On January 16, the Division of Corporation Finance of the Securities and Exchange Commission posted guidance in the form of a sample letter to companies that plan to restate previously issued financial statements for errors in accounting for grants of stock options to employees, directors and other service providers and that have determined that previously filed reports containing financial statements determined to be materially misstated require amendment. The letter states that the SEC will not raise further comment regarding a company’s need to amend prior Exchange Act filings to restate financial statements and related MD&A if the company amends its most recent Form 10-K and includes in that amendment the comprehensive disclosure outlined in the letter, which includes:

  • An explanatory note at the beginning of the Form 10-K amendment that discusses the reason for the amendment;
  • Selected Financial Data for the most recent five years as required by Item 301 of Regulation S-K, restated as necessary and with columns labeled “restated”;
  • Audited annual financial statements for the most recent three years, restated as necessary and with columns labeled “restated”;
  • Footnote disclosure reconciling previously filed annual and quarterly financial information to the restated financial information, on a line-by-line basis and for each material type of error separately, within and for the periods presented in the financial statements (audited), in selected financial data, and in the interim period information; and
  • Audited financial statement footnote disclosure of the restated stock compensation cost in the manner detailed in the letter. The Division cautions that its guidance relates only to the mechanics of the amendment of prior filings and compliance with such guidance will not preclude comments on the amended Form 10-K or even enforcement action. http://www.sec.gov/divisions/corpfin/guidance/oilgasltr012007.htm.