SEC Adopts Amendments to Accelerated and Large Accelerated Filer Definitions

Smaller reporting companies with less than $100 million in revenues no longer required to obtain independent auditor attestation of their internal control over financial reporting

On March 12, 2020, in an effort to reduce unnecessary burdens and compliance costs for certain smaller issuers, the Securities and Exchange Commission adopted amendments to the definitions of “accelerated filer” and “large accelerated filers” in Exchange Act Rule 12b-2. As a result of the amendments, “smaller reporting companies” with no revenues or revenues of less than $100 million will no longer be required to obtain a separate attestation of their internal control over financial reporting from their independent auditor. The requirement for companies to establish and maintain effective internal control over financial reporting and for management to provide certifications regarding such controls will not be effected by these amendments.

The amendments will:

• Exclude from the accelerated and large accelerated filer definitions an issuer that is eligible to be a smaller reporting company and had annual revenues of less than $100 million in the most recent fiscal year for which audited financial statements are available (the “SRC revenue test”).
• Increase the transition thresholds for an accelerated and a large accelerated filer to change to a non-accelerated filer from $50 million to $60 million in public float[1] and for exiting large accelerated filer status from $500 million to $560 million in public float;
• Add a SRC revenue test to the transition thresholds for exiting both accelerated and large accelerated filer status:
  • a large accelerated filer becomes eligible to be a non-accelerated filer under the SRC revenue test when revenue falls below $80 million and public float is below $560 million; and
  • an accelerated filer becomes eligible to be a non-accelerated filed under the SRC revenue test when revenue falls below $80 million. However, under the amended guidance, an accelerated filer that has less than $250 million in public float—and therefore qualifies as a smaller reporting company under the public float test—may transition to non-accelerated filer status as soon as its annual revenues fall below $100 million.
• Add a check box to the cover pages of annual reports to indicate whether an internal control over financial reporting auditor attestation is included in the filing.

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

The full text of the SEC Final Release can be found here.