Accel Filer Proposing Release.SupportingStatement.Final

SUPPORTING STATEMENT FOR PROPOSED RULES RELATING TO
AMENDMENTS TO THE ACCELERATED FILER AND LARGE ACCELERATED
FILER DEFINITIONS
This supporting statement is part of a submission under the Paperwork Reduction Act of
1995 (“PRA”).1
A.

JUSTIFICATION
1.

CIRCUMSTANCES MAKING THE COLLECTION OF INFORMATION
NECESSARY

On May 9, 2019, the Securities and Exchange Commission (“Commission”) proposed
amendments2 to the accelerated filer and large accelerated filer definitions in Rule 12b-23 under
the Securities Exchange Act of 1934 (“Exchange Act”).4 Accelerated and large accelerated filers
are subject to Section 404(b) of the Sarbanes-Oxley Act (“SOX”),5 which requires those issuers
to have the independent auditor that prepares or issues their financial statement audit report attest
to, and report on, management’s assessment of the effectiveness of their internal control over
financial reporting (“ICFR auditor attestation”). An ICFR auditor attestation is required only in
annual reports on Forms 10-K,6 20-F,7 and 40-F.8 Additionally, accelerated and large
accelerated filers are subject to shorter deadlines for filing their Exchange Act periodic reports
and must provide disclosure regarding the availability of their filings on their Internet websites
and the disclosure required by Item 1B of Form 10-K and Item 4A of Form 20-F about
unresolved staff comments on their periodic and/or current reports.
The proposed amendments would exclude from the accelerated and large accelerated filer
definitions an issuer that is eligible to be a smaller reporting company and had annual revenues
of less than $100 million in the most recent fiscal year for which audited financial statements are
available. In addition, the proposed amendments would increase the transition thresholds for
accelerated and large accelerated filers becoming non-accelerated filers from $50 million to $60
million and for exiting large accelerated filer status from $500 million to $560 million. Finally,
the proposed amendments would add a revenue test to the transition thresholds for exiting both
accelerated and large accelerated filer status.
1

44 U.S.C. §3501, et seq.

2

Amendments to the Accelerated Filer and Large Accelerated Filer Definition, Release No. 34-85814 (May 9,
2019) [84 FR 24876 (May 29, 2019)] (“Proposing Release”).

3

17 CFR 240.12b-2.

4

15 U.S.C. 78a et seq.

5

15 U.S.C. 7262(b).

6

17 CFR 249.310.

7

17 CFR 249.220f.

8

17 CFR 249.240f.

1

The amendments contain “collection of information” requirements within the meaning of
the PRA. The titles for the collection of information are:



2.

“Form 10-K” (OMB Control No. 3235-0063);
“Form 20-F” (OMB Control No. 3235-0288); and
“Form 40-F” (OMB Control No. 3235-0381).9
PURPOSE AND USE OF THE INFORMATION COLLECTION

As a result of the proposed amendments, an issuer that is excluded from the definitions
of accelerated filer and large accelerated filer would not be subject to accelerated or large
accelerated filing deadlines for its annual and quarterly reports or the ICFR auditor attestation
requirement. The issuer also would not have to provide the disclosure required by Item 1B of
Form 10-K and Item 4A of Form 20-F about unresolved staff comments on its periodic and/or
current reports or the disclosure required by Item 101(e)(4) of Regulation S-K about whether it
makes filings available on or through its Internet website.
Permitting these issuers to avoid the burden of being an accelerated or large accelerated
filer may enhance their ability to preserve capital without significantly affecting the ability of
investors to make informed investment decisions based on the financial reporting of those
issuers. Additionally, the benefits of having those issuers comply with the accelerated and large
accelerated filer requirements may be more limited than for other issuers. Further, the proposed
amendments are targeted at issuers whose representation in public markets have decreased over
the years, and may be a positive factor in the decision of additional companies to register their
offering or a class of their securities, which would provide an increased level of transparency and
investor protection with respect to those companies.
3.

CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY

The forms that require the new disclosure requirement are filed electronically with the
Commission using the Commission’s Electronic Data Gathering and Retrieval (“EDGAR”)
system.
4.

DUPLICATION OF INFORMATION

We believe that the proposed amendments would not duplicate, overlap, or conflict with
other federal rules.

