Aon is to restate its financial results for the years 2003, 2004, 2005 and the first three quarters of 2006, after the company's management, in consultation with the board's audit committee, confirmed that the results could not be relied upon.
The restatement will affect financial statements for other prior fiscal periods and the company will reflect those adjustments as a part of the opening balances in the financial statements for the restatement period.
The decision to restate the financial statements was based on the results of a comprehensive review of Aon's option date grant practices. In an earnings press release dated 8 February 2007, Aon announced that incorrect measurement dates for certain stock options granted in 2000 and in certain years prior appeared to have been used for financial accounting purposes.
As a result of this review, compensation expense for 2006 and 2005 was increased by $2m and $3m, respectively. Such amounts increase the compensation expense disclosed in the press release. We have concluded that the impact of corrected compensation expense is not material to any reporting period; however, the aggregate cumulative impact for the 1994 to 2006 period is considered sufficiently material to warrant restatement.
While the review found no misconduct by current or former management or directors, it did reveal some instances in which options were granted as of a prior date, for example, to honour employment or other previously made contractual commitments. In these cases, however, no evidence was found that the selection of grant dates was motivated by pricing considerations.
