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SEC Guidance Highlights Accounting, Reporting Caveats of JOBS Act

The Securities and Exchange Commission recently released guidance concerning t

The Securities and Exchange Commission has released guidance for companies and entrepreneurs to help inform them about the Jumpstart Our Business Startups Act. According to the Democratic National Committee, The

The Securities and Exchange Commission has released guidance for companies and entrepreneurs to help inform them about the Jumpstart Our Business Startups Act. According to the Democratic National Committee, The JOBS Act, signed into law in April, is designed to create jobs by offering tax cuts to small businesses and funding infrastructure projects.

The SEC guidance takes the form of an FAQ list, covering topics ranging from definitions of terms to accounting standards for companies that start under the act. The SEC points out that "emerging growth" companies are exempt from any new or changing accounting standards for a certain period of time. Companies must decide almost immediately, however, if they wish to take advantage of the exemption.

An "emerging growth" company is defined as "an issuer with total annual gross revenues of less than $1 billion during its most recently completed fiscal year," according to the SEC, and there are some other exemptions applicable to them under the JOBS Act. For example, when an emerging growth company prepares its registration statement for a first IPO of common equity securities, it needs to only submit two years' worth of audited financial statements.