9

Our estimates for Forms 10-K, 20-F, and 40-F take into account the burden that would be incurred by including
the proposed disclosure in the applicable annual report. The paperwork burden from Regulation 12B, 17 CFR
240.12b-1 through 240.12b-37, is imposed through the forms that are subject to the requirements in that
regulation and is reflected in the analysis of those forms. After the Proposing Release was issued, the OMB
discontinued the OMB control number for Regulation 12B, so that the PRA inventory would not reflect
duplicative burdens. No PRA package will be submitted for that collection of information. Additionally, the
only proposed revision to Form 10-Q, 17 CFR 249.308a, would be changing filing deadlines, which would
neither increase nor decrease the burden hours necessary to prepare the filing because there would be no change
to the amount of information required in the filing.

2

5.

REDUCING THE BURDEN ON SMALL ENTITIES

We believe it is likely that virtually all issuers that would be considered small businesses or
small organizations, as defined in our rules, are already non-accelerated filers and would continue to
be encompassed within that category if the proposed amendments are adopted. To the extent any
such issuers are not already non-accelerated filers, we believe it is likely that the proposed
amendments would capture those entities.
6.

CONSEQUENCES OF NOT CONDUCTING COLLECTION

The regulations and forms set forth the disclosure requirements for registration
statements, and periodic, and current reports filed by companies to help investors make informed
investment decisions. Not conducting this collection would deprive investors of access to
information that is important to their voting and investment decisions.
7.

SPECIAL CIRCUMSTANCES

There are no special circumstances in connection with these amendments.
8.

CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY

The Proposing Release solicits comment on the new “collection of information”
requirements and the associated paperwork burdens. In response to the solicitation for comment
in the Proposing Release, registrants, investors, and other market participants provide comments.
In addition, the Commission and staff participate in ongoing dialogue with representatives of
various market participants through public conferences, roundtables, and meetings. All
comments received on the proposal are available at https://www.sec.gov/comments/s7-0619/s70619.htm. The Commission will consider all comments received prior to publishing the
final rules as required by 5 CFR 1320.11(f).
9.

PAYMENT OR GIFT TO RESPONDENTS

No payment or gift has been provided to any respondents.
10.

CONFIDENTIALITY

All documents submitted to the Commission are available to the public.
11.

SENSITIVE QUESTIONS

No information of a sensitive nature would be required under the following collections of
information in connection with these rulemaking amendments: Forms 10-K, 20-F, and
40-F. The information collections collect basic PII that may include a name and job title.
However, the agency has determined that the information collections do not constitute a system
of record for purposes of the Privacy Act. Information is not retrieved by a personal identifier.
In accordance with Section 208 of the E-Government Act of 2002, the agency has conducted a
PIA of the EDGAR system, in connection with this collection of information. The EDGAR PIA,
3

published on February 5, 2020, is provided as a supplemental document and is also available at
https://www.sec.gov/privacy.
12. and 13.

ESTIMATES OF HOUR AND COST BURDENS

We estimate that the proposed amendments would result in approximately 539 additional
issuers being classified as non-accelerated filers. Accelerated filers are subject to the ICFR
auditor attestation requirement and shorter deadlines for filing their Exchange Act periodic
reports. Additionally, accelerated filers must provide disclosure regarding the availability of
their filings and the disclosure required by Item 1B of Form 10-K and Item 4A of Form 20-F
about unresolved staff comments on their periodic and/or current reports.
We believe that eliminating the ICFR auditor attestation requirement would reduce the
PRA burden for 358 of the 539 affected issuers.10 An ICFR auditor attestation is required only in
annual reports on Forms 10-K, 20-F, and 40-F. The table below shows the estimated number of
affected issuers that are subject to the ICFR auditor attestation requirement that file on each of
these forms and the average estimated audit-fee and non-audit costs to comply with the ICFR
auditor attestation requirement.
Table 1. Estimated Annual Costs Per Issuer of ICFR Auditor Attestation Requirement for
Specified Forms
Form Type
Form 10-K
Form 20-F
Form 40-F11

Number of
Affected Issuers
322
35
1

Audit-Fee Costs
Per Issuer
$110,000
$110,000
$110,000

Non-Audit Costs
Per Issuer
$100,000
$100,000
$100,000

Because these issuers would no longer be subject to the ICFR auditor attestation
requirement under the proposed amendments, they would no longer incur these costs. For
purposes of the PRA, this reduction in total burden is to be allocated between a reduction in
internal burden hours and a reduction in outside professional costs. The table below sets forth
the percentage estimates we typically use for the burden allocation for each form.

