10-K – What is it, definition and concept

The 10-K is a document that all US companies listed on US stock markets are required to publish on an annual basis.

In other words, the 10-K is a report that must be submitted by all US companies with shares listed on US stock exchanges.

It is a very extensive document that collects all kinds of information about the company, including detailed information about the business and its management team, its audited annual financial statements and, also, legal information, among other aspects.

Why is the 10-K published?

The SEC (Security Exchange Commission) is a regulatory body established by the national government of the United States that is responsible for maintaining the integrity of the country’s securities markets, ensuring compliance with its laws, in coordination with other federal agencies.

To carry out its mission, among other things, the SEC requires companies listed on financial markets in the United States to publish and disclose to the investing public a series of documents on financial matters. It becomes a kind of public information bank about the business of any company listed in the country. Although much of this information is also published on the websites of each company.

The ultimate goal is for investors to have at their disposal transparent and truthful data and information on the situation of companies and their evolution, so that they can make investment decisions based on analysis of verified and reliable information.

One of these documents is the 10-K, a report that contains highly detailed relevant financial information on US companies listed on US markets and is required to be published annually by the SEC. Its goal is to offer a true picture of everything a company does and the risks it faces.

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Unlike the United States, foreign companies listed on US financial markets must publish the 20-F instead of the 10-K, with the exception of Canadian firms, in which case it will be the 40-F.

The 10-K is a similar report, although much more extensive, than that of the publication of annual results, but in no case are they a substitute.

10-K content

There are 4 blocks with different sections in each one. Here is a summary of each block:

  • Block 1 – Business:
    • Information about your business model. For example, description of the products and services they offer, target audience and markets, competition, seasonal factors of the business, etc. The objective of this section is that the investor can perfectly understand what the company does and how it makes money.
    • Risk factors, including a description of each of the current and potential risks facing the company. They can be risks of a different nature. Some may have to do with the macroeconomic situation, others with business risks, etc.
    • Company explanations and clarifications to SEC comments on prior unresolved reports.
    • Relevant physical properties of the company
  • Block 2 – Common Stock Market and Issues Related to Shareholders:
    • Information about the shares: Market information, number of shareholders, distribution of dividends, share repurchase programs, etc.
    • Analysis by the board of directors of the financial situation and evolution of the company. It is a comment where they identify relevant aspects from their point of view, for example, operations and financial results, liquidity, risks, measures to face risks… This writing is known as MD&A.
  • Block 3 – Other elements:
    • Experience of directors, executives and corporate governance.
    • Remuneration and salaries of executives.
    • Information about company employees who are shareholders.
    • Fees associated with accounting services.
  • Block 4 – Annexes of the audited financial statements. For example, the company bylaws, list of subsidiaries, etc.
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Through all this data, the investor has a reasonably good basis to carry out a very complete analysis of the business and make an informed investment decision.

Deadlines to publish the 10-K

They vary depending on the company’s free float:

  • Those whose free float is less than 75 million must publish it within 90 days after the end of their fiscal year.
  • When the free float is between 75 and 700 million, they must do so within 75 days after the end of the fiscal year.
  • If the free float is greater than 700 million, they must publish it within 60 days after the end of the fiscal year.

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