On November 18, the Division of Corporation Finance (Division) of the Securities and Exchange Commission released updates to the Division’s Financial Reporting Manual. The Financial Reporting Manual is a key source of the Division’s informal accounting guidance and has been updated with changes through October 30.

In particular, the updates address:

  • previously announced amendments to the definition of “Smaller Reporting Company;”
  • changes to conform to the SEC’s 2018 Disclosure Update and Simplification;
  • previously announced amendments to the “Accelerated Filer” and “Large Accelerated Filer” definitions; and
  • the removal of outdated Division guidance and Generally Accepted Accounting Principles (GAAP) references.

In addition, the updated Financial Reporting Manual formalizes the Division’s existing policy and practice regarding audit requirements for target company financial statements included in proxy statements and registration statements on Form S-4 and Form F-4 of special purpose acquisition companies (SPACs). Where the target company’s financial statements become those of the registrant upon consummation of the SPAC merger, the Financial Reporting Manual provides that the target’s financial statements should be audited in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB).

The updated Financial Reporting Manual does not yet give effect to the recently announced new rules relating to acquired company financial statements.

The updated Financial Reporting Manual is available here.