A green graphic background with a suitcase, chart presentation, two people, and documents.

3 Best Practices for Successfully Completing Your Form 10-K

February 3, 2021 Tanya Goncalves  
LinkedIn Twitter Facebook

10-Q. 10-K. 8-K. 13D. 

The list of SEC filings you’re expected to complete can start to sound a little like the calls in a football game—and can be just as indecipherable if you’re an outsider. But for those finance professionals focused on reporting at a publicly held company, they’re a regular part of the office lexicon. And if that’s you, you’re likely already well acquainted with them—from Forms 10-Q, 10-K and 8-K, to Schedule 13D. After all, the U.S. Securities and Exchange Commission (SEC) expects you to be.

One of the most critical of those filings is Form 10-K. An annual SEC-mandated report, the 10-K offers a summary of your company's financial performance. Depending on the size of your company, it must be filed within 60 to 90 days of the closing of your fiscal year. While usually lengthy and time consuming to complete, it plays a vital role for investors—providing them with comprehensive information around the health of your business. It’s therefore a key piece of your SEC reporting.

So what do you need to know when completing your Form 10-K? Start by considering the following:

10-K, 10-Q, Annual Report: What’s the Difference?

What exactly is a Form 10-K? More importantly—what exactly isn’t it? While some might wonder what differentiates your 10-K from your Form 10-Q or Annual Report—both of which overlap with it in many ways—there are key differences that make the 10-K unique.

What is Form 10-K?

Form 10-K: Filed annually, your 10-K is designed specifically to comply with SEC guidelines. In addition to your audited financial reports, it includes detailed information on operations and provides discussion points and information to help investors assess the performance and risks facing your company. As such, it’s generally more dense than an Annual Report and more detailed than a 10-Q.

What is an Annual Report?

Annual Report: Your Annual Report is designed largely for shareholders and often featured on your corporate website. It’s likely glossy, colored and dynamically designed. Outside of the design, though, it’s usually an abbreviated version of what’s included in your 10-K, with information on company activity and finances, including your balance sheet and income statement.   

What is Form 10-Q?

Form 10-Q: Your 10-Q, on the other hand, is filed quarterly to the SEC. Due within 45 days from the end of each quarter, it’s less detailed than Form 10-K, with financial reports that are normally unaudited. But it can offer insight into the changes your organization is experiencing and provide a timely sense of any legal risks that might be forming.

What Is a 10-K Financial Report?

While it shares some overlapping information with your Annual Report, Form 10-K is a separate document required by the SEC—generally containing more detail than your Annual Report. If your company is public, you’re required to file the 10-K annually so that investors can better understand your business’s investment potential. To facilitate that, your 10-K will be made accessible alongside those of other businesses in the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) database. 

Signed by your CEO, CFO and controller or chief accounting officer to validate its accuracy, your 10-K is broken down into four unique parts. Here’s what they each looks like and some of the more prominent elements you’ll need to include:

  1. Part I is where you describe your business: the products and services you provide, any subsidiaries you operate and the market you work in. It also includes:
    • A list of risks you’re facing
    • The properties you own 
    • Information on ongoing lawsuits
    • Any discussion of unresolved comments you’ve received from SEC staff on previous reports

  1. Part II is where you disclose any information regarding your company’s equity securities—including market information, number of shareholders, dividends and so on. It also includes:
    • Select financial information from the last five years 
    • An analysis of your business results over the past year
    • Your exposure to market risks
    • Audited financial statements, with written explanations
    • Information on your company’s disclosure controls and procedures

    3. Part III is all about the people who make your business happen and ensuring they’re kept accountable. It’s where you list:
    • Your directors and executive officers, with information on their backgrounds
    • Your company’s code of ethics 
    • Compensation policies
    • Compensation paid to top executive officers over the past year
    • Any information on shares owned by directors, officers and stakeholders

    • Any relationships and transactions between your organization and its directors, officers and their family members 

    4. Part IV compiles any exhibits and documents, such as your company’s bylaws, list of subsidiaries and so on.

    There’s clearly a lot you need to put in place to get your 10-K up to code. But there are a few best practices you can apply to make sure you remain on schedule and compliant and to ensure your 10-K is investor-ready and telling your company’s full story by the time you need to submit.

Three Tips for Completing Your 10-K 
1. Consider It Through an Investor’s Eyes

Form 10-K is a critical piece of disclosure with a list of inclusions you’re required to submit. Ultimately, what you include is there for a reason, though—to inform investors and give them information they may not find in your Annual Report. Your 10-K helps build the story you’re telling about your organizational health and allows investors to make better decisions on where they should put their money. And while it must follow specified SEC standards so that it’s easily comparable with other organizations, there is room to share your story more completely in the commentary you offer. Use that commentary to address any concerns investors may have, putting yourself in their shoes and remaining transparent on any potential red flags that might exist. This is your chance to give them a better sense of those risks and challenges—whether they’re within your control or not and whether they’re long term or short term in nature.

2. Pay Close Attention To How Your Business Has Changed

Most financial teams will use last year’s 10-K report as a starting point for the new year’s version and go from there—but you should also take some time to recognize the changes your company has gone through in between. After all, those changes will play a big role in the story unveiled through your financial reports and may become a focus for investors as a result. So start with that as you frame the narrative you build, using those changes as a point of entry to drive your explanations and disclosures. In doing so, you’ll give investors a better understanding of where your company is in terms of its performance and why those changes happened—whether they were due to an acquisition, a shift in financing, market changes or something else completely. 

3. Take a Team Approach

As your organization grows and there are more stakeholders involved, the process of gathering all of the information needed for regulatory reporting becomes even more complex. Automation and technology, then, become more and more helpful in accumulating that information. But people are still as critical as ever. Data and commentary contributors, accounting policy teams, legal experts, senior management and internal and independent auditors are just some of the people who may be contributing to the process. You may start out with your core finance team and auditors but also have reviewers across the business looking at specified sections depending on their expertise. 

Taking a team approach, with multiple voices involved, will get you a full range of ideas on the details you convey and add multiple sets of eyes when it comes to ensuring your reporting is complete and accurate. To achieve alignment and make sure nothing falls through the cracks, you’ll also need strong communication, clear leadership and established roles assigned to everyone on your team.

(Check out The Ultimate Guide to Financial Reporting to help you better understand your company's financial performance.)

Putting the Right Checks and Balances in Place

As with any kind of regulatory reporting, having the right checks and balances in place is key to a successful 10-K. Your accounting and legal teams should give it a thorough evaluation to ensure all of the information is accurate, consistent and complete, and that it meets SEC requirements. Keeping up to date on SEC guidelines and maintaining a checklist to ensure you’ve compiled all of the information you require will also help.

The right technology, meanwhile, can make it easier to keep up with your reporting needs by compiling data into a central location, providing version control and ensuring you’re pulling the most recent data available.

But of course, the 10-K is just one of multiple forms the SEC requires from you. So even after it’s been checked and double-checked, don’t stop there—there’s still plenty left to do. The information you’ve already compiled, though, will make your 10-Q, Annual Report and other external reporting all the easier to complete.

Meet All of Your Regulatory Deadlines With Time to Spare

Our software consolidates your financial, HR and operational data into one central location so it’s easy to find the data that matters.

Register For Your Free Membership Now

Recommended Posts