When Do Financial Statements Go Stale?

Financial statements provide a snapshot of a company’s financial health, but their relevance diminishes over time. For investors and lenders to make sound decisions, the information must be current, as outdated data can misrepresent a company’s condition. Regulatory bodies have established timelines for when financial statements become too old to be useful, a concept known as “staleness.” The age of financial statements dictates when a company can raise capital or complete other transactions that rely on timely public disclosure.

The General Staleness Rule for Financial Statements

The principle governing the age of financial statements is the 135-day rule, from the U.S. Securities and Exchange Commission’s (SEC) Regulation S-X. For a company’s registration statement to be effective, its financial data generally cannot be more than 135 days old at the time of effectiveness.

In practice, companies target a 134-day cutoff, which is driven by Public Company Accounting Oversight Board (PCAOB) rules. These rules permit auditors to provide required assurances on financial data that is up to 134 days old. If financial statements exceed the age limit, they are deemed “stale,” and the company must provide updated financials before it can proceed.

Staleness Rules for Different Filer Categories

The application of the 135-day rule is linked to a public company’s filing deadlines for its annual Form 10-K and quarterly Form 10-Q reports. The SEC categorizes companies based on their public float—the market value of shares held by non-affiliates. These categories are Large Accelerated Filers, Accelerated Filers, and Non-Accelerated Filers.

A Large Accelerated Filer has a public float of $700 million or more. These companies have the shortest deadlines, filing their annual Form 10-K within 60 days of their fiscal year-end and their quarterly Form 10-Q within 40 days of their quarter-end.

An Accelerated Filer has a public float between $75 million and $700 million. They are required to file their Form 10-K within 75 days of year-end and each Form 10-Q within 40 days of quarter-end.

A Non-Accelerated Filer, with a public float below $75 million, has the most time. Their Form 10-K is due within 90 days of year-end, and their Form 10-Q is due within 45 days of quarter-end. For these smaller companies, the longer reporting window means their financials can approach the 135-day staleness date more quickly between filings.

Special Considerations for Initial Public Offerings

Companies undertaking an Initial Public Offering (IPO) face unique circumstances. Since they are not yet regular SEC filers, they must still adhere to the 135-day rule for their initial registration statement, a Form S-1. This means the financial statements in the S-1 cannot be more than 134 days old when the SEC declares the registration effective.

An IPO registration statement must initially include audited annual financial statements, typically for three years. As the IPO process unfolds, these statements can become stale. To keep the S-1 current, the company must amend its filing to include unaudited interim financial statements for the most recent quarter.

The Jumpstart Our Business Startups (JOBS) Act created a special category of filer called an Emerging Growth Company (EGC) to ease the transition into public markets. An EGC is defined as a company with total annual gross revenues below a specific threshold that is adjusted for inflation every five years; the current threshold is $1.235 billion. A benefit for EGCs is the reduced financial statement requirement; an EGC only needs to provide two years of audited financial statements in its IPO filing instead of three.

Updating Financial Statements to Avoid Staleness

When a company’s financial statements are at risk of becoming stale, it must take specific procedural steps to update them. The mechanism for this update depends on whether the company is already a public filer or is in the process of an IPO. For an existing public company, the process is straightforward and built into its regular reporting obligations. The company simply files its next required periodic report, typically a Form 10-Q for the most recent fiscal quarter.

This filing contains the new, unaudited interim financial statements, which resets the 135-day clock. This ensures that any subsequent registration statement or prospectus will contain current information that complies with SEC age requirements.

For a private company navigating the IPO process, the remedy involves formally amending its registration statement. The company will file an amendment to its Form S-1, which includes the new interim financial statements and related disclosures. This action ensures that the information available to potential investors is current up to the date the SEC declares the S-1 effective, preventing delays in the offering timeline caused by stale data.