Companies that are accelerated filers have a number of things to consider this month as In-line XBRL Is now required. First — don’t forget that the in-line XBRL tagging requirements (including for cover pages) have now phased-in for accelerated filers — as of June 15. Those requirements phased-in for large accelerated filers in 2019. For accelerated filers, that means that reports — generally Quarterly Reports on Form 10-Q — for fiscal periods ending on or after June 15, 2020 are required to comply with the inline XBRL tagging requirements. Here’s the SEC’s guidance in its adopting release for the XBRL in-line tagging requirements:
As an example, a Form 10-Q filer in the [second] phase-in group [accelerated filers] with a calendar fiscal year end will be required to begin compliance with the Inline XBRL requirement with its Form 10-Q for the period ending June 30, 20. As a further example, a Form 10-Q filer in the [second] phase-in group [accelerated filers] with a June 30 fiscal year end will be required to begin compliance with the requirement with its Form 10-Q for the period ending September 30, 20.
Determining Filing Status for 2021
June 30, 2020 was the reference date for calendar year-end companies to determine next year’s filer status, as well as to calculate the company’s “public float” – the aggregate market value of equity held by non-affiliates. Public float, as of the end of the second quarter (which is June 30 for calendar-year filers), is reported on the cover and dictates the filing date of the Annual Report on Form 10-K for 2020, filed in early 2021, as well as the ensuing filing dates for the Quarterly Reports on Form 10-Q during 2021.
Amendments to the Accelerated Filer and Large Accelerated Filer definitions. Determining 2021 filer status, however, was complicated somewhat by amendments to the definitions of “accelerated filer” and “large accelerated filer” adopted by the SEC earlier this year. Responding to concerns that these definitions inappropriately continued to subject some “lower revenue” smaller reporting companies (“SRCs”) to the accelerated filing deadlines as well as other requirements, particularly SOX 404’s requirement for an audit of the company’s internal control over financial reporting (“ICFR”), the SEC added a revenue test to these definitions to exclude certain low revenue SRCs. (An SRC is an issuer with less than $250 million of public float or less than $100 million in annual revenue.) Those amendments were effective April 27, 2020 and apply to Forms 10-K due on or after that date.
As a result, an SRC with annual revenues of less than $100 million in its most recent audited annual financial statements now is excluded from those definitions. As stated above, the most significant and practical effect of these amendments is that these issuers no longer will be classified as “accelerated filers” and, therefore, no longer be required to have the audit of ICFR. Note, however, that such an SRC will not become a non-accelerated filer until the Form 10-K for the year ended December 31, 2020 (for calendar year filers and assuming that the SRC satisfies the requirements for non-accelerated filer status at December 31, 2020). Such an SRC will continue to be an accelerated filer for purposes of the Forms 10-Q it files in 2020. Further, such an SRC will remain obligated, among other things, to establish and maintain ICFR and have management assess the effectiveness of ICFR. The transition rules are discussed in greater detail below.
The key changes in the definitions — under the prior definition, an issuer with public float of $75 million or more was an “accelerated filer”; there was no revenue test. Under the amended definition, other than during a transition period, issuers with a public float between $75 million and $700 million and with $100 million or more in annual revenue will be “accelerated filers.” Additionally, as discussed below, the amendments increased the transition thresholds for exiting accelerated filer status from $50 million to $60 million and for exiting large accelerated filer status from $500 million to $560 million. Finally, the SEC added a check box to the cover pages of Forms 10-K, 20-F, and 40-F to indicate whether an ICFR auditor attestation is included in the filing.
The SEC did not completely align the accelerated filer and SRC definitions, however, partially on the belief that to do so risked an adverse impact on the reliability of the financial statements of higher revenue companies. An issuer can continue to be both an accelerated filer and an SRC (see Table 1 below).  Qualifying as an SRC, however, is not the trigger that determines the ICFR auditor attestation requirement. Issuers meeting the definition of an SRC, however, qualify for certain scaled disclosure requirements.
The following Table 1 summarizes the requirements for determining filer status as well as whether auditor attestation of ICFR is required.
For example, a company with a public float of $225 million and $150 million in annual revenue would fall into the third category — SRC and accelerated filer.
