SEC disclosure project
SEC Disclosure Project – Part 1 What is the purpose of this project? The purpose of this project is to get you familiar with finding and navigating through the various financial disclosures required for publicly traded companies. Public companies are required to conform to the periodic disclosure requirements set forth by the Securities and Exchange Commission (SEC). Any information that is required to be filed with the SEC will be available on the SEC EDGAR website: https://www.sec.gov/edgar/searchedgar/companysearch.html. How do I get started on this project? For this project, everyone is being assigned the company: Company name: Apple Inc. Ticker symbol: AAPL Using the SEC EDGAR link above, search for your company’s name (or ticker symbol). (Hint: When you type your company’s name into the search field, a drop-down list of choices will appear; click on your company’s name rather than clicking the “Search” button.) Click the “View filings” button toward the left-hand side of the screen. You will now see a list of your company’s most recent SEC filings. You can also search for certain types of SEC filings by using the “Search table” field. On the following pages, you’ll be asked to search for certain SEC filings that companies are required to make and that are most relevant for an accountant/auditor to understand. Once you find the applicable document, you will be asked to search for and report certain pieces of information (it’s like a scavenger hunt for accountants!). The following pages provide spaces for you to document the information you find during your search. (Make sure you answer all 33 questions.) . It will be graded based on effort, completeness, and the extent to which you follow the instructions. Companies have some flexibility in how they report the information in these filings, so it may require a little searching to find the relevant information. 1 10-K Filing 10-K filings provide investors with comprehensive information about the financial condition of the company, new developments, and the risks of investment. The audited financial statements are part of the 10-K filing. Companies file one 10-K per year (i.e., it’s their “annual report”). Once you search for your company within the EDGAR database, it should return a list of the company’s most recent SEC filings. Locate the company’s most recent 10-K filing. You can quickly find this by typing “10-K” into the Search field. Once you locate the latest 10-K, before you click on the document link, answer the following questions: Your answers go here: 1. What is the Filing Date of this 10-K filing? 2. What is the fiscal year-end (i.e., “Reporting Date” or “Period of Report”)? Next, click the link to access the annual report (next to “10-K”). Once in the filing, you’ll need to identify the most pertinent sections of the 10-K (using the Table of Contents at the beginning of the document may be helpful) and answer the following questions: 3. What is the company’s filing status (Large Accelerated Filer, Accelerated Filer, Non- Accelerated Filer, and/or Smaller Reporting Company)? Item 1. Business. This section of the 10-K provides investors with information about the nature of the business for which they are investing. 4. This section often starts with a description of the company’s business. Provide a brief (one sentence) description of your company’s primary business activities. 5. How many employees does your company have? 6. What is the CFO’s name? (If you can’t find this information in Item 1 of the 10K, try searching for “Chief Financial Officer” using CTRL+F.) Item 1A. Risk Factors. These risks are important for investors to understand from the perspective of their investment. 7. Identify at least one risk that you think would be of particular interest or concern to investors. 2 Item 5. Market for Registrant’s Common Equity. This section discusses matters related to the company’s sale of equity securities (i.e., stock). 8. Where does the company list its common stock for trading (i.e., on what stock exchange)? 9. How many shareholders of common stock does the company have? 10. Did anything interesting happen with the company’s stock this year (e.g., sale, repurchase, stock split)? If so, explain. Item 7. Management’s Discussion and Analysis. This section provides a narrative description of a company’s financial statements and operations that helps investors to see the company through the eyes of management. 11. What are some major highlights or developments in the company’s financial or operational performance in the past year? (Discuss at least two.) 12a. During 2023, which segment of the company generated the highest revenue? 12b. During 2023, which product or service generated the highest revenue? 13. The section on “Critical Accounting Estimates” describes aspects of the company’s accounting that involve the greatest subjectivity and complexity and require the most judgment on the part of management. What items/accounts did the company list as being critical accounting estimates? Item 8. Financial Statements and Supplementary Data. This is the section of the 10-K that we focus on the most in accounting: the financial statements and footnotes. (Some companies may report this section of the 10-K in a separate “Exhibit” rather than in the main 10-K document itself. If this is the case, the Item 8 section will tell you the Exhibit number and you will need to go back to where you first clicked on the link to open the 10-K document to find that Exhibit.) Independent Auditors’ Report 14a. Take a look at the Independent Auditor’s Report (it should be the first or last item in this section). What firm audits this company? 