September 15, 2023

More on the New Clawbacks-Related Form 10-K Checkboxes

Last week, the Center for Audit Quality posted the final highlights from the June 15th Joint Meeting of the SEC Regulations Committee and the SEC Staff to its website’s SEC Regulations Committee page. One of the topics addressed in the highlights related to the new Form 10-K clawbacks-related checkboxes. The CAQ highlights address whether the restatement checkbox should be checked if there is disclosure in the financial statements about an error in previously issued quarterly financial statements, but not for any annual periods. Here’s an excerpt from the notes:

In connection with the new rule and rule amendments for the recovery of erroneously awarded compensation in the event of a required accounting restatement, a check box with the following language was added to the cover page of Form 10-K:

  • If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

A similar check box was not added to the cover page of Form 10-Q.

The retrospective correction of a material error in a registrant’s previously filed interim financial statements might be presented in the disclosure required by Item 302(a) of Regulation S-K within an unaudited note to the annual financial statements included in a Form 10-K. However, those financial statements might not disclose the correction of an error to any annual periods as the error being corrected only existed in the interim periods.

For example, assume a registrant presents (in an unaudited note to the financial statements for the fiscal year ended 20X3 in Form 10-K) the correction of material misstatements in its financial statements for the interim periods ended 03/31/X3, 06/30/X3, and 09/30/X3. The error only affected those interim periods. The annual periods presented in the 20X3 Form 10-K were not impacted by the errors. The Committee asked the staff whether the registrant in this example would need to select the check box.

The staff indicated that in the above scenario, it would not object if the checkbox referred to above was not checked. The staff noted that the registrant should provide the disclosures required by S-K 402(w).

– Meredith Ervine