Lesson 8 of 10
How to read a 10-K
What is in each item of an annual report on Form 10-K, which four items carry the information, and the reading order that gets you there fastest.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
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In one minute
- Most of what a reader wants sits in four of a 10-K's items, and only one of them, Item 8, is audited.
- The file carries no executive pay, because Part III usually points to the proxy statement, filed separately.
- Read the audited statements before management's narrative, and read the risk factors only as a diff against last year's.
Four items carry most of what a reader wants. Item 1 is what the company does. Item 1A is what could go wrong. Item 7 is management's account of the year. Item 8 is the audited statements and their notes. Only Item 8 carries the audit opinion on the statements. Reading them in the wrong order changes what each one tells you.
The order to read a 10-K in
- 1Item 8The audited statements and notes
- 2Item 7Management explains what you just read
- 3Item 1AOnly what changed since last year
- 4Item 1The business, if it is new to you
- 5Item 5Buybacks, month by month
The map, in four parts
| Part | Items |
|---|---|
| I | 1 Business, 1A Risk Factors, 1B Staff Comments, 1C Cybersecurity, 2 Properties, 3 Legal Proceedings, 4 Mine Safety |
| II | 5 Market and Repurchases, 6 reserved, 7 MD&A, 7A Market Risk, 8 Financial Statements, 9 Accountant Changes, 9A Controls, 9B Other, 9C Foreign Inspections |
| III | 10-14 Directors, Pay, Ownership, Related Transactions, Fees |
| IV | 15 Exhibits and Schedules, 16 Summary (optional) |
A 10-K is due 60 days after fiscal year end for a large accelerated filer, 75 for an accelerated filer, and 90 for everyone else. Item 6 held a five-year summary of revenue, income and assets until the Commission's 2020 amendments eliminated it, so a filing for a period from 2021 carries no such table. Ten years of history now has to be assembled from several filings, since each 10-K carries three years of income statements and two balance sheets.
The document is not the disclosure
Part III is the fork most readers never notice. In most 10-Ks its five items hold a cross-reference rather than text. The content is incorporated by reference from the proxy statement (The document a company sends shareholders before its annual meeting, with pay tables and board elections.) the company files separately, usually weeks later. So "the 10-K" means two things: as a document, it is the file you downloaded, and it contains no pay tables and no director biographies. As a disclosure package, it includes the proxy, and everything is there. Reading only the file misses how management is paid, often the most informative pages of the year.
Risk factors, read as a diff
Regulation S-K Item 105 requires risk factors specific to the registrant rather than generic, and the lists are drafted to be complete rather than ranked. What is informative is what changed: a new paragraph is a disclosure decision somebody made deliberately.
What the filing says about its own reliability
Section 302 and Section 404 of the Sarbanes-Oxley Act of 2002 require officer certifications and a management assessment of internal control. The certifications are filed as Exhibits 31 and 32. Management's report, and the auditor's opinion on it where required, sit in Item 9A or beside the statements in Item 8, with Item 9A pointing to them. A disclosed material weakness is the strongest single accounting-quality signal a filing produces about itself. It is the company stating that its own process for producing these numbers did not work.
The exhibit index in Item 15 lists the credit agreements and material contracts, each filed as its own document. The covenants that limit borrowing are clauses inside those agreements.
Check yourself
Where is a company's executive compensation actually disclosed?
- In Item 8, with the financial statements
- In Item 1A, as a risk factor
- Usually in the proxy statement, incorporated by reference into Part III
Show the answer
Answer: C.
Part III commonly holds a cross-reference rather than text. The pay tables sit in the proxy statement, filed separately and usually weeks later.Which item should you read first, and why?
- Item 1, to learn the business
- Item 7, management's summary
- Item 8, because it is audited and everything else narrates it
Show the answer
Answer: C.
Reading the audited statements first means management's account arrives after you already know what happened, rather than framing it for you.What is the most useful way to read Item 1A, Risk Factors?
- Top to bottom, treating every line as equally important
- Skip it, the list is boilerplate
- As a difference against last year's list
Show the answer
Answer: C.
The lists are drafted to be complete, not ranked. A new or reworded paragraph is a disclosure decision, which is what makes the diff informative.Sources
- Form 10-K, General Instruction A(2): 60, 75 and 90 day filing deadlines by filer status.
- Item 6 of Form 10-K: Selected Financial Data, eliminated by the Commission's 2020 amendments.
- Regulation S-K Item 105: risk factors specific to the registrant, not generic.
- Section 302 and Section 404 of the Sarbanes-Oxley Act of 2002: officer certification and internal control assessment.
- Item 15 of Form 10-K: exhibits, including material contracts.
- Apple Inc., Form 10-K, fiscal year 2025, filed 2025-10-31, accession number 0000320193-25-000079.
What this leaves out
- This lesson describes the standard content of Form 10-K for a domestic commercial filer. Foreign private issuers file a 20-F on a different timetable and item structure.
- It does not cover the accounting itself. Knowing where Item 8 sits does not tell you whether the policy inside it is aggressive.
- A company's first 10-K after going public has no earlier 10-K to diff against; the risk factors in its IPO prospectus are the prior list.
- The Apple dates and accession number above identify one filing. They are a pointer to a document, not advice about that company or any security.