14b. Auditors must report “Critical Audit Matters” which discuss the items that the auditors found to be most challenging, subjective, or complex. What item(s) did the auditors list as Critical Audit Matters? 3 Income Statement 15a. How much Research & Development Expense did the company record this year? 15b. Did R&D Expense increase or decrease compared to last year? By what percent did R&D Expense increase (or decrease)? (Hint: to calculate the change from one year to the next, use the following formula: (Current Year # – Prior Year #) / Prior Year # 16. What amount of Basic EPS did the company report for the current year? Statement of Comprehensive Income 17. Did the company report any unrealized gains or losses related to changes in the fair value of its debt securities? If so, what amount? Balance Sheet 18. Does the company classify more of its marketable securities (i.e., investments) as current or non-current in nature? Footnotes 19. How many footnotes (i.e., notes to the financial statements) does this company have? (Hint: each footnote should be numbered.) 20. What is the title of the company’s first footnote (i.e., what topic does it related to)? 21. Find the company’s footnote related to Financial Instruments. What level of the fair value hierarchy is used most frequently to determine the fair value of most of the company’s investment securities (Level 1, Level 2, or Level 3)? 22. Find the company’s footnote related to Property, Plant and Equipment. What amount of depreciation expense did the company report for the current year? 23a. Find the company’s footnote related to Leases. According to the table detailing “Lease-Related Assets and Liabilities,” in what line item of the balance sheet does the company report Right-of-Use Assets related to Operating Leases? 23b. Based on the same table described in item 23a above, in what line item of the balance sheet does the company report Right-of-Use Assets related to Finance Leases? 4 24. Find the company’s footnote related to Shareholders’ Equity. Under the company’s Share Repurchase Program, how many shares of common stock did the company repurchase during the current year (if any) and how much money was spent on the repurchase of stock? DEF 14A Filing Shortly after the 10-K filing date, the company will file a DEF 14A (i.e., a Proxy Statement). This filing provides important information for shareholders to prepare them for the annual meeting and for shareholder voting. This filing includes important information about executive compensation, including ‘‘performance-based’’ or ‘‘incentive-based’’ compensation, which can vary significantly (think millions of dollars) with the performance of the company (e.g., based on how profitable the company is). Locate the company’s latest DEF 14A filing within the SEC EDGAR database (i.e., you’ll need to go back to where you originally searched for the “10-K” and instead do a search for “DEF 14A”). Be sure you click on the one that says “Other definitive proxy statements.” Once you find the latest DEF 14A, answer the following questions: 25. Find the “Executive Compensation Tables” (make sure it’s the table and not just a discussion) (Hint: the beginning of the document contains a table of contents). How much did the Chief Executive Officer (CEO) get paid in total in the most recent year? 26. Using this same Executive Compensation Table, Salary: what amount of the CEO’s pay in the most recent year is attributable to salary vs. stock awards? (You can ignore Stock awards: other forms of compensation.) 27. Companies are required to report a CEO Pay Ratio, which indicates the ratio of CEO pay vs. the amount of pay for the median company employee (i.e., an everyday employee). What is the CEO Pay Ratio for the current year? (It’s probably ridiculous.) (Hint: You can use CTRL+F to search for “CEO Pay Ratio”) 28. Tell me one of the “proposals” that shareholders will be voting on at the annual shareholder meeting. 10-Q Filing 10-Q filings provide interim (i.e., periodic) information to shareholders between 10-K filings. Navigate back to the company’s list of SEC filings within the EDGAR database and search for “10-Q” filings. 29. What is the reporting date of your company’s most-recently issued 10-Q? 30. Based on the list of 10-Q filings, how many 10-Qs does a company make each year? 5 31. Open the most recent 10-Q filing. Quickly scroll through the filing and find the financial statements. Are the financial statements in a 10-Q filing audited or unaudited? 8-K Filings 8-K filings provide investors with timely information about material transactions that occur throughout the year. Some companies will have dozens of 8-K filings each year, while other companies have less than a handful. Companies file 8-Ks for events such as CEO or CFO turnover, auditor changes, cybersecurity breaches, and restatements of the financial statements. Navigate back to the list of filings for your company within the EDGAR database and search for “8-K” filings. Answer the following questions: 32. How many 8-Ks did the company file during 2023? 33. Open the 8-K filing with a Reporting Date of For: “2023-03-10.” This 8-K provides the results of the last shareholder vote (from the 2022 Against: shareholder meeting). The second item listed provides the voting results for deciding whether EY should be reappointed as the company’s auditor. How many votes were in favor of reappointment? How many were against? 6
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