Pick –up line for an accounting bar – So, what’s your favorite Item in Form 10-K?

A question that occasionally comes up, and can create confusion in the 10-K and 10-Q preparation process is what to do with item numbers that do not apply to your company.

For example, in Part One of the Form 10-K, Item 4 concerning mine safety disclosures frequently does not apply. So, what should you do with this Item number? Could you leave it out? Must you list it? Is it a style choice?

Well, as it turns out, the SEC has an Exchange Act Rule that answers this question: (And yes, we are into total SEC Geek territory here)

§240.12b-13   Preparation of statement or report.

The statement or report shall contain the numbers and captions of all items of the appropriate form, but the text of the items may be omitted provided the answers thereto are so prepared as to indicate to the reader the coverage of the items without the necessity of his referring to the text of the items or instructions thereto. However, where any item requires information to be given in tabular form, it shall be given in substantially the tabular form specified in the item. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted. Unless expressly provided otherwise, if any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made.

(Note that the bolding was added for this blog, and that this is also done below)

So, all Item numbers must be listed!

If you would like to look at the Exchange Act Rules, you can find them in our SEC handbook, or here on the web:

www.ecfr.gov/cgi-bin/text-idx?SID=8e0ed509ccc65e983f9eca72ceb26753&node=17:4.0.1.1.1&rgn=div5

That said, every rule has an exception, and the exception to this rule is in the Form 10-Q, Part Two, which has an instruction that says:

PART II—OTHER INFORMATION

Instruction. The report shall contain the item numbers and captions of all applicable items of Part II, but the text of such items may be omitted provided the responses clearly indicate the coverage of the item. Any item which is inapplicable or to which the answer is negative may be omitted and no reference thereto need be made in the report. If substantially the same information has been previously reported by the registrant, an additional report of the information on this form need not be made. The term “previously reported” is defined in Rule 12b-2 (17 CFR 240. 12b-2). A separate response need not be presented in Part II where information called for is already disclosed in the financial information provided in Part I and is incorporated by reference into Part II of the report by means of a statement to that effect in Part II which specifically identifies the incorporated information.

(Note that the bolding was added for this blog)

So, save those references, and we all hope your reporting goes well.

As usual, we would love to hear your thoughts and comments.