SEC Approves Change in Definitions of Accelerated, Large Accelerated Filers

By:
Chris Gaetano
Published Date:
Mar 13, 2020
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The Securities and Exchange Commission has approved a previously proposed measure that changes the definition of an accelerated and a large accelerated filer as a way to ease internal audit requirements for certain entities.

When classified as an accelerated or a large accelerated filer, an issuer is subject to, among other things, the requirement that its outside auditor attest to, and report on, management’s assessment of the effectiveness of the issuer’s internal control over financial reporting (ICFR).

Currently, a company goes from an accelerated filer to a non-accelerated filer status once its equity falls below $50 million, and it loses large accelerated filer status once its equity falls below $500 million. Under the new final rule, these thresholds have gone up to $60 million and $560 million respectively. Further, any entity that qualifies as a smaller reporting company (the definition of which the SEC also recently changed) will also be excluded from classification as an accelerated or large accelerated filer, provided that its annual revenues are less than $100 million in its most recent fiscal year.

There will also be a check box on the cover page of annual reports on Forms 10-K, 20-F, and 40-F to indicate whether an ICFR auditor attestation is included in the filing.

“The amendments represent an incremental, but meaningful, change that builds on the benefits of the JOBS Act for smaller public companies,” said SEC Chairman Jay Clayton. “The JOBS Act provided a well-reasoned exemption from the ICFR attestation requirement for emerging growth companies during the first five years after an IPO. These amendments would allow smaller reporting companies that have made it to that five-year point, but have not yet reached $100 million in revenues, to continue to benefit from that exemption as they build their businesses, while still subjecting those companies to important investor protection requirements.”

The final amendments will become effective 30 days after publication in the Federal Register and apply to an annual report filing due on or after the effective date.

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