A $10 million payment from one executive to another at

Ariba

(ARBA)

two years ago should've been accounted as an investment in the company and subsequent compensation payout, the software maker's audit committee determined, requiring restatement of the quarter in which it occurred.

Ariba said its restated results for the fiscal year ended Sept. 30, 2001, and quarter ended March 31, 2001, will reflect a non-cash charge reflecting the payment. The expense won't affect the company's cash balances, net assets or total stockholders' equity at March 31, 2001 or for any other period.

At issue is a $10 million payment made personally by Keith Krach, the company's chairman and co-founder, in March 2001 to Larry Mueller, its then-president and chief operating officer, about a month before Mueller was elevated to CEO.

"Because no company funds were used and there was no commitment to or from Ariba, the company originally viewed the payment as a personal transaction," Ariba said, noting it made no mention of the payment in its financial statements at the time. "Ariba has now concluded that for accounting purposes, the company should treat the $10 million payment as a capital contribution from Mr. Krach to the company and the payment of compensation from the company to Mr. Mueller."

Mueller succeeded Krash as CEO in April 2001 then resigned three month later with the stock trading around $5 -- down from a then 52-week high or more than $170. An Ariba share now costs $2.60.

Ariba also said it would delay filing its 2002 annual report with the

Securities and Exchange Commission

until it completes a review of past financial statements.