As small businesses grow, so do opportunities. Those opportunities often times allow for a private company to go public or for a public company to significantly increase operations. So when do companies need to disclose two years of financial information as opposed to three on their annual financial statements on Form 10-K? Public companies whose equity is traded on a public exchange base their reporting requirements off of public float. If the public float (total market value of common stock held by non-affiliates – affiliates generally defined as directors, officers and management, as well as 10% shareholders) is less than $75M as of the last day of the most recent second fiscal quarter, then only two years need be presented. Public float over that amount requires three years of financial presentation for all statements except for the balance sheet, which only requires two.
For private or non-reporting companies who have no equity in the public market and are registering shares with the SEC, the benchmark is revenue. If a Company has less than $50M in annual revenue as reported in its most recent fiscal year (12-month period) based on audited financial information, then only two years of financial statements are required. If revenue is over that amount, three years of financial statement presentation is required for all statements except the balance sheet, which only requires two.
During reverse acquisitions, the SEC rules state that the operating company merging into the shell needs to assess requirements as if it had been a reporting company. This assessment must be done on the date of reverse acquisition. Accordingly, if revenues in the most recent audited fiscal year were over $50M, three years of financial statement presentation would be required as specified above.
dbbmckennon is a registered firm of the Public Company Accounting Oversight Board, performing financial statement audits for public companies, and providing consultations to management teams involving complex accounting and reporting matters before the SEC.