SEC Urges Earnings Error Transparency in Pay Clawback Review

Companies correcting their financial statements with so-called “Big R” restatements or “Little R” revisions need to analyze whether executives are forced to pay back their bonuses as a result, a top SEC accountant said Thursday.

Even if the accounting error doesn’t affect metrics used to calculate executive pay, companies must make a formal assessment—and publicly disclose that they did, said Sarah Lowe, deputy chief accountant in the Securities and Exchange Commission’s Division of Corporation Finance.

This means companies also have to check a new box on the front of their annual 10-K financial reports indicating they conducted the ...