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Annual Report on Form 10-K Toolkit
Practical Law Toolkit 6-500-4938 (Approx. 6 pages)
Annual Report on Form 10-K Toolkit
by Practical Law Corporate & Securities
| Maintained • USA (National/Federal) |
Resources to assist in preparing an annual report on Form 10-K.
Under the federal securities laws, reporting companies must disclose information on a continuous basis. Each year companies must file an annual report on Form 10-K that provides business and financial information for the most recently completed fiscal year.
Form 10-K is the most comprehensive periodic report required to be filed with the SEC. It:
- Provides information about a company's business and financial condition.
- Includes audited financial statements for its two or three most recently completed fiscal years.
Form 10-K is different from, and provides more detailed information than, the annual report to stockholders. The annual report to stockholders provides a summary of the current state of the company and is delivered to stockholders with proxy materials for the annual stockholders' meeting. In contrast, Form 10-K contains most of the information that would also be provided in a registration statement for an offering of securities.
The SEC has been increasingly focused on improving the adequacy, transparency and completeness of company reporting. For example:
- The SEC staff has indicated that, when reviewing a company's Form 10-K and other periodic reports, they also review the company's earnings calls and press releases and other information the company makes publicly available (potentially including information posted on websites). Specifically, the SEC staff looks for inconsistencies between what is filed with the SEC and what is said to analysts or investors. The SEC staff is particularly concerned with companies that use non-GAAP financial information in earnings releases and calls but fail to disclose this information in their periodic reports or fail to comply with the non-GAAP disclosure requirements of Regulation G and Item 10(e) of Regulation S-K. The SEC staff issues comments on a company's Form 10-K and other SEC filings that are intended to bring the two types of information in line with each other and ensure that the company provides consistent public disclosure that complies with the federal securities laws.
- The SEC staff is also concerned with consistency in sustainability disclosures. When the SEC staff reviews a company's disclosures regarding climate change and sustainability in their proxy statements and Form 10-K reports, they also review the company's website and any standalone reports on sustainability and climate change. Specifically, the SEC staff looks for inconsistencies between what is filed with the SEC and what is said to investors, analysts or the public. Additionally, if a company discusses the importance of environmental, social and governance (ESG) issues on its website or a standalone report, the SEC staff will expect to see ESG disclosure in its Form 10-K report (and/or proxy statement).
In addition, the SEC's Division of Corporation Finance periodically issues guidance on public disclosure. For example, the SEC staff issued guidance on:
- Climate change disclosure in September 2021 and February 2010.
- Disclosure regarding the impact of COVID-19 in March and June 2020.
- Disclosure of key performance indicators and metrics in Management's Discussion & Analysis (MD&A) in January 2020.
- Intellectual property and technology disclosures in January 2020.
- Public filing disclosure obligations relating to cyber security risks and cyber incidents in February 2018 and October 2011.
- MD&A and accounting policy disclosures of smaller financial institutions in April 2012.
The SEC staff also periodically issues guidance in the form of compliance and disclosure interpretations (C&DIs) relating to Regulation S-K, Form 10-K and other disclosure items. For example, the SEC staff issued new and revised C&DIs on:
- Compliance with new disclosures regarding insider trading policies and procedures, Rule 105-1 trading arrangements and issuer share repurchases in May 2023.
- Pay versus performance disclosure in February 2023.
- Perks disclosure in September 2020.
- Recent amendments to MD&A requirements in January 2020.
- Interactive data rules in August 2019.
- Pay ratio disclosure in October 2016 and September 2017 (together with other pay ratio guidance).
- The use of non-GAAP financial measures in May 2016 and December 2022.
The SEC staff also periodically issues guidance on market events and conditions and their impact on companies' continuing disclosure obligations in the form of sample comment letters. For example, the SEC staff has issued sample letters on:
- Recent developments in crypto asset markets in December 2022.
- Disclosures pertaining to Russia's invasion of Ukraine and related supply chain issues in May 2022.
- Risks associated with China-based companies in December 2021 and July 2023.
- Climate change disclosure in September 2021.
Companies preparing for their upcoming Form 10-K reports should re-evaluate their previous disclosure to:
- Determine whether any updates or other modifications are necessary to comply with SEC rules and securities exchange disclosure requirements.
- Present a story consistent across all public disclosure.
- Ensure that all material information continues to be disclosed.
Companies should also review and update disclosure of their risks and circumstances as the business and economic environment changes.
The Form 10-K Toolkit provides a number of continuously maintained resources to help in-house counsel prepare an Annual Report on Form 10-K.