Definition, What’s Included, Instructions, and Where to Find It

What Is Form 10-K?

Form 10-K is a comprehensive report filed annually by a publicly traded company about its financial performance and is required by the U.S. Securities and Exchange Commission (SEC). Some of the information a company is required to document in the 10-K includes its history, organizational structure, financial statements, earnings per share, subsidiaries, executive compensation, and any other relevant data.

Understanding Form 10-K

Because of the depth and nature of the information they contain, 10-Ks are fairly long and tend to be complicated. But investors need to understand that this is one of the most comprehensive and most important documents a public company can publish on a yearly basis. The more information they can gather from the 10-K, the more they can understand the company. Canadian companies will file SEC Form 40-F to provide this information.

The government requires companies to publish 10-K forms so investors have fundamental information about companies so they can make informed investment decisions. This form gives a clearer picture of everything a company does and what kinds of risks it faces.

The 10-K includes five distinct sections:

• Business. This provides an overview of the company’s main operations, including its products and services (i.e., how it makes money).
• Risk factors. These outline any and all risks the company faces or may face in the future. The risks are typically listed in order of importance.
• Selected financial data. This section details specific financial information about the company over the last five years. This section presents more of a near-term view of the company’s recent performance.
• Management’s discussion and analysis of financial condition and results of operations. Also known as MD&A, this gives the company an opportunity to explain its business results from the previous fiscal year. This section is where the company can tell its story in its own words.
• Financial statements and supplementary data. This includes the company’s audited financial statements including the income statement, balance sheets, and statement of cash flows. A letter from the company’s independent auditor certifying the scope of their review is also included in this section.

A 10-K filing also includes signed letters from the company’s chief executive officer and chief financial officer. In it, the executives swear under oath that the information included in the 10-K is accurate. These letters became a requirement after several high-profile cases involving accounting fraud following the dot-com bust.

10-K Filings and Deadlines

Notably, 10-K filings are public information and readily available through a number of sources. In fact, the vast majority of companies include them in the Investor Relations section of their website. The information included in a 10-K can be difficult to move through, but the more familiar investors become with the layout and the type of information included, it will likely become easier to identify the most important details.

Filing deadlines for the 10-K vary based on the size of the company. According to the SEC, companies with a public float—shares issued to the public that are available to trade—of $700 million or more must file their 10-K within 60 days after the end of their fiscal year. Companies with a float between $75 million and $700 million have 75 days, while companies with less than $75 million in their float have 90 days.

Purpose of Form 10-K

The primary purpose of filing a Form 10-K is to provide comprehensive, transparent information about how a company is doing. Because this information is useful to a variety of people, the SEC requires certain information to be presented in a certain way. At a very high level, it’s fair to say Form 10-K’s purpose can be broken down into the following five categories (which slightly overlap but are more high-level than the five categories listed above):

• Transparency: It offers transparency into a company’s financial health, including its financial statements, risks, and opportunities.
• Disclosure: It requires companies to disclose relevant information about their business operations, management, and financial condition, helping stakeholders make informed decisions.
• Compliance: It ensures compliance with SEC regulations and provides a standardized format for reporting financial information, promoting consistency and comparability among companies.
• Accountability: It holds company management accountable to shareholders by providing a detailed overview of the company’s performance and strategic direction.
• Investor Confidence: It helps build investor confidence by demonstrating the company’s commitment to transparency and corporate governance practices.

Who Files Form 10-K

Form 10-K is required to be filed by all publicly traded companies in the United States. This requirement applies to companies listed on U.S. stock exchanges such as the New York Stock Exchange. The SEC imposes this filing requirement to ensure transparency and accountability in the financial markets, allowing investors and other stakeholders to access relevant information about the company’s operations, financial condition, and performance.

The filing of Form 10-K is not limited to large corporations; it applies to companies of all sizes that meet the criteria for being publicly traded. This includes both domestic and foreign companies whose securities are listed on U.S. exchanges or are registered with the SEC. Additionally, certain smaller reporting companies may file a streamlined version of the Form 10-K, known as Form 10-KSB or Form 10-KT. Note that in order to file this alternative version, a company has to meet some eligibility requirements.

Penalties for Form 10-K Noncompliance

There are penalties for not filing a Form 10-K on time. These penalties can vary depending on the severity of the violation and the circumstances surrounding the late filing. In most cases, companies pay a fee for non-compliance.

