Effective February 4, 2008, the SEC adopted a new system of disclosure rules for smaller reporting companies filing periodic reports and registration statements with the SEC. The “smaller reporting company” category includes companies that qualified as “small business issuers” before the new rules, as well as most companies that qualify as “non-accelerated filers.” In general, companies with less than $75 million in common equity public float qualify as smaller reporting companies. Companies unable to calculate the public float typically qualify if they have less than $50 million in annual revenues.
Under the new disclosure rules, a company that formerly qualified as a small business issuer will have the option to file their next annual report for a fiscal year ending after December 15, 2007 on Form 10-KSB or the standard Form 10-K. If a company formerly qualified as a small business issuer and this year opts to file a standard Form 10-K under the new disclosure rules for smaller reporting companies, the Form 10-K and financial statement disclosure requirements will not change from the prior year, except that the smaller reporting company disclosure rules require two years of balance sheets, instead of a balance sheet for only one year. Also, companies qualifying as smaller reporting companies are required to check the “Smaller Reporting Company” box on the cover page of Form 10-K.
A non-accelerated filer that now qualifies as a smaller reporting company may opt to file its Form 10-K under the new disclosure rules for smaller reporting companies. Such a company should be aware of the following scaled reporting requirements, among others, that are available for smaller reporting companies, as compared with those that are required of large accelerated filers and accelerated filers:
- Financial statements – Two years of balance sheets and statements of income, cash flow, comprehensive income, and shareholders’ equity; smaller reporting companies previously following Regulation S-X can now follow the disclosure requirements that generally applied to S-B filers under Regulation S-B Item 310
- Item 101 – Less detailed description of the business
- Item 301 – Five-year selected financial data not required
- Item 302 – Selected quarterly financial data not required
- Item 303 – Management’s discussion and analysis of financial condition and results of operations only required to cover two years; contractual obligations table not required
- Item 305 – Information regarding market risk factors not required
- Item 402 – More limited disclosures of executive compensation
Final Rule 33-8876, Smaller Reporting Company Regulatory Relief and Simplification, is available at http://www.sec.gov/rules/final/2007/33-8876.pdf. Also, Changeover to the SEC’s New Smaller Reporting Company System by Small Business Issuers and Non-Accelerated Filer Companies - A Small Entity Compliance Guide is available at http://www.sec.gov/info/smallbus/secg/smrepcosysguid.pdf.
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