Home Depot Found $200 million in Unrecorded Stock Option Expense
The Home Depot said Wednesday an internal investigation of the company's stock option practices has concluded that errors caused it to have roughly $200 million in unrecorded option expense over a 26-year period.
Despite the errors, the review, conducted with the help of outside counsel, determined that there was no intentional wrongdoing by any current member of the company's management team or its board of directors.
Home Depot, the nation's largest home improvement store chain, did not make an assertion about the integrity of actions of prior management. However, it said that for many years management personnel who have since left Home Depot generally followed a practice of reviewing closing prices for a prior period and selecting a date with a low stock price to increase the value of the options being granted to certain employees that were subsequently approved by the board.
The practice is known as backdating, and it has resulted in reviews of stock option practices at a number of big corporations.
The unrecorded stock option expense at Home Depot covers the period from 1981 to the present, and it excludes related tax consequences.
Atlanta-based Home Depot said in a statement it does not consider the errors to have a material impact on the company's financial statements. But, it said correction of the errors will result in an increase to paid-in capital of approximately $200 million and a decrease to retained earnings of the same amount.
The Securities and Exchange Commission and federal prosecutors are reviewing Home Depot's stock option practices. As a result, the company declined to comment beyond its statement and a quarterly report it simultaneously filed with the SEC.