The SEC’s mandate for Recovery of Erroneously Awarded Compensation became effective January 27, 2023, directing exchanges to adopt listing standards. Nasdaq and NYSE amended their listing standards with an effective date of October 2, 2023, requiring each listed issuer to adopt a recovery policy within 60 days and includes a compliance date of December 1, 2023.
Who is Impacted?
This rule applies to all listed issuers including smaller reporting companies (SRCs), emerging growth companies (EGCs), foreign private issuers (FPIs), and business development companies (BDCs).
Compensation recovery and policy disclosure requirements within annual filings for 10-K, 20-F, 40-F, as well as proxy and information statements must be tagged using the Executive Compensation Disclosure (ECD) Taxonomy.
The Final Rule requires registrants to tag in iXBRL:
- Two new cover page checkboxes
- Detail tagging of disclosure regarding the issuer’s conclusion that recovery was not required under the recovery policy or how the issuer applied its recovery policy after the issuer was required to prepare an accounting restatement that required recovery under the policy, or there was an outstanding balance to be recovered
- Detail tagging of the disclosure of the effects of the recovery on the Summary Compensation Table
Two new cover page checkboxes are expected to be disclosed in 10-K, 20-F and 40-F documents as shown below, followed by the concepts available in the 2023 DEI taxonomy and included with the US GAAP 2023 and IFRS 2023 taxonomies:
As provided in the latest EDGAR Filer Manual, the SEC has built in a validation messages around the new requirements, and a warning message will appear if the Document Financial Statement Error Correction [Flag] is missing from the document. The first checkbox is required to be tagged for all annual filings on form 10-K, 20-F and 40-F documents on or after December 1, 2023. The second checkbox should only be tagged if the first checkbox has a “True” value.
The SEC has provided the following Fact Sheet, Taxonomy Guide and Compliance Guide:
- SEC Fact Sheet
- Executive Compensation Disclosure (ECD) Taxonomy Guide
- SEC Erroneously Awarded Compensation Small Entity Compliance Guide
We are here to help
Since we understand this required iXBRL tagging may be new for you and your teams, the Workiva Professional Services team will be available for any of your tagging needs.
Should you want to discuss support options available in meeting the upcoming Recovery of Erroneously Awarded Compensation requirements, don't hesitate to reach out to your Account Rep, CSM or PSM.
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