PRA Supporting Statement - Accel Filer Adopt Release.Fianl.1

SUPPORTING STATEMENT FOR 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

In Release No. 34-88365 (“Adopting Release “), 2 the Securities and Exchange
Commission (“Commission”) adopted amendments to the accelerated filer and large accelerated
filer definitions in Rule 12b-2 3 under the Securities Exchange Act of 1934 (“Exchange Act”). 4
The amendments more properly tailor the types of issuers that are included in the categories of
accelerated and large accelerated filers and promote capital formation, preserve capital, and
reduce unnecessary burdens and compliance costs for certain smaller issuers while maintaining
investor protections.
Section 404(a) of the Sarbanes-Oxley Act (“SOX”) 5 requires almost all issuers that file
reports pursuant to Exchange Act Section 13(a) or 15(d) 6 to establish and maintain internal
control over financial reporting (“ICFR”) and have their management assess the effectiveness of
their ICFR. Accelerated and large accelerated filers are also subject to SOX Section 404(b), 7
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 ICFR (“ICFR auditor attestation”). 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 8 and Item 4A of Form 20-F 9 about
unresolved staff comments on their periodic and/or current reports.

1

44 U.S.C. §3501, et seq.

2

Accelerated Filer and Large Accelerated Filer Definitions, Release No. 34-88365 (Mar. 12, 2020) [85 FR
17178 (Mar. 26, 2020). See also Accelerated Filer and Large Accelerated Filer Definitions; Correction,
Release No. 34-88365A (Mar. 30, 2020) [85 FR 19884 (Apr. 9, 2020)].

3

17 CFR 240.12b-2.

4

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

5

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

6

See 17 CFR 240.13a-15 and 17 CFR 240.15d-15.

7

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

8

17 CFR 249.310.

9

17 CFR 249.220f.

1

The amendments exclude from the accelerated and large accelerated filer definitions an
issuer that is eligible to be a smaller reporting company (“SRC”) and that had annual revenues of
less than $100 million in the most recent fiscal year for which audited financial statements are
available (“SRC revenue test”). The amendments also include a specific provision excluding
business development companies from the accelerated and large accelerated filer definitions in
analogous circumstances. In addition, the amendments 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. Further,
the amendments add a revenue test to the transition thresholds for exiting from both accelerated
and large accelerated filer status. Finally, the amendments add a check box to the cover pages of
Forms 10-K, 20-F, and 40-F 10 to indicate whether an ICFR auditor attestation is included in the
filing. As a result of these amendments, certain low-revenue issuers will be required, among
other things, to establish and maintain ICFR and have management assess the effectiveness of
ICFR, but they will not be required to have their management’s assessment of the effectiveness
of ICFR attested to, and reported on, by an independent auditor.
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); 11 and
“Form 10-Q” 12 (OMB Control No. 3235-0070). 13
PURPOSE AND USE OF THE INFORMATION COLLECTION

These amendments would permit certain low-revenue issuers to avoid the compliance
costs of being an accelerated or large accelerated filer, which may represent a meaningful costs
savings for these issuers and have beneficial economic effects on competition and capital
formation without significantly affecting the ability of investors to make informed investment
decisions based on the financial reporting of those issuers. Further, the 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.

10

17 CFR 249.240f.

11

The paperwork burden from 17 CFR 240.12b-1 through 240.12b-37 (“Regulation 12B”) is imposed through the
forms that are subject to the requirements in that regulation and is reflected in the analyses of those forms. The
Commission’s estimate for Forms 10-K takes into account the burden that will be incurred by including the
disclosure in the applicable annual report.

12

17 CFR 249.308a.

13

The only revision to this form will be changing filing deadlines, which will neither increase nor decrease the
burden hours necessary to prepare the filing because there will be no change to the amount of information
required in the filing.

2

3.

CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY

The forms affected by the amendments are filed electronically with the Commission
using the Commission’s Electronic Data Gathering and Retrieval (“EDGAR”) system.
4.

DUPLICATION OF INFORMATION

The Commission believes that the amendments do not duplicate, overlap, or conflict with
other federal rules.
5.

