Management compensation plans:
A)May be affected by adopting International Financial Reporting Standards since earnings under IFRS are typically higher than GAAP earnings.
B)May be affected by adopting International Financial Reporting Standards since earnings under IFRS are typically lower than GAAP earnings.
C)Will not be affected by IFRS since earnings are equivalent to GAAP.
D)Are decided by shareholders who do not consider GAAP or IFRS when deciding how much compensation managers receive.

Question

Quizplus · Accepted Answer

Adopting International Financial Reporting Standards (IFRS) can affect management compensation plans because the calculation of earnings under IFRS can differ from those under Generally Accepted Accounting Principles (GAAP), often resulting in higher reported earnings. Since many compensation plans are tied to earnings metrics, a change in accounting standards that affects earnings can, in turn, affect compensation.

Management Compensation Plans