10

We estimate that the remaining 181 of the 539 affected issuers are emerging growth companies, which are not
required to comply with the ICFR auditor attestation requirement under SOX Section 404(b).

11

Form 40-F does not require disclosure of filer status or public float, which makes it very difficult to determine
filer status. So as not to overestimate the burden hour and cost reduction of the proposed amendments, we
estimate that only one MJDS issuer that files on Form 40-F would not be subject to the ICFR auditor attestation
requirement.

4

Table 2. Standard Estimated Burden Allocation for Specified Forms
Form Type
Form 10-K
Form 20-F
Form 40-F

Internal
75%
25%
25%

Outside Professionals
25%
75%
75%

For the $100,000 reduction in annual non-audit costs, we allocate the burden based on the
percentages in Table 2 above. However, we believe that 100% of the $110,000 annual burden
reduction for audit-fee costs related to the ICFR auditor attestation requirement should be
ascribed to outside professional costs because that amount is an estimate of fees paid to the
independent auditor conducting the ICFR attestation audit. Table 3, below, shows the resulting
estimated reduction in cost per issuer associated with outside professionals.
Table 3. Estimated Reduction in Outside Professional Costs from Proposed Elimination of
ICFR Auditor Attestation Requirement
Issuer
Type
(Form
Used)

Outside
Professional
Costs Per
Issuer
(Non-Audit)

Outside
Professional
Costs Per
Issuer
(Audit Fees)

Form 10-K
Form 20-F
Form 40-F

$25,000
$75,000
$75,000

$110,000
$110,000
$110,000

Total Outside
Professional
Costs Per
Issuer
(Non-Audit +
Audit Fees)
$135,000
$185,000
$185,000

Number
of
Affected
Issuers

322
35
1

Total
Proposed
Reduction in
Outside
Professional
Costs
$43,470,000
$6,475,000
$185,000

For PRA purposes, an issuer’s internal burden is estimated in internal burden hours. We
are, therefore, converting the internal portions of the non-audit costs to burden hours. These
activities would mostly be performed by a number of different employees with different levels of
knowledge, expertise, and responsibility. We believe these internal labor costs will be less than
the $400 per hour figure we typically use for outside professionals retained by the issuer.
Therefore, we use an average rate of $200 per hour to estimate an issuer’s internal non-audit
labor costs. The table below shows the resulting estimated reduction in internal burden hours
from the proposed elimination of the ICFR auditor attestation requirement.
Table 4. Estimated Reduction in Internal Burden Hours from Proposed Elimination of
ICFR Auditor Attestation Requirement
Issuer Type
(Form Used)

Form 10-K
Form 20-F
Form 40-F

Internal Cost
Per Issuer
(Non-Audit)
$75,000
$25,000
$25,000

Burden Hours
Per Issuer
(Internal Cost /
$200)
375
125
125
5

Number of
Affected
Issuers
322
35
1

Total Proposed
Reduction in
Internal Burden
Hours
120,750
4,375
125

As the Commission has recognized previously, changing filing deadlines neither
increases nor decreases the burden hours necessary to prepare the filing because there is no
change to the amount of information required in the filing.12 Therefore, we do not believe that
the proposed change to the filing deadlines would affect an issuer’s burden hours or costs for
PRA purposes.
We believe that eliminating the requirements to provide disclosure regarding the
availability of their filings and the disclosure required by Item 1B of Form 10-K and Item 4A of
Form 20-F about unresolved staff comments on their periodic and/or current reports would
reduce issuers’ burden hours and costs, but we do not expect that reduction to be significant. As
opposed to the burden reduction resulting from the elimination of the ICFR auditor attestation
requirement, which would apply only to 358 of the 539 total affected issuers that are not EGCs,
the burden reduction from eliminating these disclosure requirements would apply to all the 539
affected issuers, including the 181 affected issuers that are EGCs. Of these 181 affected EGC
issuers, 160 file annual reports on Form 10-K, 21 file annual reports on Form 20-F, and none file
annual reports on Form 40-F. For purposes of the PRA, we estimate the reduction to be
approximately one hour for each of the 539 affected issuers.13 That reduction is allocated by
form as shown in Table 5, below.
Table 5. Estimated Reduction in Internal Burden Hours Per Issuer from Proposed
Elimination of Disclosure Requirements Regarding Filing Availability and Unresolved
Staff Comments
Form Type