REDUCING THE BURDEN ON SMALL ENTITIES

The Commission believes it is likely that virtually all issuers that are considered “small
businesses” or “small organizations,” as defined in Commission rules, 14 are already non-accelerated
filers and will continue to be encompassed within that category under the amendments. To the extent
any such issuers are not already non-accelerated filers, the Commission believes it is likely that the
amendments capture those entities.
6.

CONSEQUENCES OF NOT CONDUCTING COLLECTION

The regulations and forms set forth the disclosure requirements for periodic and current
reports filed by companies to help investors make informed investment decisions. Not
conducting these collections 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

In Release No. 34-85814 (“Proposing Release”), 15 the Commission proposed
amendments to the accelerated filer and large accelerated filer definitions and solicited comment
on the new “collection of information” requirements and associated paperwork burdens. Also,
the Commission submitted the proposed amendments to the Office of Management and Budget
(“OMB”) for review in accordance with the PRA. 16 The Commission considered all comments
received prior to adopting the amendments as required by 5 C.F.R. 1320.11(f). While several
commenters provided comments on the possible costs of the proposed amendments, no
commenters specifically addressed the PRA analysis. The comment letters are available to the
14

For purposes of the Regulatory Flexibility Act, under our rules, an issuer, other than an investment company, is
a “small business” or “small organization” if it had total assets of $5 million or less on the last day of its most
recent fiscal year.

15

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

16

44 U.S.C. 3507(d) and 5 CFR 1320.11.

3

public on the Commission’s website at https://www.sec.gov/comments/s7-06-19/s70619.htm.
Where appropriate, the Commission has revised its burden estimates after considering these
comments as well as differences between the proposed and final rules.
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 collection of
information in connection with these rulemaking amendments: Form 10-K. The information
collection collect basic Personally Identifiable Information 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
Privacy Impact Assessment (“PIA”) of the EDGAR system, in connection with this collection of
information. The EDGAR PIA, 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

The Commission estimates that the final amendments will result in approximately 527
additional issuers being classified as non-accelerated filers. 17 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.
a.

17

ICFR Auditor Attestation Requirement

The amendments apply to foreign private issuers (“FPIs”) only an FPI files on a domestic form and presents its
financial statements pursuant to U.S. GAAP, as well as meeting the required thresholds and other qualifications.
The Commission estimates that there are no FPIs that file on domestic forms and present their financial
statements pursuant to U.S. GAAP that would meet the required thresholds and other qualifications of the
amendments. However, there are an estimated 31 FPIs that file on forms only available to FPIs, but otherwise
meet the required thresholds and other qualifications. In the Proposing Release, the Commission included FPIs
that file the forms available only to FPIs, but otherwise meet the required thresholds and other qualifications, in
the number of affected issuers. While these issuers could become subject to the amendments by changing their
reporting regime, it is difficult to predict how many would do so, as a result, the Commission does not include
them in the number of affected issuers in this release. Accordingly, the Commission does not estimate any
effect on the collections of information corresponding to Forms 20-F or 40-F.

4

The Commission believes that expanding the exemption from the ICFR auditor
attestation requirement will reduce the PRA burden for 373 of the 527 affected issuers. 18 An
ICFR auditor attestation is required only in annual reports. Table 1, below, shows the estimated
number of affected issuers that are subject to the ICFR auditor attestation requirement that file on
Form 10-K and the average estimated audit-fee and non-audit costs to comply with the ICFR
auditor attestation requirement. 19
Table 1. Estimated Annual Costs Per Issuer of ICFR Auditor Attestation Requirement for
Specified Form
Form Type
Form 10-K

Number of
Affected Issuers
373

Audit-Fee Costs
Per Issuer
$110,000

Non-Audit Costs
Per Issuer
$100,000

Because these issuers would no longer be subject to the ICFR auditor attestation
requirement under the amendments, they would no longer incur these costs. For purposes of the
PRA, this reduction in total burden is allocated between a reduction in internal burden hours and
a reduction in outside professional costs. Table 2, below, sets forth the percentage estimates the
Commission typically uses for the burden allocation.
Table 2. Standard Estimated Burden Allocation for Specified Form
Form Type
Form 10-K

Internal
75%

Outside Professionals
25%

For the $100,000 reduction in annual non-audit costs, 20 the Commission allocates the
burden based on the percentages in Table 2 above. However, the Commission believes that 100
percent 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,
18

