16 July 2018
The Securities and Exchange Commission (SEC) requires publicly traded companies to file a number of forms. It may seem like filing these forms merely satisfies bureaucratic requirements, but that’s far from the case. In fact, it is the responsibility of the SEC and other regulatory agencies to ensure business confidence and a level playing field, forming a permanent part of the architecture of economic growth.
One of the more important forms to be familiar with in this regard is Form 10-K. Form 10-K is a report filed annually with the SEC that has the job of reporting to investors and potential investors everything they would want to know before buying/selling shares of the company: operations, finances, risks, opportunities and so on.
Unfortunately, although these reports are available to the public through the SEC’s website, many investors never bother to read through a full 10-K filing, since it’s full of the kind of details and figures that make our eyes glaze over. But there are ways that your organization can both satisfy the federal government and maintain the interest of investors in the 10-K. This post serves as an introduction to some of them.
What is the 10-K form, and what do you find in it?
The 10-K form is similar to the annual reports the leadership of an organization prepares for its investors. However, it differs in that the SEC has a number of requirements for information that companies include in their filing. Some of these are:
- Financial statements, including the income statement and balance sheets;
- How a company makes its money, as well as which markets it operates within;
- Accounting policies and practices, such as warranties and insurance;
- Disclosure of risks or potential risks, including current lawsuits;
- A listing of all other debt not included on the balance sheet, e.g., for operating leases;
- A signed oath from the CEO and CFO that the filings are accurate; and
- An assessment from the independent auditor of financial records.
Because a 10-K form is filed annually, it is longer and more thorough than the similar 10-Q filing, which the SEC requires quarterly.
The role of technology in creating and leveraging 10-K forms
The 10-K form should therefore not be seen as red tape to be cleared away, but rather as an opportunity to “open the books” to the government and the public. Responsible investors will read these filings and develop a sense of the pattern for the industry. Thus, the 10-K is also an opportunity to attract more and better investment.
Companies engaged in preparing the 10-K can facilitate this by using advanced methods of data presentation that come along with certain entity management software platforms.
For instance, the reason why our eyes glaze over when presented with endless blocks of text and tables of figures is that human beings (the SEC and your investors included) don’t primarily learn, and we particularly don’t form memories, through reading on its own. We’re primarily visual learners—which means that the most important information should be presented in visual form. These forms depend on the needs of the organization (and, especially in terms of a 10-K filing, the legal requirements), but they include diagrams, charts and graphs that serve as accessible entry points into the story a company tells us through its filings.
In several previous posts, we covered Entity Relationship Diagramming (ERD), which is one method of visualizing operations across an organization’s various entities and subsidiaries. ERD and tools like it can be applied to the filing process to make magic happen and turn the filing into something that is actually attractive and interesting to investors or potential investors.
While filing the 10-K and other forms is a process of composition that requires the coordination of (at the bare minimum) accounting, legal counsel and leadership, the tools of entity management software can provide a tremendous assist to companies by automating the collection and presentation of data that goes into a standard filing.
Blueprint OneWorld has a number of elegant and effective solutions along these lines to enable smarter and more effective filing. Our software can automatically generate reports in PDF form that chart the global structure of your entity, tie this information into specialized spreadsheets to see specific transactional data, as well as overall indexing, sorting and management functions.
We hope to be your organization’s entry point into a reliable and effective strategy for legal filings, of the 10-K form and beyond. Please call or email us today to discuss this and others of our software solutions.