Form 10-K
Form 20-F
Form 40-F

Burden Hours
Per Issuer

Number of Affected
Issuers

Proposed Reduction in
Internal Burden Hours

1
1
1

482
56
1

482
56
1

The table below shows the total estimated reduction in internal burden hours and outside
professional costs for all aspects of the proposed amendments.

12

Revisions to Accelerated Filer Definition and Accelerated Deadlines for Filing Periodic Reports, Release No.
33-8644 (Dec. 21, 2005) [70 FR 76634 (Dec. 27, 2005)].

13

We believe that this one-hour reduction will be solely for an issuer’s internal burden hours.

6

Table 6. Requested Paperwork Burden under the Proposed Amendments

Current Burden
Current
Annual
Responses
(A)

10-K
20-F
40-F

8,137
725
132

14.

Current
Burden
Hours
(B)

Proposed Burden Change
Current
Cost
Burden
(C)

Proposed
Change in
Company
Hours from
Auditor
Attestation
(D)

14,198,780 $1,895,224,719 (120,750)
479,304
$576,875,025
(4,375)
14,237
$17,084,560
(125)

Proposed
Change in
Company
Hours from
Disclosure
Requirement
Elimination
(E)

(482)
(56)
(1)

Proposed
Total
Change in
Company
Hours
(F)

Proposed
Change in
Professional
Costs
(G)

Proposed
Burden
Hours for
Affected
Responses
(H)

Proposed Cost
Burden for
Affected
Responses
(I)
= (C) + (G)

= (D) + (E)

= (B) + (F)

(121,232) ($43,470,000) 14,077,548 $1,851,754,719
(4,431)
($6,475,000) 474,873
$570,400,025
(126)
($185,000)
14,111
$16,899,560

COSTS TO FEDERAL GOVERNMENT

The annual cost of reviewing and processing disclosure documents, including registration
statements, post-effective amendments, proxy statements, annual reports and other filings of
operating companies amounted to approximately $103,479,690 in fiscal year 2019, based on the
Commission’s computation of the value of staff time devoted to this activity and related
overhead.
15.

REASON FOR CHANGE IN BURDEN

We are proposing amendments to the accelerated filer and large accelerated filer
definitions to promote capital formation for smaller reporting issuers, by more appropriately
tailoring the types of issuers that are included in the categories of accelerated and large
accelerated filers and revising the transition thresholds for accelerated and large accelerated
filers. As a result of the amendments, certain low-revenue issuers would not be required to have
their assessment of the effectiveness of internal control over financial reporting attested to, and
reported on, by an independent auditor, although they would continue to be required to make
such assessments and to establish and maintain the effectiveness of their internal control over
financial reporting.
The table below illustrates the changes in cost and hour burdens from the burdens
currently approved by OMB. The total estimated burdens were calculated by adding the
incremental burdens to the existing burdens.

7

Table 7. Summary of Revised Annual Responses, Burden Hours, and Burden Hour Cost
Estimates for Each Information Collection
IC
Title

Form
10-K
Form
20-F
Form
40-F
Total

Annual Number
of Responses
Previously
Requested
Approved

Change

Annual Time Burden
(Hours)
Previously
Requested
Change
Approved

Annual Burden Cost Burden
($)
Previously
Requested
Change
Approved

8,137

8,137

0

14,198,780

14,077,548

(121,232)

$1,895,224,719

$1,851,754,719

($43,470,000)

725

725

0

479,304

474,873

(4,431)

$576,875,025

$570,400,025

($6,475,000)

132

132

0

14,237

14,111

(126)

$17,084,560

$16,899,560

($185,000)

8,994

8,994

0

14,692,321

14,566,532

(125,789)

$2,489,184,304

$2,439,054,304

($50,130,000)

16.

INFORMATION COLLECTION PLANNED FOR STATISTICAL
PURPOSES

The information collections do not employ statistical methods.
17.

