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The SEC Form 10-K – A Quick Overview

By Timothy Jalbert, CPA

The Security and Exchange commission requires (pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934) that all publicly traded companies submit a comprehensive summary report of their performance annually.  The report includes detailed information about the company’s financial and operation performance, its history, its organizational structure, officers, directors, etc.  Depending on a company’s size the due date for filing the 10-K is from 60 to 90 days after its fiscal year end.

The Form 10-K is divided into 4 major parts: 

Part I describes the company’s business, risk factors faced by the company, unresolved prior SEC comments, properties owned by the company, and significant legal proceedings to which the company if a part thereof.

Part II describes the company’s equity securities, market information, number of shareholders, dividends, repurchases of stock by the company and other equity related information.  This part also contains financial information for the past 5 years and more detailed financial information for the past 3 years.  Part II also contains management’s view of the results for the past year, and impending uncertainties and/or risks (including market risks) and what management is doing to address them. Management also communicates its estimates and assumptions used and whether any prior year changes are affecting the current year results.  Part II also contains the company’s audited (GAAP) financial statements (income statement, balance sheet, statement of cash flows, statement of stockholder’s equity) and related notes explaining the financial statement information.  If the company changed financial auditors during the year, any disagreements with the company’s predecessor auditors must be explained. This Part also discusses the company’s internal control over financial reporting. Finally, within this Part, the Sarbanes-Oxley Act (2002) requires that the CEO and CFO certify that the 10-K is both accurate and complete.

Part III details experience of the company’s directors and executive officers, and the company’s code of ethics.  It also describes the company’s compensation of its top executives, including the salary (and equity compensation) details of those plans.  It provides information on share ownership by directors, officers and large shareholders.  It also provides information on any relationships or business transactions between the company and its directors (are they independent), executives and/or their families (including separate businesses owned by those individuals).  Part III ends with information on the fees paid to its accountants for different services during the year (providing transparency as to whether or not the independent auditors are independent).

Part IV provides a list of the financial statements and exhibits included in the Form 10-K. Exhibits required include the company’s bylaws, material contracts, and a list of subsidiaries owned by the company.

Once the company files its 10-K with the SEC, the SEC reviews it as part of its effort to monitor and enhance the company’s compliance with the SEC filing requirements. If the company’s filing appears to be inconsistent with the SEC’s disclosure requirements, the SEC will issue comments to the company.  As discussed above, Part I requires that the company report any unresolved comments made by the SEC.  The Sarbanes Oxley Act requires that the SEC review all publicly traded companies’ financial statements at least once every three years.