Agile and Atmel Accounting: Time to Show Everything

Agile Software (AGIL) issued a non-reliance 8-K last week, indicating they would be going down the long-term restatement path that seems to be a trend (for now, at least). The firm concluded that it “will need to restate certain annual and interim consolidated financial statements for fiscal 2000 and later,” but as is also the typical case, they don’t have specific periods identified yet within that range of dates.

Atmel (ATML), however, won’t restate as far back as others; at least, not right now. In their non-reliance 8-K, they announce an intention to restate from 2003 to the first quarter of 2006 - but they’ll adjust the retained earnings balance at the beginning of 2003 to reflect a catch-up. From the 8-K:

In addition, the restatement will affect financial statements for fiscal years prior to fiscal 2003 and, therefore, financial statements for fiscal years prior to fiscal 2003 should also no longer be relied upon. The Company expects to reflect the impact of the adjustments to those prior periods as an adjustment to the opening balances as of January 1, 2003 in the financial statements for the restatement period.

Because the Audit Committee’s investigation is ongoing, it has not identified all stock options for which the accounting measurement dates may have been incorrectly determined. As a result, the Company has not determined the final aggregate amount of additional stock-based compensation expenses that may need to be recorded or the amount of such expenses that may need to be recorded in any specific prior period or in any future period. Further, there can be no assurance that no other matters will come to the attention of the Audit Committee during the course of its investigation that will require additional adjustments to the Company’s financial statements.

They claim that they can’t narrow down the amount of adjustments needed down to specific years - yet at the same time they know they will be immaterial at the beginning of 2003. Let’s hope they’re sure. At least they leave the door open for further revisions.

If I were the king of the world, I’d require all companies in this situation to restate as far back as these sorry episodes go - no catch-ups allowed.

These companies took advantage of shareholders once, and I’m not so sure I’d be happy to trust them in making amends by letting them bury any part of these episodes in a catch-up adjustment. It would be too easy for them to find other errors needing offsetting “corrections” that coincidentally tone down a restatement to a mere catch-up. Show everything.