The Division of Corporation Finance (the "division") of the United States Securities and Exchange Commission (SEC) recently posted slides from an annual presentation at the Forum on Auditing in the Small Business Environment. The December 2012 forum, during which common financial reporting issues for smaller companies were discussed, was hosted by the Public Company Accounting Oversight Board (PCAOB). The slides focus on areas in which the staff of the division (the "staff") frequently provides comments when reviewing the reports of smaller public companies, as well as recent SEC developments. The slides contain detailed discussions of the following areas in which the staff routinely provides comments:
- reverse mergers
- disclosure controls and procedures, internal control over financial reporting and certifications
- equity transactions
- stock compensation
- embedded conversion options and freestanding warrants
- deferred tax valuation allowances
- items 4.01 and 4.02 of Form 8-K
- audit reports
- smaller reporting company status
The SEC slides provide in-depth discussion and examples regarding how to adequately comply with required reporting to avoid staff comments, as well as directing readers to specific resources for guidance on adequate compliance. Some of the resources to which small business issuers are directed on the SEC's website include: (i) the Corporation Finance Division's pages (including staff guidance and interpretations, disclosure program updates, division announcements, and statutes, rules and forms); (ii) the "information for small businesses" link; and (iii) information for accountants in the corporation finance reporting guidance link (including the Division of Corporation Finance Financial Reporting Manual, the Division of Corporation Finance Compliance & Disclosure Interpretations, Staff Accounting Bulletins, Corporation Finance Comment Letters, the Corporation Finance Filing Review Process, and Disclosure Guidance Topics).
The slides regarding recent key developments and staff initiatives discuss:
- the Dodd-Frank Wall Street Reform and Consumer Protection Act rulemaking and studies
- the JOBS Act rulemaking and studies
- a commission statement in support of convergence and global accounting standards
- updates to the division's financial reporting manual
- new Corporation Finance compliance and disclosure interpretations
- Corporation Finance disclosure guidance topics
These slides direct readers to the SEC's dedicated Internet sites containing detailed information regarding these key developments and staff initiatives. Additionally, the slides provide a brief discussion of "emerging growth companies" under the JOBS Act, since that part of the act was effective immediately upon enactment and may be relevant to companies currently reporting as smaller reporting companies.
The slides also briefly discuss the review process itself and the types of comments generally given by the staff.
For additional information, the slides are available at: http://www.sec.gov/news/speech/2013/pcaob-forum-slides-2012.pdf