APPROVAL TO OMIT OMB EXPIRATION DATE

We request authorization to omit the expiration date on the electronic version of this
form. Including the expiration date on the electronic version of the form will result in increased
costs, because the need to make changes to the form may not follow the application’s scheduled
version release dates. The OMB control number will be displayed.
18.

EXCEPTIONS TO CERTIFICATION FOR PAPERWORK REDUCTION
ACT SUBMISSIONS

There are no exceptions to certification for the Paperwork Reduction Act submissions.
B.

STATISTICAL METHODS
The information collections do not employ statistical methods.

8

Form 10-K Short Statement
The proposed amendments would exclude from the accelerated and large accelerated filer
definitions an issuer that is eligible to be a smaller reporting company and had annual revenues
of less than $100 million in the most recent fiscal year for which audited financial statements are
available. In addition, the proposed amendments would increase the transition thresholds for
accelerated and large accelerated filers becoming non-accelerated filers from $50 million to $60
million and for exiting large accelerated filer status from $500 million to $560 million. Finally,
the proposed amendments would add a revenue test to the transition thresholds for exiting both
accelerated and large accelerated filer status.
Accelerated filers are subject to the ICFR auditor attestation requirement and shorter
deadlines for filing their Exchange Act periodic reports. Additionally, accelerated filers must
provide disclosure regarding the availability of their filings and the disclosure required by Item
1B of Form 10-K and Item 4A of Form 20-F about unresolved staff comments on their periodic
and/or current reports. Because these issuers would no longer be subject to these requirements
under the proposed amendments, they would no longer incur these costs, which would decrease
the burdens and costs for registrants to prepare and review the affected collections of
information.
For Form 10-K, we estimate that the proposed amendments would result in a reduction of
approximately 121,232 internal burden hours and a reduction of approximately $43,470,000 in
outside professional costs.

9

Form 20-F Short Statement
The proposed amendments would exclude from the accelerated and large accelerated filer
definitions an issuer that is eligible to be a smaller reporting company and had annual revenues
of less than $100 million in the most recent fiscal year for which audited financial statements are
available. In addition, the proposed amendments would increase the transition thresholds for
accelerated and large accelerated filers becoming non-accelerated filers from $50 million to $60
million and for exiting large accelerated filer status from $500 million to $560 million. Finally,
the proposed amendments would add a revenue test to the transition thresholds for exiting both
accelerated and large accelerated filer status.
Accelerated filers are subject to the ICFR auditor attestation requirement and shorter
deadlines for filing their Exchange Act periodic reports. Additionally, accelerated filers must
provide disclosure regarding the availability of their filings and the disclosure required by Item
1B of Form 10-K and Item 4A of Form 20-F about unresolved staff comments on their periodic
and/or current reports. Because these issuers would no longer be subject to these requirements
under the proposed amendments, they would no longer incur these costs, which would decrease
the burdens and costs for registrants to prepare and review the affected collections of
information.
For Form 20-F, we estimate that the proposed amendments would result in a reduction of
approximately 4,431 internal burden hours and a reduction of approximately $6,475,000 in
outside professional costs.

10

Form 40-F Short Statement
The proposed amendments would exclude from the accelerated and large accelerated filer
definitions an issuer that is eligible to be a smaller reporting company and had annual revenues
of less than $100 million in the most recent fiscal year for which audited financial statements are
available. In addition, the proposed amendments would increase the transition thresholds for
accelerated and large accelerated filers becoming non-accelerated filers from $50 million to $60
million and for exiting large accelerated filer status from $500 million to $560 million. Finally,
the proposed amendments would add a revenue test to the transition thresholds for exiting both
accelerated and large accelerated filer status.
Accelerated filers are subject to the ICFR auditor attestation requirement and shorter
deadlines for filing their Exchange Act periodic reports. Additionally, accelerated filers must
provide disclosure regarding the availability of their filings and the disclosure required by Item
1B of Form 10-K and Item 4A of Form 20-F about unresolved staff comments on their periodic
and/or current reports. Because these issuers would no longer be subject to these requirements
under the proposed amendments, they would no longer incur these costs, which would decrease
the burdens and costs for registrants to prepare and review the affected collections of
information.
For Form 40-F, we estimate that the proposed amendments would result in a reduction of
approximately 126 internal burden hours and a reduction of approximately $185,000 in outside
professional costs.

11