The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Last week, I blogged about the intersection of the coming Dodd-Frank clawback rules and FASB/IASB’s new revenue recognition rules. In response, here’s a note that I received from an in-house member:

I have been highlighting that exact same point. My prediction was that there would be a lifting effect on salary and bonuses based on individual achievement not otherwise tied to financial metrics. The CD&A descriptions two years after those final rules go into effect should be interesting.

Another part of this story is whether a future conversion to IFRS could trigger a “restatement” for purposes of the rule. I guess a lot of this will come down to how the SEC defines the words “material noncompliance”? Does that mean restatements based on simple negligence/disagreement wouldn’t fall under the clawback? I think that there are some interesting issues for the Staff to tackle when drafting the rules. Since DF has removed the “bad actor” standard, reasonable accounting judgment calls could put a large swath of individuals in harm’s way, even those who have no supervisory role over the finance department.

In addition, this Towers Watson memo weighs in on the topic…