D. PUBLIC COMPANY REPORTING TOPICS

Question 1

_{D. PUBLIC COMPANY REPORTING TOPICS}

What are Regulations S-X & S-K?

Answer 1

Regulation S-X
Regulation S-X g_overns the form and content of_ financial statements and financial disclosures, such as the balance sheet, income statement, shareholders equity statement, cash flow statement, and footnotes.

Regulation S-K
Regulation S-K governs the form and content of nonfinancial disclosures, such as:

• description of the business,
• management’s discussion and analysis (MD&A),
• information on management.

Question 2

_{D. PUBLIC COMPANY REPORTING TOPICS}

Filer Types:

Answer 2

Large accelerated filer: A company with market value of $700 million or more.

Needs to file:

• 10-K within 60 days of fiscal year end,
• 10-Q within 40 days of the end of the quarter.

Accelerated filer: A company with market value between $75 and $700 million and annual revenues of $100 million or more.

Needs to file:

• 10-K within 75 days of fiscal year end,
• 10-Q within 40 days of the end of the quarter.

Nonaccelerated filer: A company with market value of less than $700 million with annual revenue of less than $100 million, or a market value of less than $75 million.

Needs to file:

• 10-K within 90 days of fiscal year end, and the
• 10-Q within 45 days of the end of the quarter.

Question 3

_{D. PUBLIC COMPANY REPORTING TOPICS}

Form 10-K:

Answer 3

Form 10-K is the annual filing or “annual report”. The 10-K must be audited by an independent, registered auditor.

The 10-K is organized into 4 main parts:

Part 1 - General Info (4 items)

Part 2 - Financial Info (6 items)

Part 3 - Corporate Info (5 items)

Part 4 - Schedules (1 items)

Question 4

_{D. PUBLIC COMPANY REPORTING TOPICS}

Form 10-Q:

Answer 4

Form 10-Q is the quarterly filing**. The 10-Q is **not audited but is reviewed by an auditor. Disclosures in the 10-Q are not nearly as extensive as in the 10-K.

The 10-Q includes the following reviewed financial statements:

Balance sheets:

• most recent fiscal quarter, and a
• end of the preceding year

Income statement:

• quarterly and
• year to date income statements for current year and
• preceding year

Cash flow statement:

• year to date and
• preceding year cash flow statements

Question 5

_{D. PUBLIC COMPANY REPORTING TOPICS}

Form 8-K;

Answer 5

Form 8-K is for significant or “material” events that happen between 10-Ks and 10-Qs.

These might include: (5)

• a bankruptcy,
• departure of a CEO,
• triggering events for material obligations,
• delisting from a stock exchange,
• change in accountants, etc.

Question 6

_{D. PUBLIC COMPANY REPORTING TOPICS}

Diluted earnings per share:

Answer 6

Diluted earnings per share

The idea is to calculate what the EPS would be if all possible shares were outstanding. This is because at any given time, a company might have millions of stock options or convertible bonds that would significantly impact the EPS if all those shares were outstanding.

There are things that can affect both the numerator and denominator in the diluted EPS calculation.

Items affecting the numerator:
• With convertible bonds, the interest expense needs to be added to net income in the numerator (net of tax)

Items affecting the denominator:
• First, only dilutive (items that would lower EPS) potential common stock will be included. For convertible bonds it’s possible that when adding back interest expense to the numerator and the potential shares to the denominator that it’s actually non-dilutive, is so it wouldn’t be used in the calculation of DEPS. This can also happen with stock options or warrants, see below.

For stock options or warrants:
• Assume the options are exercised, and that the company buys back as many shares as it can based on the exercise price

Example: 100 shares at $10 exercise price with market value of $25 = proceeds of $1,000 so they buy back 40 shares @ $25/share. This means the remaining 60 shares would be added to the denominator, and would be dilutive

Note: If the option price exceeds the market price, this would be non-dilutive, and you wouldn’t use the number

• For convertible bonds, assume the bonds are converted to shares and add the shares to the denominator

Example: 10 convertible bonds each convertible to 50 shares, so if converted there would be 500 shares. Add 500 to the denominator