What is the important difference between form 10-k and annual reports?
Just see what annual report of Tata coffee and 10-k of Starbucks look like.
Tata Coffee Annual report for the Financial year 2018-19
Starbucks Form 10-k for the fiscal year ended 1 October 2017.
The annual report can give you information but it will be nothing against what form 10-k will give you. Under part 1, there is item 1, 1A, and 1B. They are extremely helpful. Just saying. Starbucks can give the information in tables and about its all business segments. I may not need all of it but by giving it the company is sending a signal that they are not hiding anything. They talk about their competition. I can’t see anything about competition in any annual report ever. They talk about their employees as a highlight of their careers. Very few Indian companies talk about it and one or two talks about it in their annual report.
Form 10-k is like a different version of Red Herring Prospectus in India. They talk about risks in detail. Something which I found in many DRHPs. In 1B it talks about Unresolved Staff Comments. I believe that there are many ways with which we can analyze the corporate governance level of the company This one is better, Letter to the shareholder is better but the question is how many letters are really worth reading.
In India, we don’t have many rules and regulations. Not many companies publish in format what is needed. DLF, one of the biggest real estate company in fact hide information about their subsidiary. Whereas form 10-k of Johnson and johnson is worth reading. As it is the diversified company doing different businesses under the tag of pharma, they mention
Johnson & Johnson and its subsidiaries (the Company) have approximately 132,200 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the health care field. Johnson & Johnson is a holding company, with operating companies conducting business in virtually all countries of the world. The Company’s primary focus is products related to human health and well-being.
Pretty interesting. Now tell me the name of one company which can give you such information in a simplistic manner? On the same page, company mention…
The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices.
Hereafter the company starts giving names of its products. Wow. I never found this in any Indian company. That is only for the analyst.
The Consumer segment includes a broad range of products focused on personal healthcare used in the beauty, over-the-counter pharmaceutical, baby care, oral care, women’s health and wound care markets. Major brands in Beauty include the AVEENO®; CLEAN & CLEAR®; DR. CI:LABO®; NEUTROGENA® and OGX® product lines. Over-the-counter medicines include the broad family of TYLENOL® acetaminophen products; SUDAFED® cold, flu and allergy products; BENADRYL® and ZYRTEC® allergy products; MOTRIN® IB ibuprofen products; NICORETTE® smoking cessation products outside the U.S.; ZARBEE’S NATURALS® and the PEPCID® line of acid reflux products. Baby Care includes the JOHNSON’S® and AVEENO Baby® line of products. Oral Care includes the LISTERINE® product line. Major brands in Women’s Health outside of North America are STAYFREE® and CAREFREE® sanitary pads and o.b.® tampon brands. Wound Care brands include the BAND-AID® Brand Adhesive Bandages and NEOSPORIN® First Aid product lines. These products are marketed to the general public and sold online and to retail outlets and distributors throughout the world.
The company keeps going on. But I think My readers got what I want to say. I remember for collecting all this information about Indian companies I needed to go to their special section for the analyst and sometimes it was impossible as I am not listed, analyst. many of them don’t even care to give information about the USFDA inspection and what they receive. If you are an investor, it’s your duty to collect data.
In a simple word, Companies following IFRS are way more transparent then Indian comoanies.