No. 25, which
deems the “measurement date” to be the first date on
which all of the following are known with finality: (1) the
identity of the individual employee who is entitled to
receive the option grant; (2) the number of options that
the individual employee is entitled to receive; and (3) the
option’s exercise price.
The Company completed a grant date by grant date
analysis of approximately 191 option grant dates during
the relevant period for compliance with APB No. 25. Each
individual grant on each grant date was evaluated based on
its particular facts and circumstances. Where the Company
determined that it did not complete the required granting
actions by the original grant date, it used judgment to
determine corrected measurement dates consistent with
what the evidence suggested was its practice or process
or other information obtained as part of the investigation
that suggested the date upon which all requirements for
a measurement date had been satisfied under applicable
accounting principles. If the measurement date was not
the same date the Company used previously, it made
accounting adjustments as required, which resulted in
stock-based compensation and related tax effects when an
option had intrinsic value on the revised measurement date.
The documents and information considered in connection
with the measurement date adjustments that the Company
has made included, but was not limited to:
• minutes of Board of Directors and Compensation
Committee meetings and related presentations;
• unanimous written consents signed by the
Compensation Committee members, and evidence
relating to the date such consents were created
and circulated for signature and/or signed;