What is a 10K report?
A 10K report — also known as Form 10K — is a document that US public companies must submit to the Securities Exchange Commission annually. It is a summary of an organization's financial performance that keeps shareholders or prospective investors informed about the company's financial stature and business activities. Glenn Davis, director of risk advisory services at Kaufman Rossin described the 10-K to Business Insider in these simple terms: “It is the story of their business operations over the past 12 months.”
What is a 10K used for?
The 10-K is a powerful tool for all kinds of stakeholders to use when they’re evaluating a company. There are many stakeholders who might review a 10K in order to get a sense of a company’s viability. Three of the most prominent users are investors, competitors, and regulators.
Investors use Form-10k to understand a company’s viability, and whether an investment in this organization will be a safe one that aligns with their values while yielding returns.
Competitors will refer to the 10-K to see how their business is measuring up and look for clues about their competitors’ next move.
Regulators may review 10ks for accuracy. Currently, the Sarbanes Oxley Act requires the SEC to review every public company’s financial statements at least once every three years, but some companies may be reviewed more frequently. When the SEC reviews 10Ks, and 10Qs for that matter, they look at them with an eye for inconsistencies, deficiencies, or lack of clarity.
Where can you find 10K and 10Q reports?
There are a few places where you can locate a company’s 10K, 10Q as well as other disclosure filings. You can find them on the company’s website. You can also find 10k filings in the SEC’s EDGAR database, using the Company Search tool. Other paid filings databases exist. These have more advanced search technology and will help you get to specific information and compare filings more efficiently than EDGAR. Other sites like MarketWatch will aggregate information from company filings.
What kind of companies file a 10K report?
Public companies must file 10K reports to the SEC annually. Contrary to popular belief, public companies aren't the only ones who have to submit a 10K. Private businesses with over $10 million in assets held by 2000 or more people must also submit a 10k to the SEC.
What does a 10K report contain?
The 10K contains information like company history, organizational structure, equity and subsidiaries holdings, key financial indicators like earnings per share, and audited financial statements. Companies must file their 10K within 60 days of their fiscal year end. The 10K includes five sections, which you can view on the SEC's website. All 10Ks follow the same structure defined by the SEC.
The five sections are:
- Business: This section outlines the company's operations, its products, and services.
- Risk Factors: This section describes the potential risks a company currently faces or could face in the future.
- Selected Financial Data: In this section, the company discloses specific financial information, including a five-year overview of its financial data and recent performance.
- Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A): The MD&A gives management the opportunity to explain these business result of the past fiscal year in their own words.
- Financial Statements and Supplementary Data: In this section, the company appends its audited financial statements, including the balance sheet, cash flow statement, and income statement. These financial statements give investors an idea of the company's profitability. The company also has to include a letter from the auditor certifying their review.
What financial statements are included in a 10K?
The SEC requires public companies to include the following audited financial statements:
- The income statement
- Balance sheets
- Cashflow statement
10K filings must also include a letter from the company’s third-party auditor that certifies the filings have been reviewed and how they’ve been reviewed.