The SEC today approved amendments to the "smaller reporting company" definition to expand the number of companies that qualify for certain existing scaled disclosure accommodations. The new smaller reporting company definition enables a company with less than $250 million of public float to provide scaled disclosures, as compared to the $75 million threshold under the prior definition. The scaled disclosures for smaller reporting companies include, among other things, fewer disclosure requirements regarding executive compensation and financial statements.
The final rules also expand the definition to include companies with less than $100 million in annual revenues if they also have either no public float or a public float that is less than $700 million. This reflects a change from the revenue test in the prior definition, which allowed companies to provide scaled disclosure only if they had no public float and less than $50 million in annual revenues. The $700 million threshold in particular may help biotech and other development companies developing new drugs and products that have significant public floats but have not yet recognized significant revenues.
Notably, the amendments do not change the threshold in the somewhat overlapping "accelerated filer" definition that requires, among other things, that filers provide the auditor's attestation of management's assessment of internal control over financial reporting. So companies between the $75 million and $250 million threshold will still need to provide a SOX 404 audit report even if they take advantage of the scaled disclosures in other areas. However, the SEC has begun to formulate recommendations for possible additional changes to the "accelerated filer" definition, so stay tuned.
The rules will become effective 60 days after publication in the Federal Register.