Ask FERF about ... revised SEC deadlines.

The internal control over financial reporting requirements mandated by Section 404 of the Sarbanes-Oxley Act calls for a public company to include in its annual report a report by management on the effectiveness of the company's internal control over financial reporting and an accompanying auditor's report.

In the October issue of Financial Executive, Financial Executives Research Foundation (FERF) reported on the work of the Securities and Exchange Commission's (SEC) Advisory Committee on Smaller Public Companies. On September 21, consistent with a recent Advisory Committee recommendation, the SEC postponed for one year the compliance date of Section 404 reports for non-accelerated filers.

Definition of 'Accelerated Filer'

The current definition of accelerated filer as per Rule 12b-2 of the Securities and Exchange Act of 1934 (Exchange Act) applies to an issuer that:

* has an aggregate market value of voting and non-voting common equity held by non-affiliates of $75 million or more as of the most recently completed second fiscal quarter;

* has been subject to reporting requirements of Section 13(a) or 15(d) of the Exchange Act for at least 12 months;

* has filed at least one annual report; and

* is not eligible to use Forms 10-LSB and 10-QSB for annual and quarterly reports.

Final Rule -- 404 Extension for Non-Accelerated Filers

The final rule, 33-8618 Management's Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports of Companies that are Not Accelerated Filers (www.sec.gov/rules/final/33-8618.pdf), states that a company that is not an accelerated filer is required to comply with the Section 404 requirements for its first fiscal year ending on or after July 15, 2007.

The SEC press release noted that the ongoing efforts by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission to develop an internal control framework for smaller public companies, in addition to the Advisory Committee's recommendations, warranted the deferral of the compliance dates. This final rule has no impact on accelerated filers.

Proposed Rule -- Periodic Report Filing Deadlines And the Revised Definition of 'Accelerated Filer'

Also on September 21, the SEC voted to propose amendments to the periodic report filing deadlines and the definition of an accelerated filer previously cited. The proposals would:

* Create a new category of companies called "large accelerated filers" for companies that have a public float of $700 million or more and meet the same other conditions that apply to accelerated filers.

* Adjust the definition of "accelerated filers" as companies that have at least $75 million but less than $700 million in public float.

The table on this page compares the periodic reporting deadlines under the current and proposed rules.

The proposed amendments would also modify the procedures by which accelerated filers can exit accelerated filer status. If the equity market value of an accelerated filer falls to less than $25 million as of the last business day of the issuer's most recently completed second fiscal quarter, it would be permitted to file its annual report on a non-accelerated filer basis for that fiscal year. Likewise, a large accelerated filer could have its status changed if its public float falls to less than $75 million.

The comment period for this proposed rule ended by the time this article went to print, but a final decision is likely to occur in November, given that most companies' fiscal year-ends come on December 31.

Cheryl de Mesa Graziano ([e-mail]), CPA, is Director of Research for FERF.

contributed by FERF

                                Current        For Fiscal Year Ending
Category of Filer               Rules          On or After 12/15/05
                                10-K Deadline  10-Q Deadline

Accelerated Filer               60 days        35 days
($75 million or more)
Non-accelerated Filer           90 days        45 days
(less than $75 million)

                                Proposed       For Fiscal Year Ending
Category of Filer               Rules          On or After 12/15/05
                                10-K Deadline  10-Q Deadline

Large Accelerated Filer         60 days        40 days
($700 million or more)
Accelerated Filer               75 days        45 days
(between $75 and $700 million)
Non-accelerated Filer           90 days        45 days
(less than $75 million)