The number of late annual filings has tapered off in recent years, but a growing number of the biggest companies in U.S. capital markets are finding it difficult to get their annual reports filed on time, according to a recent analysis by Audit Analytics.
Across all public companies, the number of companies that have filed a Form NT 10-K to indicate their annual filing will be late has fallen from a high of 2,256 in 2005 when Sarbanes-Oxley was still new to a low of 1,256 in 2015. Across large accelerated filers, however, or those with a public float greater than $700 million, the trend is different.
In 2010, for example, only 10 large accelerated filers gave notice to the markets that their 10-K would be late. By 2015, 32 companies fell into that category of late filers, more than tripling the raw number.
In the 10-year analysis conducted by Audit Analytics, the number of late filings by large accelerated filers peaked at 94 in 2007. For calendar year companies, those filings would be due in early 2008, shortly after financial markets spiraled into crisis and hit a massive wall of illiquidity.
The number dropped to 58 in 2008 and again to 25 in 2009, then bottomed out at 10 in 2010. Every year since, the number has crept steadily upward -- to 25 by 2013, 28 in 2014 and 32 in 2015.
In the bigger picture, large accelerated filers represent only 5 percent of all late filers from 2006 to 2015, the report says. Also important to the analysis, from 2000 to 2015, the number of SEC registrants has fallen 40 percent. That means the decline in overall late filings “seems to chart proportionately to the overall decline in registrants,” the report says.
Audit Analytics doesn’t say why late filings for large accelerated filers have risen steadily, but the increase correlates closely with a period of rising restatements rates for large accelerated filers, according to separate reports by the research firm. Just as with late filings, restatements by accelerated filers also bottomed out in 2010. That year, the number was 175, followed by steady increases through 2014 to a recent high of 353. The number dropped back in 2015 to 264.
Corporate bankruptcies jumped in the aftermath of the financial crisis, complicating the completion of financial statements for those entities. The late filing trend also also correlates with an increased focus by the Public Company Accounting Oversight Board on audit deficiencies, especially calling out problems with the audit of internal control. That, along with adoption of a new COSO internal control framework, has led to heavy re-examination and re-tooling of internal controls over financial reporting.
In more recent years, companies also have engaged in a wave of mergers or acquisitions that sometimes are associated with tardy filings, as the timing of the transaction is another common event that can complicate the completion of financial statements.