How to read a 10-K annual report

How to read a 10-K? Which information is included in a company’s “annual report on Form 10-K” filed with the Securities and Exchange Commission? Find out by walking through an example of the table of contents of a 10-K filing. A big part of the success in analyzing an annual report is knowing where to look!

⏱️TIMESTAMPS⏱️
0:00 Introduction to 10-K document
0:22 10-K annual report example
1:29 Most important sections in a 10-K annual report
4:11 Selected Financial Data in the 10-K
4:44 10-K MD&A
5:26 Financial statements in the 10-K
6:42 Corporate governance, executive compensation and audit fees
7:38 10-K summary

For this overview, I have taken as an example the 10-K filing of a well-known company called 3M. Their 2017 10-K document is 176 pages in length (longer than for example Apple and Alphabet, but shorter than GE). A significant part of the volume of a 10-K is made up by exhibits attached at the end of the document, such as the 3M executive life insurance plan, and the company’s long term incentive plan. I personally must admit that I have never spent time reading those sections (I fully trust the company’s compensation committee and audit committee plus the company’s auditors on that!), so the “net workload” of reviewing a 10-K document may be less intimidating than it seems. In compliance with SEC rules, the 10-K document has 4 parts (with Roman numerals), and one level below that items numbered 1 through 16. That doesn’t mean there are only 16 items in a #10-K, as we will soon see. By taking you through an example of an actual 10-K document rather than just a theoretical discussion, I can also show you the volume of pages for each section.

For me personally, item 1 business, item 6 selected financial data (a one-page summary for the latest 5 years), and the financial statements in item 8 are the first things to read in a 10-K report, followed by a review of item 7 the MD&A. Let’s review them in numerical order, and find out what’s in them.

Philip de Vroe (The Finance Storyteller) aims to make strategy, #finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!