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SEC proposal targets capital formation by low-revenue companies

In brief , PwC US May 13, 2019

Learn more about the SEC’s proposal to update the definition of an accelerated filer, and the related implications.

Download SEC proposal targets capital formation by low-revenue companies

What happened?

On May 9, the SEC proposed amendments that would expand the population of companies designated as “non-accelerated filers.” Non-accelerated filers are afforded additional time to file Forms 10-K and 10-Q (as compared to accelerated or large accelerated filers). They are also not required to provide an auditor’s report on the company's internal control over financial reporting (ICFR), among other things.

Under the proposal, the population of non-accelerated filers would be expanded to include companies with less than $100 million in annual revenue that meet the SEC’s definition of a smaller reporting company. This means that many companies with less than $100 million in annual revenue and a public float of $75 million or greater but less than $700 million would become non-accelerated filers. Currently, a company with $75 million or more in public float does not qualify as a non-accelerated filer, regardless of revenue.

Importantly, the SEC’s proposal would not:

extend non-accelerated filer status to all smaller reporting companies (e.g., a smaller reporting company with a public float of $75 million or greater but less than $250 million and revenues of $100 million or more would not qualify as a non-accelerated filer under the proposal),
change the existing definition of a smaller reporting company,
alter the existing requirements relating to CEO/CFO certifications and management’s assessment relating to the effectiveness of ICFR, or
impact an auditor’s responsibilities under PCAOB standards to consider ICFR in the performance of its financial statement audit of an issuer, regardless of whether the issuer is subject to the ICFR auditor attestation requirement.

Why is this important?

The SEC’s stated goal for this proposal is to promote capital formation by smaller reporting companies. If adopted as proposed, these changes will result in additional companies being eligible for the accommodations afforded non-accelerated filers.