What is a 10-K form? Every publicly traded company is required to file financial reports with the Securities and Exchange Commission, or the SEC. The SEC Form 10-K offers a comprehensive snapshot of the company's financial health throughout the year, almost like an annual report for the business numbers. Ensuring these filings are completed on-time and accurately is essential for maintaining regulatory compliance, otherwise companies risk heavy sanctions. Dive deep into SEC 10-K filing, including what kind of information is reported, who needs to file, and how to file quickly and securely.
What Is a 10-K Report?
A Form 10-K discloses all the important business information that investors want to know about companies that are traded on the stock exchange. Information typically found in a 10-K earnings release includes:
- Business history and current operations
- Plans and programs
- Business revenue
- Managerial and executive level changes
- Business threats and opportunities
- Company debt and assets
- Business balance sheet
- Business income statement
- Subsidiaries
This form needs to be filed within 60-90 days of the end of a company's fiscal year, which may or may not overlap with the end of the calendar year. The 10-K report is made available online, through the SEC database and on a company’s website. This allows investors, analysts, shareholders and other curious individuals to check the health of a company at any time. Audited statements are an important means of maintaining investor confidence as well as meeting regulatory requirements.
How to prepare for your 10-K throughout the year
Having a proper protocol for 10-K reporting is critical, given how complex and detailed these reports must be. It’s highly recommended that companies establish a compliance calendar for collecting data on a quarterly basis if one doesn’t already exist. In addition, internal controls testing must be put in place before year-end to ensure everything is handled in the most appropriate manner. It’s also crucial to maintain version control on all financial documents. By taking these proactive steps, companies can have a 10-K filing process that operates as smoothly as possible.
How do you file a 10-K?
In general, the process for filing a 10-K form looks like this:
- Gathering Information: This includes audited financial statements, risk factors and details on internal controls used.
- Filing: Companies are required to complete the 10-K form with all necessary information and submit it to the SEC.
- Reviewing and Certification: Section 302 of the Sarbanes-Oxley Act of 2002 requires CEOs and CFOs to certify that the information they have submitted in the 10-K form is accurate and complete.
So, how is the information filed with the SEC? The SEC uses what is commonly known as the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) platform to accept, manage and store companies' required reporting. EDGAR is searchable by anyone wishing to view corporate reporting. To deliver documents to the SEC thus requires secure software that is able to transmit documents to EDGAR's system while encrypting data for confidentiality. These days, most companies use cloud-based software so employees can generate and deliver reports from anywhere.
DFIN's financial compliance software provides all the tools necessary for meeting the SEC's data disclosure requirements. Its robust security and encryption protect data during transmission to guard against data leaks. This is critical for meeting EDGAR requirements during the account setup process, which includes testing transmissions to ensure data security. With cloud collaboration, companies can streamline their submission and review processes to achieve faster and more accurate results.
Who Must File and Why?
The 10-K form is important for regulatory reasons, as it offers a way to compare one company with a competitor using the same set of metrics. Since companies are legally bound to file a 10-K and other forms, those who skip this obligation can be held accountable through fines or fees. There are ethical considerations, too. In the wake of the dot-com bust, the SEC started requiring that company CEOs and CFOs sign off on the data, essentially swearing that the financial data is accurate.
A business auditor also includes a letter to accompany the 10-K. In his or her letter, the auditor describes the scope of auditing work that was done, and any errors or omissions discovered during the audit process. If the auditor is concerned about the company's financial wellbeing, he or she will make a veiled note of this in the letter, perhaps by highlighting a concern about the company's ability to continue. This sort of "alarm bell" can signal to investors that they may want to sell shares or notify a competitor of an upcoming opportunity to acquire a struggling peer.
The form is also important for investment purposes. Prudent investors and would-be investors should study the 10-K carefully. With a thorough understanding of business operation, finances, risks, and opportunities, investors can decide whether to support the business by buying shares. Given that a business wants its stock valuation to increase, attracting new investors is key to its success and profitability. Official signoffs by CEOs and CFOs help build trust among investors and enhance transparency.
While the 10-K is important for investors, regulators, competitors, and shareholders, it can also benefit the business that must prepare it. The 10-K is essentially a guided tour through the business's health, strategic opportunities and liabilities. While some companies may be intimately familiar with their financial landscape, others operate more on instinct and are less certain of the numbers. For these companies, the 10-K can serve as a financial checkup as well as a weathervane, helping the business's stakeholders see the best path forward with transparency.
It's also important to note that smaller filers may have different requirements for internal controls, including SOX compliance and more.
How to Handle Financial Reporting Requirements
The 10-K is just one of the many forms that must be filed with the SEC. This means that the average publicly traded company not only has to deliver a comprehensive financial report every year but must also meet a range of other financial reporting requirements. DFIN offers software and services to help your company handle all of its filing requirements, including filing a 10-K.
Leverage DFIN ActiveDisclosure to streamline the complicated filing process. Built-in validation and health checks ensure no information is missing, while iXBRL tagging features support compliance with SEC regulations. When it's time to transmit, leverage fraud detection, robust security, encryption, and data privacy for total protection. It also provides you with tools for collaboration and real-time validations for multiple forms at once. Learn more about ActiveDisclosure now.