Last month, ASIC published a media release on Capitol Health’s decision to restate comparative figures. See HERE.
This restatement would have been carried out to comply with AASB 101 40A, which notes:
“An entity shall present a third statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements required in paragraph 38A if:
a) it applies an accounting policy retrospectively, makes a retrospective restatement of items in its financial statements or reclassifies items in its financial statements; and
b) the retrospective application, retrospective restatement or the reclassification has a material effect on the information in the statement of financial position at the beginning of the preceding period.”
Putting retrospective application of accounting principles and reclassification of items in the financial statements to one side and considering restatement due to error in a prior statement, two things are key here:
- The company is acknowledging that an error has been made via the restatement
- The correction of the error is considered to be material
Since many companies with malus provisions or clawback clauses would number “material misstatement” (being individually or collectively, influence the economic decisions that users make on the basis of the financial statements) or financial misstatement among the triggers for the provision and in this case, an error that is “material” is being acknowledged via the restatement, then malus would need to be considered to be consistent with policy. This still may not necessarily result in pay forfeiture if it is found not appropriate.
The disclosure of malus consideration in the remuneration report will meet with proxy adviser expectations, who are keen to see remuneration committees serious about not only having malus policies but also actually using them.© Guerdon Associates 2023 Back to all articles