As anticipated, consistent with the definitional changes to "smaller reporting companies" effected last year (reported on here), at its open meeting today, the SEC proposed amendments to the "accelerated filer" and "large accelerated filer" definitions that would exclude smaller reporting companies with less than $100 million in annual revenues, thus alleviating those companies from the SOX 404(b) ICFR (internal control over financial reporting) outside auditor attestation requirement and the shorter (than non-accelerated filer) "accelerated filer" periodic report filing deadlines.
Specifically, as noted in the Fact Sheet included in the SEC's release, the proposed amendments would:
- Exclude from the accelerated and large accelerated filer definitions an issuer that is eligible to be an SRC and had no revenues - or annual revenues of less than $100 million - in the most recent fiscal year for which audited financial statements are available
- Increase the transition thresholds for accelerated and large accelerated filers becoming a non-accelerated filer from $50 million to $60 million and for exiting large accelerated filer status from $500 million to $560 million
- Add a revenue test to the transition thresholds for exiting both accelerated and large accelerated filer status
In his informative Statement, SEC Chair Clayton noted that the proposed rules are appropriately tailored to a subset of smaller, lower revenue companies to reduce significant costs associated with the auditor attestation requirement that those companies otherwise incur, and encourage more companies to enter the public markets, without adversely impacting investors:
The lower-revenue companies affected by the proposed amendments generally have simpler financial statements. In fact, our economists do not expect that exempting these companies from the ICFR auditor attestation requirement would weaken the effectiveness of the ICFR or increase restatement rates compared to those companies that would remain accelerated filers.
Clayton also emphasized that other key SOX requirements that promote investor confidence in financial reporting, such as independent audit committees, CEO & CFO certifications, and establishing, maintaining and assessing ICFR, would remain intact.
SEC Commissioners Peirce and Roisman approved, and Commissioner Jackson dissented. See Cooley's post.