Failure to file required periodic reports can result in the loss of good standing with stock exchanges and other regulatory bodies. This could lead to delisting from stock exchanges or temporary suspensions of 10 trading days. In addition, the SEC may take legal and regulatory actions against companies that repeatedly fail to meet filing deadlines or comply with disclosure requirements. These actions can include enforcement proceedings, investigations, fines, and sanctions against the company, its officers, directors, or other responsible parties.

On the softer side of the consequences, late or incomplete filings can erode investor confidence and trust in the company’s management. Investors may perceive delayed filings as a red flag indicating potential financial problems, lack of transparency, or poor internal controls. There’s little reason for a Form 10-K to be filed late, and investors may (and probably should) be curious about the reasons behind any non-compliance.

Limitations of Form 10-K

While Form 10-K reports a wealth of useful information, it does have its downsides. These limitations include but aren’t necessarily limited to:

• Forward-Looking Statements: Companies often include forward-looking statements in their Form 10-K, which are statements about future expectations, plans, or financial projections. These statements are subject to various risks, uncertainties, and assumptions. They may be given in good faith, but this commentary may mislead investors as to what may actually happen.
• Complexity and Length: Form 10-K filings are long, complex documents. On one hand, that means it has a wealth of information. On the other hand, it’s easy to lose sight of important information that may get buried. Investors may find it challenging to navigate and interpret the vast amount of information provided in the Form 10-K.
• Selective Disclosure: The SEC requires certain information be given in a Form 10-K. However, companies may selectively disclose certain information or present it in a favorable light in their Form 10-K. This means they can control the narrative and potentially omit or downplay negative or unfavorable aspects of their business. Investors should critically evaluate the completeness and objectivity of the information provided.
• Use of Estimates and Assumptions: The financial statements and disclosures included in the Form 10-K may be based on management’s estimates, assumptions, and judgments. After all, part of GAAP reporting is based on accounting judgment and financial guesses. These estimates may be subjective and involve inherent uncertainties, meaning things may not always play out how the company is presenting them on the financial front.
• Regulatory Compliance and Legal Risks: Companies may face regulatory compliance issues, legal disputes, or other contingencies that are not fully disclosed or adequately addressed in the Form 10-K. This is because companies may choose to not disclose sensitive information, or they may be more defensive in having to disclose this type of information. Investors should consider the potential impact of regulatory and legal risks that may not be fully disclosed.

Forms 10-Q vs. Form 8-K

Along with the 10-K, the SEC requires that public companies regularly file forms 10-Q and 8-K.

Form 10-Q must be submitted to the SEC on a quarterly basis. This form is a comprehensive report of a company’s performance and includes relevant information about its financial position. Unlike the 10-K, the information in the 10-Q is usually unaudited. The company is only required to file it three times a year as the 10-K is filed in the fourth quarter.

The form 8-K though is required by the SEC whenever companies announce major events of which shareholders must be made aware. These events may include (but aren’t limited to) sales, acquisitions, delistings, departures, and elections of executives, as well as changes in a company’s status or control, bankruptcies, information about operations, assets, and any other relevant news.

Form 10-K vs. Annual Report

The Form 10-K and the annual report serve distinct purposes and cater to different audiences. The Form 10-K is a regulatory filing mandated by the SEC. On the other hand, the annual report represents a broader communication tool utilized by companies to engage with a wider range of stakeholders. While it may include Form 10-K as its core financial and regulatory component, the annual report often incorporates additional elements such as narrative descriptions, graphics, photos, and other visually appealing features.

These elements aim to provide a more reader-friendly and engaging format for shareholders, employees, customers, and other stakeholders. For example, companies may have high-quality photographs or graphic designs as part of the introduction to their annual report. The intention is to make the annual report visually attractive to entice readership; Form 10-K is not meant to look nearly as pretty.

Unlike the Form 10-K, which is subject to specific regulatory requirements and accounting standards, the annual report is not bound by such constraints. Instead, it allows companies greater flexibility in crafting a narrative that aligns with their objectives and corporate identity. Through the annual report, companies seek to showcase their accomplishments, company values, and vision to stakeholders. In many ways, it’s fair to call an annual report a marketing and communication tool, whereas the Form 10-K is much more of a regulatory compliance document. 

The Bottom Line

Form 10-K is an annual comprehensive report filed by publicly traded companies with the SEC, detailing their financial performance and business operations. It includes audited financial statements, management’s discussion and analysis, risk factors, and other important disclosures. This document provides investors and stakeholders with crucial information to assess the company’s financial health and is required by regulatory bodies.