Transitioning Among Filer Categories
As previously mentioned, the 2020 amendments also increased the thresholds for exiting large accelerated filer and accelerated filer status, allowing companies at the lower end of the prior thresholds to potentially transition to the lower (and potentially less burdensome) status. Similar to the tests described above, the SEC added a revenue component to the amended transition thresholds and specifically excluded a transitioned SRC from the definitions of accelerated filer and large accelerated filer. This also contributed to the complexity of the amended rules.
Large Accelerated Filer/Accelerated Filer/Non-accelerated Filer. Once a company becomes a large accelerated filer, it remains a large accelerated filer unless it determines, at the end of a fiscal year, that:
- its public float was $60 million or more but less than $560 million, and
- it is not eligible to use the requirements for SRCs under one of the SRC revenue tests described below.
A large accelerated filer that makes this determination becomes an accelerated filer — and will not become a large accelerated filer again until it meets the requirements to become a large accelerated filer (e.g., public float of $700 million or more). See Table 1 above.
Accelerated Filer/Non-accelerated Filer. Once a company becomes an accelerated filer, including as a result of ceasing to be a large accelerated filer as described in the preceding paragraphs (i.e., a large accelerated filer can transition directly to being a non-accelerated filer), it remains an accelerated filer unless it determines, at the end of a fiscal year, either that:
- its public float was less than $60 million, or
- it is eligible to use the requirements for SRCs under one of the SRC revenue tests described below.
An accelerated filer that meets one of these tests becomes a non-accelerated filer — and will not become an accelerated filer again until it meets the accelerated filer definition (e.g., public float of $75 million or more) and will not become a large accelerated filer again until it meets the large accelerated filer definition (e.g., public float of $700 million or more). See Table 1 above.
Table 2 below summarizes rules for transitioning from large accelerated filer to accelerated filer or from accelerated filer to non-accelerated filer status for companies that are not SRCs.
Size Matters — Is the Company an SRC? The final amendments, however, provide more complexity to the definitions with the addition of a revenue test for exiting both large accelerated filer and accelerated filer status. As amended, an accelerated filer would remain an accelerated filer unless either:
- its public float dropped below $60 million or
- it becomes eligible to be an SRC under the revenue tests in paragraphs (2) or (3)(iii)(B) set forth in the SRC definition.
Table 3 summarizes the two revenue tests that allow an SRC that would otherwise be classified as an accelerated filer to nevertheless be excluded from that category and classified as a non-accelerated filer.
Note that paragraph 2 of the SRC definition states that a company will be an SRC if its annual revenues are less than $100 million and it has no public float or a public float of less than $700 million. Paragraph (3)(iii)(B) states, among other things, that a company that initially does not qualify as an SRC because it had annual revenues of $100 million or more cannot qualify as an SRC until its annual revenues fall below $80 million. A company that is initially applying the SRC definition or previously qualified as an SRC would apply paragraph (2) of the SRC definition. After a company determines that it does not qualify as an SRC, it would apply paragraph (3)(iii)(B) of the definition at its next annual determination.
Once an issuer determines that it does not qualify for SRC status because it exceeded one or more of the current thresholds, it will remain unqualified unless when making its annual determination it determines either:
- that its public float was less than $200 million; or
- that it meets the public float/revenue test set forth in Table 3.
At that time, the SRC would become a non-accelerated filer (i.e., not an accelerated or large accelerated filer) regardless of the other transition rules.
Here are two examples that the SEC provided to illustrate the operation of the transition provisions:
Example 1. Under the final amendments, an accelerated filer with revenues of $100 million or more that is eligible to be an SRC based on the public float test contained in paragraphs (1) and (3)(iii)(A) of the SRC definition can transition to non-accelerated filer status in a subsequent year if it has revenues of less than $100 million. For example, an issuer with a December 31 fiscal year end that did not exceed the public float threshold in the prior year and that has a public float, as of June 30, 2020, of $230 million and annual revenues for the fiscal year ended December 31, 2019 of $101 million will be eligible to be an SRC under the public float test; however, because the issuer would not be eligible to be an SRC under the SRC revenue test, it will be an accelerated filer (assuming the other conditions [required for accelerated filers] are also met). At the next determination date (June 30, 2021), if its public float, as of June 30, 2021, remains at $230 million and its annual revenues for the fiscal year ended December 31, 2020 are less than $100 million, the issuer will be eligible to be an SRC under the SRC revenue test (in addition to the public float test) and thus it will become a non-accelerated filer.
