The Power of EDGAR: Finding Financial Statements

Dec 13, 2006 by Adam C. Powell, Ph.D.

In the news, you might have recently heard about The Sarbanes-Oxley Act of 2002, which was written in the wake of the Enron scandal.

Definition: The Sarbanes-Oxley Act of 2002 (SOX): An act created to require the independent auditing of financial statements, enhance civil and criminal liability for falsifying financial statements, and create the Public Company Accounting Oversight Board. The act also does a number of other things, such as prohibiting insider trading during pension fund blackout periods, preventing executives from receiving personal loans from their companies, and providing protection for whistle-blowers who wish to report fraud.

Anyway, all in all, SOX was created to increase the accuracy of financial statements; the 10-Ks (annual financial statements), 10-Qs (quarterly financial statements), and other things that companies have to file with the Securities Exchange Commission (SEC). So, now that these statements are accurate, where would the average investor go about finding them? Luckily, they are easily accessible to the public through an online clearinghouse run by the SEC, called “EDGAR”. EDGAR’s address is http://sec.gov/edgar.shtml

To use EDGAR, either follow the tutorial, or click “Search for Company Filings,” and then on the next page, click “Companies & Other Filers.” Enter the company name in the appropriate box, click “Find Companies,” and presto, all of the reports in the system appear! After doing this, you will see a long list of files, which may be hard to decipher. The key is to read what is in the “Form” column. Each form is also described in the “Description” column, and forms are ordered in order of date of filing. Unfortunately, some of the forms are far more helpful than others.

Here are some common forms, in order of importance to the average investor:
10-K: Annual report
10-Q: Quarterly report
8-K: Current report of material events or corporate changes (Something has materially changed since the last 10-K or 10-Q)
4: Statement of changes in beneficial ownership of securities (an executive or VP bought or sold some of the company’s stock)