Companies that trade in the public markets have a responsibility to investors and regulators to report accurate information about the financial and operational performance of their business. Companies are required by law to present the U.S. Securities and Exchange Commission with a 10-K filing, which is technically an annual report for regulators, each year. Considering that an annual report is created for investors, it is a document with more of a conversational tone than a 10-K filing.
An annual report is a yearly booklet that is usually sent to investors in the spring. The timing of the distribution is not coincidental as the spring months are generally when companies host shareholder meetings. Investors can use the annual report to prepare for shareholder votes on major events, such as changes to a board of directors. Although the annual report was once a platform where material information could be discussed, the emergence of a law called Regulation Fair Disclosure (Reg-FD) triggered a trend in which corporate executives -- in an attempt to avoid conflict with Reg-FD -- started to use 10-Ks as replacements for annual reports.
A 10-K is a compilation of financial statements that have been audited, including a balance sheet, income statement, cash flow and shareholder's equity disclosures. This document is intended for regulators and is also often examined by financial professionals, including money managers and analysts. Regulators require that public companies -- depending on their size -- file their 10-K documents anywhere from 40 to 45 days after the fiscal year ends.
The U.S. SEC requires that all companies that list shares in the public markets in addition to privately-held businesses with more than 500 investors and assets worth at least $10 million file 10-K reports with the agency. Although 10-K filings and annual reports can both be lengthy documents with hundreds of pages, a 10-K generally has more content. A 10-K divulges the compensation structure of key executives and reveals any changes to a company's organizational structure. By law, companies must also present a copy of their annual report online on the investor relations page of their website.
An annual report is presented in a much more user-friendly way than a 10-K document. The annual report begins with a letter from a top executive, such as the chief executive officer or member of the board of directors. It also contains color photos throughout and provides context for recent financial performance, including economic, market or company-specific headwinds that may have hindered or could potentially compromise earnings results. A 10-K filing is filled with financial tables and year-over-year performance comparisons. A 10-K, however, is not all numbers and may contain content, including risk factors facing the business.
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