The proposal would expand the number of companies designated as nonaccelerated filers to include those companies with less than $100 million in annual revenues that meet the SEC’s definition of a smaller reporting company. They no longer would need an independent auditor to look over management’s shoulders with regard to internal control over financial reporting (ICFR). Biotech companies are the big beneficiaries of this, and many support the SEC’s proposal.
Tobin Schilke, CFO of Revance Therapeutics, told the SEC that the current requirement’s “disproportionate expense…diverts capital away from research and development and is not material for or important to our investors.”
Yet PwC told the SEC that eliminating the current requirement for small companies “may potentially have a detrimental impact on the quality of financial reporting for these registrants.” But it went on to say any detrimental impact might be countered by careful management assessment of the effectiveness of ICFR and an auditor’s normal scrutiny of a company’s books. The Council of Institutional Investors opposes the proposed rule.