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Fundamental Analysis · Intermediate · 5 min

Finding and reading annual reports

You can find a listed company's annual and quarterly reports, name their main parts and choose a sensible reading order.

Free, official, long

Before a company's numbers reach a news headline, they appear in an official report. That report is free, legally required and usually checked by an auditor.

It is also long. A large company's annual report often runs to well over a hundred pages, and most people never open one. You do not need to read every page. You need to know where to find the report and which parts to read first.

10-K, 10-Q, 8-K

Where to find reports:

Comparison In the United States, companies file a 10-K every year, a 10-Q each quarter and an 8-K for major events, all free on the SEC's EDGAR database. In the European Union, listed companies publish an annual report within four months and a half-year report, in one digital format. United States 10-K yearly 10-Q quarterly 8-K for events Free on EDGAR European Union Annual report Half-year report Within four months One digital format

In the United States, companies file three main reports:

In the European Union, the Transparency Directive requires listed companies to publish an annual financial report within four months of the end of the financial year and a half-year report within three months of the half-year's end. Since 2020, annual reports must be prepared in one electronic format. Consolidated accounts of EU listed companies follow international accounting standards (IFRS), while US companies use US GAAP.

According to the SEC's guide to the 10-K, Item 1 describes the business, Item 1A the main risks, Item 7 management's discussion and analysis (MD&A), and Item 8 the financial statements with their notes and the auditor's report.

A reading order

Starting on page one is the slowest way to understand a company. A practical order:

Steps A reading order for an annual report: the business description, the risk factors, management's discussion and analysis, the financial statements, then the notes. 1 Business 2 Risk factors 3 MD&A 4 Statements 5 Notes
  1. Business. What does the company sell, to whom, and against which competitors?
  2. Risk factors. What does the company itself say could go wrong?
  3. MD&A. Management explains why sales and profits changed and what it expects.
  4. Statements. Check the story against the balance sheet, income statement and cash flow statement.
  5. Notes. How was revenue counted? When does the debt fall due? Are there large one-off items?

Also look at the auditor's report. An opinion with reservations, or a warning about the company's ability to continue, is a serious signal.

Common mistakes

The takeaway

Annual reports are free from the company or regulator. Read the business, the risks and management's discussion first, then the statements and their notes.

Check yourself

Quick quiz

4 questions. Instant feedback, nothing is saved.

  1. 1Tap the part where management explains the results in its own words.

    Tap the chart.

    Steps Chart for the question: Tap the part where management explains the results in its own words. 1 Business 2 Risk factors 3 MD&A 4 Statements 5 Notes

    Management's discussion and analysis, Item 7 of a 10-K, is where management tells its story and explains changes in the numbers.

  2. 2How long does a large US company (a large accelerated filer) have to file its 10-K?

    Large accelerated filers have 60 days, accelerated filers 75 and all others 90. Four business days is the usual deadline for an 8-K.

  3. 3When does a US company usually file a Form 8-K?

    The 8-K reports important events between the regular annual and quarterly reports.

  4. 4Why read the notes to the financial statements?

    Two companies can report the same profit with different accounting choices. The notes show those choices.

of 4 correct.

Sources

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