This excerpt taken from the UNH 8-K filed Dec 19, 2006.
Estimated Non-Cash Accounting Impact of Historical Stock Option Practices
On November 7, 2006, the Company announced that it was working expeditiously to complete its final review of accounting adjustments based on the October 15, 2006 WilmerHale report to the Independent Committee of the Board of Directors on the Companys historical stock option practices. The Company also announced at that time that, due solely to its expectation that it would recognize non-cash charges for stock-based compensation expense that were likely to be material for certain periods covered in the review, the Companys financial statements and earnings releases for the years ended 1994 2005 and the interim quarters through September 30, 2006, as well as the related reports of the Companys independent registered public accounting firm, should no longer be relied upon.
The Company has now substantially completed its analysis of the adjustments to its financial statements for pre-tax, non-cash stock-based compensation expense necessary to reflect the findings of the independent review and has submitted a request for consultation on certain interpretive issues to the Office of Chief Accountant of the SEC. The Company will review these issues with the SEC staff prior to completing its restatement of historical financial statements and filing quarterly reports for the quarters ended June 30, 2006, and September 30, 2006.
The Company analyzed the accounting impact under two methods: its former accounting method under APB 25, and its current accounting method under FAS 123R. Management estimates that the aggregate amount of pre-tax non-cash charges for stock-based compensation expense for the period 1994 2005 determined under APB 25, the Companys former method of accounting, ranges from $1.5 billion to $1.7 billion.
On January 1, 2006, the Company adopted FAS 123R using the modified retrospective transition method, under which all prior period financial statements were restated to recognize compensation expense in the amounts historically disclosed under FAS 123. Under this current accounting method, management estimates that the aggregate amount of pre-tax non-cash charges for stock-based compensation expense ranges from $400 million to $600 million for the period 1994 2005 and from $25 million to $60 million for 2006.
These estimates have not been audited and are not yet final; they are subject to change based upon the outcome of the Companys consultation with the SEC staff and completion of the Companys restatement of its historical financial statements, which will be audited. In addition, these estimates do not take into account any impact on prior tax deductions related to previously exercised stock options under Section 162(m) of the Internal Revenue Code, or reflect any adjustment for any non-operating cash charges which may be required in connection with the resolution of stock option-related tax matters, litigation, and regulatory matters, the amount and timing of which are uncertain but which are likely to be material. See Forward-Looking Statements at the end of this press release.
UnitedHealth Groups chief financial officer, G. Mike Mikan, said, The accounting adjustment estimates announced today address stock option-related issues that are historical in nature, and do not stem from the current operations of our businesses. We will review our analysis and proposed restatement adjustments with the SEC and return to current filing status as quickly as possible.