We must interpret the instruction. We must take actions, in the form of writing parts of the instruction - the K value - into a register. We make a register bank with a destination register selection, and a data input, and a write enable (feels good to have that).
We take out the different pieces of the instruction, and feed the destination register and the sign-extender, from which we take the 32-bit value back to the register bank, so that when the clock comes, the value is written to the correct register. This sounds really cool! Perhaps we do not need a full program for this section. No, I do not think so, only code snippets from the final program, which is presented in total in the next section!