SEC investigating IBM stock option accounting

The U.S. Securities and Exchange Commission (SEC) has launched an informal investigation into the way IBM Corp. reported stock options in its most recent financial statements, the Armonk, New York, company said Monday.

The investigation covers IBM's earnings for its first fiscal quarter, IBM said in a statement. During that quarter IBM changed its accounting practices and began counting employee stock options as an expense -- a practice that the majority of technology companies have resisted. The SEC now requires companies to do this.

IBM is cooperating with the investigation, which was launched within the past "several days," by providing the SEC with documents concerning "the disclosure of expensing of equity compensation," said Edward Barbini, an IBM spokesman.

Barbini could not provide further details on what, exactly, the SEC was examining, or on what had prompted the investigation. "There is no reason at this time to believe that the accuracy of IBM's reported earnings is an issue," he said.

The company's first-quarter earnings came as a nasty surprise to Wall Street, falling US$0.05 per share below the forecast of analysts polled by Thomson First Call. At the time, IBM blamed the shortfall on a failure to close deals during the final weeks of the quarter.

The SEC could not be reached for comment on this story.

IDG News Service

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