Form 10-K is the annual report that most companies with publicly traded securities in the United States must file with the Securities and Exchange Commission. It gives a comprehensive picture of the company's business, risks, operations and financial condition for its most recent fiscal year, and it contains the company's audited financial statements. The requirement comes from the Securities Exchange Act of 1934, and the form's contents are set by SEC rules, chiefly Regulation S-K for narrative disclosures and Regulation S-X for the financial statements.
The 10-K is different from the glossy annual report to shareholders that many companies publish, although some combine the two. It is more detailed, follows a fixed structure and carries legal liability for misstatements. Companies also file quarterly reports on Form 10-Q and current reports on Form 8-K for major events. Foreign private issuers generally file Form 20-F instead, and Canadian companies may use Form 40-F.
Structure of a 10-K
A 10-K is organized into four parts and numbered items, which makes it easy to compare companies:
- Part I describes the business (Item 1), risk factors (Item 1A), cybersecurity risk management (Item 1C, added in 2023), properties (Item 2) and legal proceedings (Item 3).
- Part II covers the market for the company's shares (Item 5), management's discussion and analysis of financial condition and results of operations, known as MD&A (Item 7), market risk (Item 7A), the financial statements and supplementary data (Item 8), and controls and procedures (Item 9A).
- Part III covers directors, executive officers, executive compensation, security ownership and corporate governance, though this information is often incorporated by reference from the company's proxy statement.
- Part IV lists exhibits, such as material contracts, subsidiaries and the officers' certifications.
Item 8 contains the balance sheet, income statement, statement of comprehensive income, statement of cash flows, statement of stockholders' equity, notes and the auditor's report.
Filing deadlines
The deadline depends on the company's filer status, which is based mainly on its public float, the market value of shares held by non-affiliates:
- Large accelerated filers, generally with a public float of $700 million or more, must file within 60 days of fiscal year end.
- Accelerated filers, generally with a float of $75 million to $700 million, have 75 days.
- Non-accelerated filers, including most smaller reporting companies, have 90 days.
For a company with a 31 December year end that is a large accelerated filer, the 10-K is therefore due around the start of March. A company that cannot meet the deadline can file Form 12b-25 for a short extension. All filings are made electronically and are available free to the public on the SEC's EDGAR system.
Certifications and internal control
Since the Sarbanes-Oxley Act of 2002, the chief executive and chief financial officer must personally certify each 10-K under sections 302 and 906, stating that they have reviewed it, that it does not contain material misstatements and that the financial statements fairly present the company's condition. Section 404 requires management to report on the effectiveness of internal control over financial reporting, and for accelerated and large accelerated filers the independent auditor must also give an opinion on those controls. Knowingly false certifications can lead to criminal penalties.
How investors use the 10-K
Analysts and investors use the 10-K as their main source of reliable, audited information. Risk factors show what management sees as the biggest threats. MD&A explains the reasons behind changes in revenue, margins and cash flow, and discusses liquidity and capital resources. The notes reveal accounting policies, debt terms, lease commitments, segment results and contingent liabilities. Because the document is long, often more than 100 pages, many readers start with MD&A and the notes and compare the current year's risk factors with the previous year's to spot new concerns. Lenders also rely on it to check financial covenants, and regulators use it to monitor compliance with disclosure rules.