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What’s Hot on Checkpoint for Accounting, Audit, and Corporate Finance Professionals?

Checkpoint Editorial Team  

Checkpoint Editorial Team  

Navigate the latest trends and emerging issues with new resources and expert guidance from Checkpoint Edge.

In this edition, we take a look at recent editions to Checkpoint’s ESG toolkit, new SEC rules on clawback of executive compensation, and new FASB guidance on revenue contracts.

Please note that access to the resources below requires a Checkpoint subscription except as otherwise stated. Not yet a subscriber? Sign up for a free 7-day trial today!

 

Checkpoint ESG Toolkit: Recent Additions Customers May Find Useful

Who needs to know: Small, midsize and large companies, as well as their advisors (e.g., through due diligence, advisory, consulting and assurance services).

The weekly ESG Toolkit article published in Accounting & Compliance Alert (ACA) rounds up environmental, social and governance (ESG)-related Checkpoint updates across practice areas. Some of the latest additions that customers may find useful include:

  • A Special Report on tax jurisdictional perspectives that addresses current trends in corporate tax transparency to align with ESG reporting.
  • SEC final rulemaking adopting the long-awaited clawback rules that govern the recovery of incentive compensation awarded to executive officers in error.
  • Other SEC final rulemaking intended to enhance the transparency of social and governance reporting for registered funds: a final rule aimed at beefing up the information that registered funds must report about their proxy votes; and another aimed at modernizing shareholder reports by requiring tailored versions that highlight key information.

Though ESG reporting continues to be a business and market imperative for many industries, it can be difficult for companies to find the latest information, especially given the absence of a mandatory ESG reporting regime in the US.

Checkpoint’s ESG Toolkit helps companies get to the information that they need faster. Access the toolkit today with a free 7-day trial!

 

New SEC Rules Require Companies to Claw Back Erroneously Awarded Executive Compensation

Who needs to know: Small, midsize and large public companies—including smaller reporting companies, emerging growth companies, and foreign private issuers—and their advisors.

Tired of wondering whether your clawback policy would pass muster in the eyes of the SEC? The SEC recently adopted new rules governing the recovery of incentive compensation awarded to executive officers in error that later required an accounting restatement of financials. With the new rules and their many required disclosures, companies can determine whether (and how) to amend their existing policies or adopt separate policies.

Though compliance dates are not yet definitive, it is expected that companies will be required to implement clawback policies by late 2023 or early 2024. Note that in conjunction with establishing clawback policies, companies ought to review their directors and officers insurance policies, as well as their internal controls for evaluating restatements, and consider updates that may be required under the new rules.

  • Many companies, particularly large ones, have voluntarily adopted clawback policies in response to investor feedback. However, a common concern has been whether the policy would be deemed acceptable by SEC standards (e.g., overly broad or too narrow; overly prescriptive or not prescriptive enough). The Checkpoint resources below can help companies incorporate the new requirements into existing policies or craft new policies altogether.

Checkpoint Edge resources:

SEC Adopts Dodd-Frank Executive Compensation Clawback Rules [read this article without a subscription!]

SEC Final Rulemaking Release No. 33-11126; Regulation S-K Item 402(w); Forms 10-K, 20-F, and 40-F

SEC Accounting and Reporting Update (SARU): No. 2022-26

 

New FASB Rules on Revenue Contracts with Customers Acquired in a Business Combination Take Effect in 2023

Who needs to know: Small, midsize and large finance and accounting professionals that prepare or audit financial statements in compliance with US GAAP.

Want more clarity around how to account for revenue-generating contracts in business combinations? The FASB recently addressed this issue, responding to questions that have been raised about how to apply Codification Topic 805 on business combinations to contracts with a customer acquired in a business combination once the acquirer has adopted the revenue standard in Topic 606. Effective as of fiscal year 2023, an acquirer must account for revenue contract assets and liabilities acquired in a business combination in accordance with Topic 606.

Among other significant changes, this new guidance could result in acquiring companies booking higher revenues than currently allowed, depending upon the situation.

  • Though there is US GAAP guidance on when to recognize and how to measure assets and liabilities in a business combination, until the issuance of the new rules, there was none specific to contract assets and liabilities arising from revenue contracts with customers accounted for in accordance with Topic 606. The Checkpoint resources below provide much-needed clarity.

Checkpoint Edge resources:

New FASB Rules Issued on Revenue Contracts Acquired in Business Combinations

Accounting Standards Update (ASU) No. 2021-08

Catalyst: US GAAP: Business Combinations/Catalyst: Section 310Recognition and Initial Measurement

 GAAP Reporter: Explanation for 805-20-25

 SEC Expert Highlight: FASB Codification Update—FASB Clarifies Rules for Applying Topic 606 to Customer and Other Contracts Acquired in a Business Combination

 

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