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ARTICLE · 13 DECEMBER 2021

SEC Adopts SAB 120 To Address Spring-Loaded Compensation Awards

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Last week, the SEC announced the adoption of Staff Accounting Bulletin No. 120 (SAB 120), which provides guidance for companies as to how they should recognize and disclose the cost of providing "spring-loaded" awards to executives.

United StatesAccounting and Audit
Alan Wilson
Alan Wilson
Jonathan Wolfman
Jonathan Wolfman
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Last week, the SEC announced the adoption of Staff Accounting Bulletin No. 120 (SAB 120), which provides guidance for companies as to how they should recognize and disclose the cost of providing "spring-loaded" awards to executives. As defined in SAB 120, a spring-loaded award refers to a "share-based payment award granted when a company is in possession of material nonpublic information to which the market is likely to react positively when the information is announced." Such awards include all instruments, including share options and restricted stock units. Consistent with the SEC's focus on gatekeepers, the new guidance sends a warning to compensation committees and audit committees, stating "non-routine spring-loaded grants merit particular scrutiny by those charged with compensation and financial reporting governance."

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