| Criteria | Previous SRC Definition | Revised SRC Definition |
|---|---|---|
| Public Float | Public float of less than $75 million | Public float of less than $250 million |
| Revenues | Less than $50 million of annual revenues and no public float |
Less than $100 million of annual revenues and
|
For purposes of determining whether or not it is an SRC, a reporting issuer (vs. a non-reporting issuer filing its first registration statement) must measure its public float annually, on the last trading day of the second fiscal quarter of the previous fiscal year. Qualifying issuers are then eligible to use scaled disclosure rules for the first quarterly report on Form 10-Q for the fiscal year following the determination. Newly eligible SRCs may “early adopt” those rules for the quarterly report immediately following the determination.
Once a company fails to qualify as an SRC, it may continue to report under SRC disclosure requirements through the end of that fiscal year. However, in order to re-qualify as an SRC, the company must meet more stringent qualification thresholds. The subsequent qualification thresholds, set forth in the table below, are set at 80% of the initial qualification thresholds in the table above.
| Criteria | Previous SRC Definition | Revised SRC Definition |
|---|---|---|
| Public Float | Public float of less than $50 million | Public float of less than $250 million |
| Revenues | Less than $40 million of annual revenues and no public float | Less than $80 million of annual revenues, if it previously had $100 million or more of annual revenues; and
Less than $560 million of public float, if it previously had $700 million or more of public float. |
It is worth noting that a company may qualify as an SRC, but still be an accelerated filer. The amendments do not change the threshold in the “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. However, the SEC staff has begun to formulate recommendations to the Commission for possible additional changes to the “accelerated filer” definition to reduce the number of companies that qualify as accelerated filers.
In addition to amendments to the definition of “smaller reporting company,” the SEC also adopted amendments to Rule 3-05(b)(2)(iv) of Regulation S-X, in order to increase the net revenue threshold in that rule from $50 million to $100 million. As a result, companies may omit financial statements of businesses acquired or to be acquired for the earliest of the three fiscal years otherwise required by Rule 3-05 if the net revenues of that business are less than $100 million.
