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10230 Accounting Standards Transition Period Accommodation
us SEC - Financial Reporting Manual
10230.1 An EGC may elect to defer compliance with new or revised financial accounting standards until a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002) is required to comply with such standards, if such standards apply to companies that are not issuers. The term new or revised financial accounting standards refers to any update issued by the FASB to its Accounting Standards Codification after April 5, 2012, the date of the enactment of the JOBS Act. See Section 10300 for companies filing under IFRS as issued by the IASB.
- An EGC must make such choice at the time the company is first required to file a registration statement, periodic report, or other report and must notify the Commission of such choice.
- An issuer must comply with the transition provisions for all new or revised accounting standards in the same manner. In other words, it may not apply some new and revised financial accounting standards at the same date a non-EGC is required to comply, but defer the adoption of other standards.
- An EGC may choose not to take advantage of the "extended transition period" exemptions for EGCs and instead comply with the requirements that apply to an issuer that is not an EGC. Any decision to forego the extended transition period for complying with new or revised accounting standards is irrevocable.
- If an EGC chooses to take advantage of the extended transition period, the company can later decide otherwise (i.e., "opt in" by complying with the financial accounting standard effective dates applicable to non-EGCs), so long as it complies with the requirements in Sections 107(b)(2) and (3) of the JOBS Act, which state that an EGC may not select some standards to comply with and not others, and must continue to comply with such standards to the same extent as a non-EGC is required to comply for as long as the company remains an EGC. This decision should be disclosed in the first periodic report or registration statement following the company's decision and is irrevocable.
- An EGC that has elected to take advantage of the extended transition period provision may early adopt a new or revised accounting standard if permitted by the standard, without being deemed to have "opted in" for purposes of subsequent new or revised financial accounting standards.
- EGCs that take advantage of an extended transition period provision are encouraged to review their plans to adopt accounting standards upon losing EGC status and to discuss with the staff any issues they foresee in being able to timely comply. Generally, if an EGC loses its status after it would have had to adopt a standard absent the extended transition, the issuer should adopt the standard in its next filing after losing status. However, depending on the facts and circumstances, the staff may not object to other alternatives. (Last updated: 12/1/2017)
10230.2 Nonpublic entities are specifically excluded from the scope of certain financial accounting standards. The provisions regarding the extended transition periods available to EGCs do not exempt EGCs from compliance with accounting standards applicable to public entities. Rather, EGCs, like non-EGCs, must evaluate the scope of each financial accounting standard.
10230.3 SAB Topic 11M provides disclosure guidance with respect to recently issued accounting standards that will be adopted by the registrant in a future period. SAB Topic 11M specifies that one of the disclosures that should generally be considered by a registrant is the effective date of such standards. For each recently issued accounting standard that will apply to its financial statements, an EGC that chooses to take advantage of the extended transition periods should disclose the date on which adoption is required for non-EGCs and the date on which the EGC will adopt the recently issued accounting standard, assuming it remains an EGC as of such date.
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