Originally published December 17, 2004

In recognition of the difficulties that some public companies that are accelerated filers and their independent accountants are having in preparing to timely comply with the new internal control over financial reporting requirements, the Securities and Exchange Commission has deferred final implementation of two requirements applicable to accelerated filers.

On November 17, 2004, the SEC adopted rules delaying the final acceleration of the due dates of quarterly and annual reports required to be filed by accelerated filers. Release Nos. 33-8507; 34-50684. This delay will give accelerated filers one additional year to implement the new SEC requirements governing internal control over financial reporting, which are effective for fiscal years ending on or after November 15, 2004, without also having to worry about filing their periodic reports within a further compressed time period. As originally adopted on September 5, 2002, beginning with fiscal years ending on or after December 15, 2004, accelerated filers would be required to file their annual reports within 60 days after the end of their fiscal year (down from 90 days originally and 75 days currently) and their quarterly reports within 35 days after the end of their calendar quarters (down from 45 days originally and 40 days currently). However, the rule change will defer implementation of the last acceleration period until fiscal years beginning on or after December 15, 2005. Accordingly, issuers that are accelerated filers will continue with the current schedule for another year. During 2005 these issuers will be required to file their annual reports within 75 days after the end of the fiscal year (March 16 for calendar year companies) and their quarterly reports within 40 days after the end of their calendar quarters (May 10, August 9 and November 9 for calendar year companies).

An accelerated filer is an issuer that:

  • Has a public float of $75 million or more as calculated as of the last business day of the second quarter of the issuer’s most recently completed fiscal year;
  • Has been subject to the reporting requirements of the Securities Exchange Act of 1934 for at least 12 calendar months;
  • Has filed at least one annual report; and
  • Is not eligible to use Forms 10-KSB and 10-QSB for its annual and quarterly reports.

On November 30, 2004, the SEC issued an order deferring the compliance deadline for the new internal control over financial reporting requirements for 45 days for issuers that are accelerated filers with a market capitalization of less than $700 million who also meet certain other requirements. Release No. 34-50754. This deferral will allow smaller accelerated filers and their independent accountants additional time to implement, test and report on their internal control over financial reporting. In order to take advantage of this deferral, an accelerated filer must meet the following requirements:

  • The market value of the issuer’s outstanding common equity held by non-affiliates must be less than $700 million at the end of its second fiscal quarter in 2004;
  • The issuer must file all of the information required to be included in its Annual Report on Form 10-K within the current 75-day period (March 16 for calendar year companies), except for the management’s annual report on internal control over financial reporting (Item 308(a) of Regulation S-K) and the related attestation report of the registered public accounting firm (Item 308(b) of Regulation S-K);

The issuer must identify the information that it has not filed as permitted by the deferral;

  • If a material weakness in its internal control over financial reporting has been identified by the issuer or its independent accountant, the issuer must disclose the material weakness when it initially files its Form 10-K; and
  • The issuer must amend its Form 10-K within 45 days after the initial due date (April 30 for calendar year companies) to include the information that it previously omitted in reliance on the deferral.

It is important to note that for purposes of Form S-2 and Form S-3 eligibility, an issuer taking advantage of the deferral will not be considered to have timely filed its Form 10-K until it has filed the required amendment.

Neither action taken by the SEC has any impact on public companies that are not accelerated filers.

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