The SEC and 10-K
There are several ways, which the SEC employs to protect investors, maintain efficient markets, and facilitate capital formation by requiring corporations to file annual 10-K reports.
The report comprises essential business risks in the section “Risk Factors” that a corporation may face. They affect its business operations and, consequently, overall profitability. The transparency of this information facilitates the decision-making process for investors.
It also contains ongoing legal proceedings (“Contingencies and Commitments”) against the company that may lead to a future liability or negatively affect the Corporations business. All these proceedings are provided in the first part of the report so that potential investors or any other stakeholders may review it and make their decisions accordingly.
Other information pertaining to “Unresolved Staff Comments” and “Mine Safety disclosures” is also available in the first part of the report, which might be of interest to the potential investors and related stakeholders.
The second part of the report contains financial information related to the company, which might be used by potential investors in their decision-making process. It reflects the stock performance, share buyback schemes, selected financial data, including EPS and diluted EPS, and the management’s commentary discussing the company’s performance in the financial/fiscal year.
There are many other components in the section “Selected Financial Data.” They present in detail the interpretations of available financial information and year-over-year comparisons facilitating understanding of stakeholders.
Consolidated financial information is also provided to the whole group to ensure a better understanding of the company and its operations.
It also contains the audit report made by registered public accountants that help investors and users of the financial information have more confidence in the accounts of the company presented in the 10-K report.
Factors of Communication
There is a variety of factors of communication that must be considered while preparing an annual 10-K report. They primarily relate to the way the information is presented to target users. The importance of these factors is defined not only by the fact that they disclose financial information but also by the inclusion of future plans and opportunities for development (United States Securities 2019). Therefore, the most crucial communication factors are stakeholders, purpose, theme, and message. Their combination defines the overall success of the company’s report and, consequently, shapes its image among customers.
In the case of Apple Inc., the orientation on stakeholders is key to the company’s sustainable development. Hence, they present the information in such a way that their needs in receiving extensive data on the current situation of the business and its place on the market are addressed (United States Securities 2019). The purpose of the Apple Inc.’s report is clearly seen in their focus on the provision of financial statistics to ensure the target users in the company’s capability to remain profitable. As for the message and theme, they relate to the changing market and the circumstances that allow Apple Inc. to demonstrate the required degree of flexibility.
Two Types of Information for the Users of Annual Statements
There are various types of information included in the 10-K report of Apple Inc. The two of them considered for the purposes of this paper are the company’s services and the description of common stock. The former is explicitly given at the beginning of the report and primarily intended for target users since their awareness of available options would bring the company more profits in the long run (United States Securities 2019). Hence, the services of Apple Inc. include digital content stores, streaming services, AppleCare, iCloud, licensing, and others (United States Securities 2019). The presentation of such a wide variety of offers by the company is aimed at addressing the needs of a higher number of users.
The latter presents information about the ownership of the company by stakeholders. These data are extremely useful for people owning shares in Apple Inc. since they allow them to see the distribution of profits in the business (United States Securities 2019). The description of common stock includes specific sections such as fully paid and nonassessable shares, voting rights, dividends, rights for liquidation distributions, and the lack of preemptive or similar rights (United States Securities 2019). In this way, Apple Inc. shareholders can receive detailed information about their possible profits depending on shares.
Information Needs of 10-K Users
The information needs of 10-K users are addressed through the inclusion of various sections corresponding to their interests. Thus, for example, shareholders will mostly benefit from the availability of such data as share price performance and purchase schemes, earnings per share (EPS), and diluted EPS (United States Securities 2019). The creditors will find useful information about the company’s cash flow and liquidity position (United States Securities 2019). Hence, these two categories of 10-K users will receive extensive data regarding their needs.
The company’s employees will mostly focus on share-based compensation and employee stock plan as the key areas of their interest. Customers will be informed on the company’s performance and stability and the lack of illegal issues resulting from its activities such as frauds (United States Securities 2019). Finally, financial analysts will benefit from the presented financial statements (United States Securities 2019). These sections will allow them to conduct the analysis predicting the development of Apple Inc. in the nearest future.
United States Securities and Exchange Commission. 2019. FORM 10-K. Apple Inc. Web.