SEC Changes the Accelerated and Large Accelerated Filer Definitions

March 2020

On March 12th, the SEC adopted the highly anticipated amendments to the accelerated and large accelerated filer definitions.  As a result, an issuer that is eligible to be a smaller reporting company (SRC) with less than $100 million in annual revenue will no longer be required to obtain an audit of its internal control over financial reporting (ICFR) and will have more time to file its periodic reports on Forms 10-K and 10-Q.
 

What Has Changed?

A summary of the revised initial qualification thresholds for determination of filer status compared to the current thresholds is as follows:
 
  Current thresholds Revised thresholds
Non-accelerated filer Public float is less
than $75 million
 
Public float is less than $75 million
 
-OR-
 
Public float is between $75 million
and $700 million and annual revenue
is less than $100 million
Accelerated filer Public float is at least
$75 million, but less than
$700 million
 
Public float is at least $75 million, but
less than $700 million and annual revenue
is $100 million or more
 
Large accelerated
filer
Public float is $700 million
or more
 
Public float is $700 million
 or more
 
 
 
Accordingly, registrants that will no longer qualify as accelerated filers are those with annual revenue of less than $100 million and public float between $75 million and $700 million. 
 
In addition to amendments that add a conforming revenue rest for exiting accelerated filer and large accelerated filer status, the SEC also increased the public float transition thresholds for exiting accelerated and large accelerated filer status to 80% of the initial qualification thresholds as follows:
 
 
 
 
Current public float threshold
for exiting status
Revised public float threshold
for exiting status
Accelerated filer Public float is less
than $50 million
Public float is less
than $60 million
Large accelerated
filer
Public float is less
than $500 million
Public float is less
than $560 million
 
A Business Development Company (BDC) will also be excluded from the definition of an accelerated filer if the BDC has (1) public float of at least $75 million, but less than $700 million and (2) investment income1 of less than $100 million.  BDCs will apply the same transition provisions for accelerated and large accelerated filer status that apply to other issuers (as outlined above, using investment income instead of revenue).   
 

What Hasn’t Changed?

The amendments do not change other key protections from the Sarbanes-Oxley Act of 2002, such as CEO and CFO certifications of financial reports, or the requirement that companies continue to establish, maintain, assess and report on the effectiveness of their ICFR and disclosure controls and procedures. Further, auditors are still required to obtain an understanding of a company's ICFR in order to plan their audits, are required to consider control defects that come to their attention, and may test controls in order to place reliance on internal controls and reduce substantive audit testing. 
 

When Are the New Rules Effective?

The amendments are effective 30 days after publication in the Federal Register and apply to annual reports due on or after the effective date. 
 
Refer to the Appendix for a summary of how an issuer will evaluate its filer status following the effective date of the amendments. 
 

Contacts 


Appendix

The following table summarizes how an issuer will evaluate its filer status (and the corresponding filing requirements) as a result of the amendments: 
 
 

Public
float2

Annual revenue3

ICFR
audit4

Filing
deadlines5

Non-accelerated filer and SRC Less than $75 million N/A No 10Q – 45 Days
10K – 90 Days
$75 million, but less than $700 million Less than $100 million No 10Q – 45 Days
10K – 90 Days
Accelerated filer and SRC $75 million, but less than $250 million $100 million or more Yes 10Q – 40 Days
10K – 75 Days
Accelerated filer and not an SRC $250 million, but less than $700 million $100 million or more Yes 10Q – 40 Days
10K – 75 Days
Large accelerated filer $700 million or more N/A Yes 10Q – 40 Days
10K – 60 Days

1 Investment income as defined in Rule 6-07.1 of Regulation S-X. 
2 Public float is calculated as the aggregated worldwide market value of an entity’s voting and non-voting common equity held by non-affiliates and is measured at the end of an issuer’s second fiscal quarter. 
3Annual revenue is based on an issuer’s most recently completed fiscal year. 
In connection with the amendments, annual reports will be revised to include a check box on the cover page indicating whether an attestation report on ICFR has been included in the filing. 
5 Due dates are based on the number of days after the most recent fiscal year end or quarter end, as applicable.