03.08.2005
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Updates
The SEC's Division of Corporation Finance has released a Staff Alert for companies completing their upcoming annual reports on Form 10-K that highlights existing requirements and reiterates previously articulated positions. Although the Staff Alert is not a rule, regulation or an official statement of the SEC, and was not approved by the Commission, it provides valuable insight into the staff's views on the annual reporting requirements and signals where the staff may focus attention.
Form 10-K Must Disclose Previously Unreported Form 8-K Events That Occurred in the Fourth Quarter
If a company fails to report any information required by Form 8-K during the fourth quarter of a fiscal year, the company must disclose that information under Item 9B in the annual report on Form 10-K for the fiscal year.
Accelerated Filers Must Update Text of CEO/CFO Certifications
SEC rules enacting Section 404 of the Sarbanes-Oxley Act of 2002 with respect to internal control over financial reporting are effective for "accelerated filers" starting with their annual reports on Form 10-K for fiscal years ending on or after November 15, 2004. Accelerated filers must now include management's report on the company's internal control over financial reporting and a registered public accounting firm's audit report on management's assessment of internal control over financial reporting.
This Form 10-K, and subsequent reports on Form 10-Q, must include an updated version of the CEO and CFO certifications required to be filed as exhibits to a company's periodic reports. See our sample Section 302 certification for the additional language that must be included.
"Accelerated filers" are companies that:
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have a public equity float of at least $75 million (based on the market value of outstanding shares held by non-affiliates on the last business day of the second fiscal quarter);
- have been subject to the Exchange Act's reporting requirements for at least 12 calendar months;
- previously have filed at least one annual report; and
- are not eligible to file their quarterly and annual reports on Forms 10-QSB and 10-KSB.
Smaller accelerated filers (less than $700 million public equity float) who rely on the SEC's exemptive order (see our December 8, 2004 Update on the SEC's exemptive order) to delay filing management's report on the company's internal control over financial reporting and related audit report for up to 45 days after the applicable Form 10-K filing deadline, may omit the additional language regarding internal control over financial reporting from the CEO and CFO certifications filed as exhibits to the annual report on Form 10-K filed without such reports (in accordance with the transition provisions). However, the CEO and CFO certifications filed with the amended Form 10-K that includes management's report and the related audit report:
must include the additional language regarding internal control over financial reporting; and
- should omit the following language (regarding financial information) that appears in the third paragraph of these certifications unless the amendment contains financial statements or other financial information:
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
Management's Internal Control Report Should Appear Near the Related Audit Report
The SEC rules enacting Section 404 of the Sarbanes-Oxley Act do not specify where management's report on internal control over financial reporting must appear in the company's annual report. However, the SEC expects the report to be located in close proximity to the corresponding auditor's report on management's assessment of internal control over financial reporting and expects both reports to be near MD&A or immediately preceding the financial statements.
Auditor Consents Must Cover Auditor's Report on Internal Controls
If a company's annual report on Form 10-K includes the auditor's report on management's assessment of internal control over financial reporting and will be incorporated by reference into a Securities Act registration statement, the auditor's consent should cover both the auditor's report on the financial statements and the auditor's report on management's assessment of internal control over financial reporting.
Additional Information
You can find the full text of the Staff Alert at http://www.sec.gov/divisions/corpfin/cfalerts/cfalert030405.htm. You can find discussion of other recent laws, regulations and rule proposals of interest to public companies on our website.
Full Text of the Section 302 Certification
(Delete Text in Italics for Use Before Internal Controls Report Compliance Date)
Exhibit 31._
CERTIFICATIONS
I, [identify the certifying individual], certify that:
I have reviewed this [specify report] of [identify registrant];
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:
[Signature]
[Title]
[Note: Provide a separate certification for the CEO and CFO.]