Example 2. On the other hand, an issuer with a December 31 fiscal year end that has a public float, as of June 30, 2020, of $400 million and annual revenues for the fiscal year ended December 31, 2019 of $101 million will not be eligible to be an SRC under either the public float test or the SRC revenue test and will be an accelerated filer (assuming the other conditions [required for accelerated filers] also are met). At the next determination date (June 30, 2021), if its public float, as of June 30, 2021, remains at $400 million, that issuer will not be eligible to be an SRC under the SRC revenue test unless its annual revenues for the fiscal year ended December 31, 2020 are less than $80 million, at which point it will be eligible to be an SRC under the SRC revenue test and to become a non-accelerated filer.
In essence, as the proposing release explained, under the amendments, “an accelerated filer would remain an accelerated filer until its public float falls below $60 million or its annual revenues fall below the applicable revenue threshold ($80 million or $100 million), at which point it would become a non-accelerated filer.” Similarly, a large accelerated filer would become an accelerated filer at the end of its fiscal year if its public float fell to $60 million or more but less than $560 million as of the last business day of its most recently completed second fiscal quarter and its annual revenues were not below the applicable revenue threshold ($80 million or $100 million). A large accelerated filer would become a non-accelerated filer if its public float fell below $60 million as of the last business day of its most recently completed second fiscal quarter or its annual revenues fell below the applicable revenue threshold ($80 million or $100 million).
Exception to the Transition Rules. One exception to these transition rules applies to a large accelerated filer whose public float has fallen below $700 million (but remained $560 million or more) but becomes eligible to be an SRC under the SRC revenue test in the first year that the SRC amendments become effective. That company would become a non-accelerated filer even though its public float remained at or above $560 million.
How does all this affect you?
For issuers with annual revenue of less than $100 million and public float between $75 million and $700 million — your company may now qualify as a non-accelerated filer. Note that these rules do not apply to emerging growth companies (EGCs) until they exit EGC status.
- Issuers — Discuss with your auditors the implications of these transition rules to your future audits. Review the transition provisions carefully as well as public float and annual revenue definitions.
- Auditors — Discuss the potential impact of the amended definition with issuer audit clients. Help ensure they are aware of the related transition provisions and the potential impact to future audits.
- Audit Committees — Your company may now qualify as a non-accelerated filer. Ask management to prepare a filer status analysis to determine if there is any change to the company’s ICFR auditor attestation requirement. If no longer required, discuss the impact with the company’s auditor. Even if an external auditor attestation over ICFR is no longer required, audit committees may want to consider the benefit of continuing to obtain such an attestation, whether for “optics” or thinking ahead that the requirement may apply in the future if the company becomes an accelerated filer.
The above is only a summary of some of the changes in the amendments.
 The in-line XBRL requirements were adopted in Exchange Act Rel. 34-83551 (June 28, 2018). The requirement for cover page in-line tagging was added (with the same phase-in schedule) in Exchange Act Rel. 34-85381 (Mar. 20, 2019).
 Exchange Act Release 34-88365 (Mar. 12, 2020).
 To assist companies in applying these tests, the SEC staff published a Small Entity Compliance Guide: https://www.sec.gov/corpfin/secg-accelerated-filer-and-large-accelerated-filer-definitions#_ftn1.
 Public float is calculated according to the requirements and instructions of Exchange Act Rule 12b-2 as of the end of the prior year’s second fiscal quarter and consistent with prior year calculations, and generally includes all outstanding common stock not held by an insider (e.g., officers and directors).
 Annual revenues should equal the number used in the company’s most recent audited annual financial statements.
 “Prior year annual revenues” are determined by reference to the annual revenues in the audited financial statements for the year prior to the most recent year-ended – so, for a determination being made as of June 30, 2020, the prior year annual revenues would be those in the 2018 audited financial statements.
 “Prior” public float, for purposes of a particular year, means the immediately preceding year – so, for a determination being made as of June 30, 2020, the prior year public float is determined as of June 30, 2019
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