Where to Find Revenue on a 10-K Report
Master finding and understanding revenue disclosures in a company's 10-K report for insightful financial analysis.
The 10-K report is an extensive annual filing submitted by public companies to the U.S. Securities and Exchange Commission (SEC). This document provides a comprehensive overview of a company’s financial performance and business operations over the past fiscal year. It serves as a foundational resource for investors, analysts, and the public to gain detailed insights into a company’s health and strategic direction. Understanding how to extract specific financial information, such as revenue, from this report is a valuable skill for anyone seeking to make informed decisions.
Navigating the 10-K Report
Companies file these reports with the SEC, and they are publicly accessible through the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) database. To locate a 10-K, one can visit the SEC’s EDGAR website and use the company search function, typically by entering the company name or ticker symbol.
Beyond the SEC’s database, many companies also provide direct links to their 10-K filings on the investor relations section of their official websites.
The report is generally divided into four main parts. Part I covers the business description, risk factors, and legal proceedings, while Part II focuses on financial information, including the financial statements and management’s discussion and analysis. Part III details executive compensation and security ownership, and Part IV includes exhibits and financial statement schedules.
Locating Revenue on the Income Statement
The most direct place to find a company’s top-line revenue is within its Income Statement, also known as the Statement of Operations or Statement of Earnings. This financial statement is typically situated within “Part II, Item 8: Financial Statements and Supplementary Data” of the 10-K report. This section presents the audited financial statements, which include the Income Statement, Balance Sheets, and Statement of Cash Flows.
On the Income Statement, the primary revenue figure is usually found at the very top. It may be labeled under various terms, such as “Net Sales,” “Total Revenues,” “Sales,” or “Sales and Operating Revenues.” This line item represents the total amount of money a company earned from its primary business activities during the reporting period before deducting any expenses.
Deeper Dive into Revenue Disclosures
While the Income Statement provides the consolidated revenue figure, more detailed breakdowns and insights are available in other sections of the 10-K. Additional granular information about revenue is often found in the “Notes to Consolidated Financial Statements.” These notes typically appear directly after the main financial statements in “Part II, Item 8.”
The notes to the financial statements explain the accounting policies applied and offer detailed breakdowns of significant line items, including revenue. Companies often disaggregate revenue by different categories, such as product lines, services, geographic regions, or customer segments, providing a more nuanced understanding of where revenue is generated.
The “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A),” found in “Part II, Item 7,” offers management’s narrative on the company’s financial results. This section provides qualitative context for the revenue figures, discussing trends, significant changes, and factors impacting revenue performance, such as economic conditions or new product introductions.
Understanding Revenue Recognition Principles
The revenue figures reported in a 10-K reflect specific accounting principles that dictate when and how revenue can be recorded. Companies operating in the United States generally follow Generally Accepted Accounting Principles (GAAP).
Under GAAP, revenue is recognized when a company satisfies its performance obligations by transferring promised goods or services to a customer. This means revenue is recorded when control of the good or service passes to the customer, irrespective of when cash is received.
The core principle involves a five-step framework for recognizing revenue from contracts with customers. This framework ensures that revenue is recognized in an amount that reflects the consideration the company expects to be entitled to in exchange for those goods or services.