In 2021, Celsius Holdings modified the terms of stock awards held by six departing employees and retiring board members. Under GAAP, a modification of an equity award requires re-measurement of the compensation cost. Celsius did not apply the modification accounting, and its general and administrative expenses were materially understated as a result.
The error flowed into the company's Q2 and Q3 2021 quarterly reports and into two earnings releases furnished on Forms 8-K. The SEC also found that Celsius failed to maintain adequate disclosure controls from 2019 through 2023.
In January 2025 Celsius agreed to a cease-and-desist order and paid a $3 million civil penalty.
Celsius changed award terms for departing staff without modification accounting, misstating two quarters and drawing a $3M SEC penalty.
Stock-compensation modification accounting is a technical area, and a fast-growing company may not have the accounting depth to handle it.
The awards were for departing employees, so the modification looked like a routine separation matter rather than an accounting event.
Disclosure controls that do not reach non-financial disclosures miss the equity-award changes that drive the numbers.
A stock-award modification is an accounting event, not an HR event — if the terms change, the numbers change, and the controls need to connect the two.
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