What Is Backdating?
Backdating is the apply of marking a record, whether or not a take a look at, contract, or every other legally binding record, with a date this is previous to what it will have to be. Backdating is typically disallowed and will also be unlawful or fraudulent according to the placement. Every now and then even though, backdating can also be appropriate; alternatively, the events concerned should conform to it.
Key Takeaways
- Backdating is the apply of marking a take a look at, contract, or different legally binding settlement with a date this is prior to the present date.
- Backdating is typically now not allowed or even can also be unlawful or fraudulent in some scenarios.
- Alternatively, there are occasions when backdating can also be appropriate, however the events concerned should conform to it.
Figuring out Backdating
Imagine the next examples of not unusual backdating eventualities which might be now not allowed:
- On Dec. 10, a tenant, who has overlooked his Dec. 5 time limit for hire cost to his landlord, backdates a take a look at to Dec. 4 and submits the take a look at to the owner.
- On April 30, a taxpayer, who has forgotten in regards to the April 15 time limit to make a tax-deductible particular person retirement account (IRA) contribution for the former tax 12 months, backdates a take a look at to April 1 and mails the take a look at to her monetary marketing consultant.
- On July 4, a automotive proprietor, who didn’t pay his automotive insurance coverage top rate for July, crashes his automotive right into a parked car whilst texting. He backdates a take a look at to pay his July top rate and submits it to the insurance coverage corporate.
Listed here are a couple of examples of scenarios the place backdating would possibly be appropriate:
- An individual desires to shop for a lifestyles insurance plans and make it efficient starting at a date prior to the present date. The insurance coverage corporate most often would permit this backdating to happen for up to six months previous, however the policyholder should pay the top rate quantity masking the prior duration.
- An individual desires to shop for medical insurance and make it efficient starting at a date prior to the present date. The insurance coverage corporate would possibly or won’t permit backdating relying at the state the place the individual lives. If allowed, backdating for a six-month duration would practice so long as the patron will pay for that point.
- Two events in a industry contract explicitly agree in writing that an efficient date for the contract could also be made at a date prior to the present one. On this case, backdating may well be helpful for the reason that events had already begun performing at the settlement as they had been completing the main points of the general written contract.
Examples of Fraudulent Backdating
Within the 2000s, there was once a spate of backdating inventory choices, most commonly at generation companies that depend closely on inventory choices for government reimbursement, but in addition at some corporations now not within the tech sector. The backdating scheme concerned shifting the efficient date for exercising the choices from when the choices had been ‘out of the cash’ to a date that made the choices ‘within the cash’ to permit sure executives to workout their choices profitably.
Firms corresponding to Apple, Comverse, and McAfee—in addition to Broadcom, Monster International, and UnitedHealth Crew (UNH)—to call a couple of, engaged on this fraudulent job to various levels and had been compelled to pay fines and consequences and behavior time-consuming and costly restatements in their books.
