In the United States, publicly listed corporations submit form 10-K with a comprehensive report of their yearly financial performance. This form must be submitted to the Securities and Exchange Commission (SEC) within 60 days after the end of the fiscal year. However, you can find out the details of it in this article.
List of Contents
What Exactly Is a Form 10-K?
A form 10-K is a detailed report on a publicly listed company’s financial performance that is required by the United States Securities and Exchange Commission (SEC). The report is far more detailed than a firm’s annual report, distributed to shareholders before the annual meeting to elect company directors.
In addition, form 10-K must include information such as a company’s history, organizational structure, financial statements, profits per share, subsidiaries, executive remuneration, and any other relevant data. The SEC requires this report to notify investors about a company’s finances before they buy or sell shares or bonds.
Understanding a Form 10-K
Due to the breadth and nature of the information they provide, form 10-K tends to be lengthy and complex. However, investors must recognize that this is one of the most complete and significant papers a public business may publish yearly. The more information they glean from the 10-K, the greater their comprehension of the organization.
The government compels corporations to post 10-K forms so that investors may make educated investment decisions based on core company facts. This form provides a complete view of a company’s activities and the dangers it confronts.
5 Different Sections of a Form 10-K
1. Financial statements and supplementary data
This comprises the company’s audited financial documents, such as its income statement, balance sheet, and cash flow statement. This part also contains a letter from the company’s independent auditor attesting to the extent of their assessment.
2. Management’s discussion and analysis
This section, the MD&A section, allows the corporation to describe its business performance from the preceding fiscal year. This area is where the organization may share its own story.
3. Selected financial data
This section describes the company’s financial performance over the past five years. This section provides a closer look at the company’s recent performance.
4. Risk factors
These detail any threats the organization confronts or may encounter in the future. Typically, the dangers are ordered in order of significance.
5. Business
This summarizes the company’s principal operations, including its goods and services.
Nevertheless, a form 10-K filing also includes letters signed by the organization’s chief executive officer and chief financial officer. In it, the CEOs affirm under oath that the 10-K contains truthful information. After many high-profile examples of accounting fraud following the dot-com crash, these letters were mandatory.
Form 10-K Users
Publicly traded corporations file Form 10-K. Once it has been filed, investors and prospective investors use it. It enables them to examine the precise ways business functions and generates revenue. It also describes where the firm works and the dangers it faces, including any active or ongoing litigation. This information enables investors to make educated judgments on whether or not to trade or hold the company’s shares.
Where to Find a Form 10-K?
Significantly, form 10-K filings are publicly published and readily accessible from various sources. In reality, most corporations feature them on their Investor Relations pages. The information contained in form 10-K can be difficult to navigate. However, as investors become more familiar with the style and types of information presented, finding the most crucial element will likely become simpler.
Deadlines of a Form 10-K Filing
The form 10-K filing deadline varies depending on the size of the organization. According to the SEC, companies with a public float of $700 million or more must file their 10-K within 60 days of their fiscal year. Firms with a float of $75 million to $700 million have 75 days, whereas companies with a float of less than $75 million get 90 days.
Alternatives to Form 10-K
Form 10-Q filings are shorter versions of form 10-K filings. The SEC receives the form 10-Q report after each business quarter. Investors can also access it through a company’s website.
Form 10-Q and Form 8-K
Along with the 10-K, the SEC mandates public corporations to file forms 10-Q and 8-K regularly. Every quarter, form 10-Q must be submitted to the SEC. This form is a detailed report on a company’s performance that contains pertinent financial information. In contrast, to form 10-K, the information in the form 10-Q is often unaudited. Since form 10-K was submitted in the fourth quarter, the corporation only needed to fill it out three times a year.
On the other hand, the SEC requires form 8-K anytime a company announces a big event that shareholders should be informed of. Examples are sales, acquisitions, delistings, departures, executive elections, changes in corporate status or ownership, bankruptcies, operations, assets, and other relevant news.
Advantages of a Form 10-K
1. The Independent Auditor’s Letter
This letter should describe the breadth of the auditing firm’s certification of the financial records and any significant problems it discovered. If the auditor thinks the firm will fail, they may ask about its ability to continue as a going concern or something similar. If you ever see such phrases, you should be on high alert.
2. Letters Signed by the CEO and CFO
The CEO and CFO must provide signed statements stating that, to their knowledge, the company’s records are correct. The government uses these letters to punish CEOs who falsify their form 10-K or other necessary disclosures on purpose.
3. Accounting Policies and Practices
Assume you are thinking about investing in a washing machine company. Thousands of models are breaking down beyond repair, causing the corporation to make national headlines. Is the corporation responsible for reclaiming them from customers? A corporation must disclose its warranty policy and projected warranty expenses for items it sells or produces in its form 10-K filing.
Conclusion
In conclusion, annual reports and form 10-K must be submitted on a single page, with the annual report beginning with a review of the company’s financial results. A competent analyst must thoroughly study and understand both papers before making investing judgments. In addition, an analyst must study the risk elements within and outside the corporate environment to appropriately comprehend the organization.
FAQs
Form 10-K is an annual report that publicly traded companies are required to file with the Securities and Exchange Commission (SEC) to provide detailed financial information about their business.
Form 10-K is due within 60 days after the end of a company’s fiscal year, or 75 days if the company has a market capitalization of less than $700 million.
All publicly traded companies in the United States are required to file Form 10-K with the SEC.
Form 10-K is an annual report that provides a comprehensive overview of a company’s financial performance and operations, while Form 10-Q is a quarterly report that provides updates on a company’s financial results.
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Source: The Balance