The U.S. Securities and Exchange Commission is the federal agency responsible for oversight of the country's stock markets. Businesses that want to offer their stock publicly, or brokerage firms engaging in the purchase and sale of stocks, are required to submit various financial documents to be registered with the SEC. Income statements are one financial document required for reporting revenue information from brokerage firms or publicly traded companies to the SEC.
The SEC defines an income statement as a financial report that shows revenue earned over a specific time period, such as a year or one financial quarter, and the expenses incurred to earn that revenue. SEC income statements begin with an accounting of the total revenue made from sales over the set time period. Subtract from that total all expenses needed to earn that revenue over the time period. This creates a basic income statement, and the result that you're left with is known as the business's "bottom line." Other financial information reported in income statements typically includes earnings per share, a measure of what shareholders would receive if the business elected to disperse net earnings as stock dividends, as well as outstanding income that must still be collected.
Section 17 of the Securities Exchange Act of 1934, part of the act which created the guidelines that govern the U.S. SEC, mandates certain requirements for financial statement reporting between stock brokers and their customers. Each year, brokerage firms which are registered with the SEC must file both a certified balance sheet and an income statement; firms are also required to send a copy of the certified balance sheet to customers. As of January 2005, private brokerage firms must have their financial documentation, including income statements, certified by a registered public accounting firm before filing them with the SEC.
Corporations that register with the SEC to release public stock must submit various financial statements to the commission, including income statements. This is mandated by Regulation S-X of the Securities Act of 1933. Companies with publicly offered stock totaling more than $75 million must provide audited income statements annually to the SEC that forecast the company's expected revenue for the next two fiscal years. Companies with less than $75 million worth of publicly available stock, referred to as smaller reporting companies, must submit a three-year income statement to the SEC.
Where a parent company owns a subsidiary and must file annual income statements, the parent company should include all expenses incurred for its subsidiary in its income statement, including officer salaries, rent, depreciation and advertising. If a company is involved in an asset transaction during the fiscal year before an initial public offering, the transaction should be reflected in the income statement filed with the SEC. Income statements typically give two different revenue amounts, gross revenue and net revenue. Gross revenue is the revenue from all sales and business without deductions from business expenses, while net revenue is the profit left over after expenses are taken out.
- U.S. Securities and Exchange Commission: Beginners' Guide to Financial Statements
- U.S. Securities and Exchange Commission: Division of Corporation Finance: Financial Reporting Manual
- U.S. Securities and Exchange Commission: Codification of Staff Accounting Bulletins: Financial Statements
- Deloitte: SEC Issues Financial Reporting Manual; Feb. 2009
- U.S. Securities and Exchange Commission: Broker-Dealer Financial Statement Requirements under Section 17 of the Exchange Act
- Apple Investor Relations. “Form 10-K - For the fiscal year ended September 30, 2017,” Page 42. Accessed April 21, 2020.