Companies that will qualify as “smaller reporting companies” for the first time under the SEC’s recently revised definition should consider whether to take advantage of the simplified reporting requirements that will become available to them on September 10, the effective date of the new rule. For example, a calendar-year issuer that qualified as a smaller reporting company as of June 29, 2018 (the last business day of its second fiscal quarter) can comply with the smaller reporting company disclosure requirements in its Form 10-Q for the third quarter of 2018. In Form 10-Q, smaller reporting companies:
- can prepare their financial statements under Article 8 of Regulation S-X, which can be slightly less onerous than the full requirements of Regulation S-X;
- are not required to provide or update risk factors; and
- are not required to provide quantitative or qualitative disclosures about market risk under Item 305 of Regulation S-K.
Smaller reporting companies enjoy more extensive relief in their annual reports on Form 10-K and annual proxy statements.