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Reasons for an Amended 10-K: 2019

Form 10-K, an annual report filed by US-based public registrants, is the most comprehensive source of information regarding a company’s financials and its underlying business. These reports are thoroughly scrutinized by investors and other users, which explains why they need to be promptly amended in the event of an error or if material information is missing or omitted. Although amended filings can raise concern for investors and other stakeholders (especially if filed to correct material errors), some amendments are filed for mundane reasons.

In this analysis we look at the primary reasons NYSE and Nasdaq companies disclosed for having to file amended 10-Ks in 2019.

In 2019, 375 amended 10-Ks were filed, a 6% decrease from the 401 filed in 2018.

For the sixth consecutive year, the most common reason for filing a 10-K/A was to incorporate information required in Part III. This information, encompassing Items 10-14, can be filed within the original 10-K, proxy statement or amended 10-K no later than 120 days after the period end. This is a technical amendment and should not cause concerns. Here is a typical disclosure:

We are filing this Amendment No. 1 on Form 10-K/A to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (“Amendment No. 1”), for the sole purpose of reporting the information required by Part III of Form 10-K. Our Annual Report on Form 10-K was originally filed with the Securities and Exchange Commission (“SEC”) on April 1, 2019 (“Original Filing”). The Original Filing incorporated the Part III information by reference to our Form 10-K/A, to be filed with the SEC within 120 days of our 2018 fiscal year-end.

This Amendment No. 1 does not change any of the information contained in the Original Filing. Other than as specifically set forth herein, we have not updated or amended the disclosures contained in the Original Filing to reflect events that have occurred since the date thereof. Accordingly, this Amendment No. 1 should be read in conjunction with our Original Filing.

Missing signatures and exhibits were the second most common reason for an amended 10-K. These amendments are often due to typographical or other inconsequential errors and do not raise alarms. Other reasons in this category, including the need to re-file confidential exhibits, may be of more interest.

In March 2019, the SEC issued Final Rule 33-10618, FAST Act Modernization and Simplification of Regulation S-K. The rule aims to modernize and simplify disclosure requirements for public companies, investment advisers, and investment companies, and includes changes to Items 601(b)(2) and 601(b)(10) of Regulation S-K. Companies may now redact certain confidential information in material contracts and other exhibits without submitting a confidential treatment request, provided such information is immaterial and competitively harmful. Ten companies specifically mentioned this rule change as the reason for their amendment, including this example:

The purpose of this Amendment is to refile Exhibit 10.16(b), which was originally filed with the Form 10-K, in connection with the transition to the new requirements set forth in Item 601(b) of Regulation S-K permitting registrants to omit immaterial and competitively harmful confidential information from material contracts filed pursuant to Item 601(b)(10) without the need to submit a confidential treatment request to the SEC.  The Company has also withdrawn its confidential treatment request for Exhibit 10.16(b).

The third most common reason for a 10-K/A was to include the financial statements for a significant subsidiary or an equity method investee, primarily pursuant to Rules 3-09 and 3-10 of Regulation S-X, as in this example:

The Registrant is filing this Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K for the year ended December 31, 2018 to file under Item 15 the consolidated financial statements of its equity investee […], as required by Rule 3-09 of Regulation S-X. Accordingly, the Registrant hereby amends and replaces in its entirety Item 15 of its Annual Report on Form 10-K for the year ended December 31, 2018.

Except as described above, this amendment does not update or modify in any way the disclosures in the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and does not purport to reflect any information or events subsequent to the filing thereof.

2018 saw an unusual number of amendments related to the auditor’s report (49 reports, or 12%), likely due to new requirements per PCAOB AS 3101. In 2019, only 22 companies (5.9%) cited the auditor’s report as the reason for the 10-K/A, a 55% decrease. Of these, only six cited AS 3101-related changes to the auditor’s report – three to include standardized language and three to add auditor tenure disclosure.

Although many of these amendments are mundane and routine in nature (such as Part III requirements), other reasons could be indicative of process weaknesses or other underlying issues and should be carefully evaluated.

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