The Advisors' Blog

Meredith blogged last month about media coverage of “the unlucky first few” companies that had to mark the new clawback checkbox(es) on their Form 10-K due to a correction of a financial statement error. At last week’s ABA meeting, Corp Fin Director Erik Gerding (again) confirmed that the circumstances are rare in which a company would check the first checkbox about error correction but not the second checkbox about the recovery analysis. He also provided a few other reminders. Here are the key takeaways (also see my earlier blog):

1. The second check box must be checked for all non-voluntary restatements (whether “Big R” or “little r”), since an analysis always must be performed in those situations. This is the case even if very little analysis needs to be done to confirm no recovery is needed.

2. The extent of that recovery analysis will vary based on the facts & circumstances, but even where no amount is recovered, the rules still require a brief discussion of why no amount was recoverable. In other words, the rule calls not just for disclosing your conclusion, but an explanation of why you reached that conclusion.

3. Don’t forget XBRL block-tags for your disclosure about the recovery analysis. The Staff is using tagging to check for compliance with the substance of the rule as well as the tagging requirements, and the tags are also important to investors.

– Liz Dunshee