SEC Form ARS: An Overview
Security & Exchange Commission (SEC) Form ARS, or the Annual Report to Shareholders, is a document used by a public company to report its latest financial performance to its shareholders shortly before its annual shareholders' meeting.
Form ARS does not have to be filed with the SEC. It is intended as a direct communication from a company's executives to its shareholders. It summarizes the company's latest financial performance and may also contain hints of its future direction.
- ARS is an acronym for annual report to shareholders
- A company may use SEC Form ARS to report its performance for the past year to shareholders in advance of their annual meeting.
- Other companies use SEC Form 10-K as it contains more comprehensive financial information.
In recent years, most public companies have combined or replaced the ARS with a Form 10-K, which contains more comprehensive financial information and must be filed with the SEC.
Understanding Form ARS
A typical SEC Form ARS will include a summary of the year's major events and a list of some of its accomplishments and future plans as well as detailed financial information regarding the last year's operations.
This document and the company's proxy statement are essential reading for fundamental analysts who study the ongoing business of a company in order to determine whether it makes a good investment for the future.
What's In the ARS
An ARS will include:
- A director’s report, which includes information about the director’s salary and a review of corporate governance policies and procedures
- General information about the company
- A review of company financial information and operations
- A statement by the chairperson
- An auditor’s report with an opinion on the accuracy of the financial information found in the ARS
- Financial statements, including income statements, balance sheets, cash flow statements, and a statement of changes in equity
- Notes relevant to the financial statements
- Information on the company’s accounting policies
Stock analysts use SEC Form ARS or Form 10-K to track a company's financial results and form an opinion on its value as an investment.
The ARS may cover additional information as its executives see fit, including reports on the company’s social responsibility policy, a description of its manufacturing operations, and any other details considered useful for shareholders and potential investors.
Presentation of the ARS
The ARS is to some extent a public relations document. As such, it is usually published on high-gloss paper with photos, images, and graphics.
The Form 10-K is a more detailed version of the Form ARS and is submitted to the SEC. That's why many companies forego a separate ARS and provide shareholders with a copy of its 10-K.
Financial Information Included in the ARS
The ARS contains financial statements for each period since its last annual meeting and for the previous year as a whole.
The income statement compares the company’s income with the cost of operating expenses during the year. The balance sheet gives a complete picture of the company’s assets and debts over the course of the previous financial year. The cash flow statement shows how the company has generated and used liquid assets and cash during the year under review.
The more comprehensive SEC Form 10-K must provide an overview of the company's major operations, an outline of known risk factors to the business, specific financial data covering the past five years, and commentary from the management as well as a full financial report.