Ho John Lee’s Weblog

A couple of weeks ago, Apple Computer announced a better-than-expected quarter, and also mentioned that they didn’t expect any “material adjustments” to result from their stock options accounting investigation. Since then, the share price has been rocketing from the low 50s up to touch 70 today.

After the close today, they mentioned that they will restate earnings back as far as 2002 and will delay filing their 10-Q. Oops.

Reuters News, August 3, 2006

Apple Computer Inc. (NASDAQ:AAPL - News) said on Thursday it would likely need to restate earnings and will delay filing its quarterly report because of additional irregularities it found in its accounting of stock options and its shares fell 6.6 percent.

Apple also said in a SEC regulatory filing Thursday that all financial communications issued since September 29, 2002, should not be relied upon. The irregularities are related to the issuance of stock option grants made between 1997 and 2001.

It can be difficult to have a lot of confidence in financial statements published by publicly traded companies. Companies built on intellectual property or financial instruments are especially prone to varying interpretation of their finances, but accounting issues seem to plague companies from every industry these days.

This tale was posted by Wavesmash in the comments at Bill Cara’s site today:

Re: how can we ever trust any financial statements at all? An old joke an accountant once told me…

A business man was interviewing applicants for the position of divisional manager. He devised a simple test to select the most suitable person for the job. He asked each applicant the question, “What is two and two?”

The first interviewee was a journalist. His answer was “Twenty-two.”

The second was a social worker. She said, “I don’t know the answer but I’m glad we had time to discuss this important question.”