February 6, 2020
Accounting Issues for Compensation Committees
– Liz Dunshee
This 10-page memo from Cleary Gottlieb & PwC walks through accounting and financial reporting considerations that apply to executive pay – e.g. factors that impact how equity awards are expensed, and assets & liabilities for deferred compensation plans. This excerpt highlights why these issues matter to compensation committees:
Types of pay that seem economically similar may be recorded in the financial statements in different ways. Those accounting differences can impact the company’s earnings per share or industry ratios — attracting or driving away investors. Understanding them is important to the committee’s ability to effectively oversee compensation plans.