The Commission estimates that the remaining 154 of the 527 affected issuers are Emerging Growth Companies
(“EGCs”), which are not required to comply with the ICFR auditor attestation requirement under SOX Section
404(b). See Section IV.C.1. of the Adopting Release. In addition to the 154 EGCs, the Commission estimates
that a further 78 of the 527 affected issuers are currently also subject to the FDIC’s auditor attestation
requirement. See Section 18A of Appendix A to FDIC Rule 363. These issuers would continue to incur burden
hours and costs associated with an auditor attestation requirement even under the final amendments. However,
the FDIC’s auditor attestation requirement is not part of the Commission’s rules. For purposes of considering
the PRA effects of the final amendments, therefore, the Commission has reduced the burden hours and costs for
these 78 issuers as it would for the other affected issuers that are not EGCs.

19

See Sections IV.C.3. and IV.C.5. of the Adopting Release.

20

As discussed in Section IV.C.3, of the Adopting Release, in deriving this estimate of the reduction in non-audit
costs, the Commission has looked to outside vendor and internal labor costs, and not to non-labor costs, because
it believes that those non-labor costs (such as software, hardware, and travel costs) are primarily attributable to
management’s ICFR responsibilities under SOX Section 404(a) and thus would continue to be incurred. To the
extent elimination of the auditor attestation requirement also results in a reduction in management’s time
burden, the Commission believes this reduction generally is captured by the estimated $100,000 reduction, as
this amount reflects an overall reduction in non-audit costs.

5

below, shows the resulting estimated reduction in cost per issuer associated with outside
professionals.
Table 3. Estimated Reduction in Outside Professional Costs from Elimination of ICFR
Auditor Attestation Requirement
Issuer
Type
(Form
Used)
[A]

Outside
Professional
Costs Per
Issuer
(Non-Audit)
[B]

Outside
Professional
Costs Per
Issuer
(Audit Fees)
[C]

Form 10-K

$25,000

$110,000

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

Number of
Affected
Issuers
[E]

373

Total
Reduction in
Outside
Professional
Costs
(D x E)
[F]
$50,355,000

For PRA purposes, an issuer’s internal burden is estimated in internal burden hours. The
Commission is, therefore, converting the internal portions of the non-audit costs to burden hours.
These activities are mostly be performed by a number of different employees with different
levels of knowledge, expertise, and responsibility. The Commission believes these internal labor
costs will be less than the $400 per hour figure it typically uses for outside professionals retained
by the issuer. Therefore, the Commission uses an average rate of $200 per hour to estimate an
issuer’s internal non-audit labor costs. Table 4, below, shows the resulting estimated reduction
in internal burden hours from the elimination of the ICFR auditor attestation requirement.
Table 4. Estimated Reduction in Internal Burden Hours from Elimination of ICFR
Auditor Attestation Requirement
Issuer Type
(Form Used)
[A]
Form 10-K
b.

Internal Cost
Per Issuer
(Non-Audit)
[B]

Burden Hours
Per Issuer
(B / $200)
[C]

Number of
Affected
Issuers
[D]

$75,000

375

373

Total Reduction
in Internal
Burden Hours
(C x D)
[E]
139,875

Filing Deadlines, Disclosure Regarding Filing Availability, and
Unresolved Staff Comments

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. 21 Therefore, the Commission does
not believe that the change to the filing deadlines will affect an issuer’s burden hours or costs for
PRA purposes.

21

See 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)].

6

The Commission believes 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 will reduce their burden hours and costs, but it does not expect that reduction to be
significant. For purposes of the PRA, the Commission estimates the reduction to be
approximately one hour for each affected issuer. 22 However, as opposed to the burden reduction
resulting from the elimination of the ICFR auditor attestation requirement, which would apply
only to 373 of the 527 total affected issuers that are not EGCs, the burden reduction from
eliminating these disclosure requirements will apply to all the 527 affected issuers, including the
154 affected issuers that are EGCs. That reduction is allocated as shown in Table 5, below.
Table 5. Estimated Reduction in Internal Burden Hours Per Issuer from Elimination of
Disclosure Requirements Regarding Filing Availability and Unresolved Staff Comments
Form Type
[A]

Form 10-K
c.

