Standard Industrial Classification (SIC Code)
Candlefocus EditorThe system was eventually expanded to over 800 different codes, and it is still utilized by agencies such as the Securities and Exchange Commission (SEC) today. The system helps to group and classify companies based on their primary services and products. This system eliminates the need for multiple listing of companies under multiple categories, by providing a single code that succinctly describes the company’s primary purpose. The codes make it easier for the SEC to review corporate financial documents and for the U.S. Census Bureau to collect data for statistical analysis.
The 4-digit SIC codes are divided into 11 main divisions. These divisions are further identified with two sub-classifications. The divisions are as follows:
• Division 1: Agriculture, Forestry, Fishing and Hunting • Division 2: Mining • Division 3: Construction • Division 4: Manufacturing • Division 5: Transportation, Communications, Electric, Gas, and Sanitary Services • Division 6: Wholesale Trade • Division 7: Retail Trade • Division 8: Finance, Insurance, and Real Estate • Division 9: Services • Division 10: Public Administration • Division 11: Nonclassifiable Establishments
The significance of the SIC code and its categorization is widely accepted today. It is widely used and accepted by banks, financial institutions and other governing bodies, along with the SEC, to classify a company and assess appropriately. However, Standard Industrial Classification (SIC) codes have largely been superseded by the North American Industry Classification System (NAICS), which uses six-digit codes to classify business activities. Still, many companies and government organizations still use SIC codes due to their widespread acceptance.
Overall, Standard Industrial Classification codes are a widely-used system for categorizing businesses based on the products and services offered and the industry in which they operate. The codes have been around for decades and have been proven to be an effective way of quickly and easily classifying businesses for different types of audits, analysis and government taxation.