Burden Hours
Per Issuer
[B]

Number of Affected
Issuers
[C]

Reduction in Internal
Burden Hours
(B x C)
[D]

1

527

527

Check Box Disclosure

In a change from the proposed amendments, the final amendments add a check box to the
cover pages of annual reports on Forms 10-K, 20-F, and 40-F 23 for issuers to indicate that they
included an ICFR auditor attestation in the filing. In addition, if the issuer is otherwise required
to tag cover page disclosure data using Inline XBRL, it must also to tag the cover page check
box disclosure using Inline XBRL. Issuers must already determine whether they are subject to
the ICFR auditor attestation requirement, so requiring issuers to add a check box to the cover
pages of their annual reports on Forms 10-K, 20-F, and 40-F, and check that box if they provide
the ICFR auditor attestation, will not substantively modify existing collection of information
requirements or otherwise affect the overall burden estimates associated with these forms.
Therefore, the Commission is not adjusting any burden or cost estimates in connection with the
check box requirement in the final amendments.
d.

Total Burden Reduction

Table 6, below, shows the total estimated reduction in internal burden hours and outside
professional costs for all aspects of the amendments.

22

The Commission believes that this one-hour reduction will be solely for an issuer’s internal burden hours.

23

We estimate that the amendments will not affect the PRA costs and burdens associated with Forms 20-F and 40F. See supra note 17.

7

Table 6. Requested Paperwork Burden Under the Amendments
Current Burden
Current
Annual
Responses
(A)

10-K

8,292

14.

Current
Burden
Hours
(B)

Burden Change
Current
Cost
Burden
(C)

Change in
Company
Hours from
Auditor
Attestation
(D)

14,188,040 $1,893,793,119 (139,875)

Change in
Total
Change in
Burden Cost Burden for
Company Change in Professional Hours for
Affected
Hours from Company
Costs
Affected
Responses
Disclosure
Responses
Hours
(G)
(I)
Requirement
(F)
(H)
= (C) + (G)
Elimination
(E)
= (D) + (E)
= (B) + (F)

(527)

(140,402) ($50,355,000) 14,047,638 $1,843,438,119

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 $119,447,840 million in fiscal year 2020, 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

The Commission adopted the amendments to the accelerated filer and large accelerated
filer definitions to permit certain low-revenue issuers to avoid the compliance costs of being an
accelerated or large accelerated filer, which may have beneficial economic effects on
competition and capital formation. As described in further detail in Items 12 and 13, the
amendments more appropriately tailor the types of issuers that are included in the categories of
accelerated and large accelerated filers, among other things. 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.

8

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

Form
10-K
Total

Annual Number
of Responses
Previously
Requested
Approved

Change

Annual Time Burden
(Hours)
Previously
Requested
Decrease
Approved
In
Burden

Annual Burden Cost Burden
($)
Previously
Requested
Decrease
Approved
In Cost
Burden

8,292

8,292

0

14,188,040

14,047,638

(140,402)

$1,893,793,119

$1,843,438,119

($50,355,000)

8,292

8,292

0

14,188,040

14,047,638

(140,402)

$1,893,793,119

$1,843,438,119

($50,355,000)

16.

INFORMATION COLLECTION PLANNED FOR STATISTICAL
PURPOSES

The information collection does not employ statistical methods.
17.

APPROVAL TO OMIT OMB EXPIRATION DATE

The Commissions requests 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 is no exceptions to certification for the PRA submission.
B.

STATISTICAL METHODS
The information collection does not employ statistical methods.

9

Form 10-K Short Statement
The amendments exclude from the accelerated and large accelerated filer definitions an
issuer that is eligible to be a smaller reporting company and that had annual revenues of less than
$100 million in the most recent fiscal year for which audited financial statements are available.
In addition, the amendments 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. Further, the amendments
add a revenue test to the transition thresholds for exiting from both accelerated and large
accelerated filer status. Finally, the amendments add a check box to the cover page of Form 10K to indicate whether an internal control over financial reporting auditor attestation is included in
the filing.
An issuer that is excluded from the definitions of accelerated filer and large accelerated
filer is not be subject to accelerated or large accelerated filing deadlines for its annual and
quarterly reports or the internal control over financial reporting auditor attestation requirement.
The issuer also does 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.
For Form 10-K, the Commission estimates that the amendments would result in a
reduction of approximately 140,402 internal burden hours and a reduction of approximately
$50,355,000 in outside professional costs.

10