[Char143]

This may be a very stupid question and you may very well say to yourself: you shouldn’t be an accountant Charlene if you don’t know this.. BUT WTH do they mean by restating the financial statements?

When we have a retrospective accounting principle change we restate the financial statements to make sure we have no comparability issues.. fine got that, BUT what does that mean? Do we just change the numbers on last years financial statements like manually and not the actual books (general ledger).

Like if for example assets are affected by a change in accounting principle and it’s from a prior year issue, I understand how we adjust it on our books for the current year, but would I just go grab a copy of last years financial statements and x out the number and fill it in with the new amount (not literally but u know what I mean)? I hope this makes sense… :/ I’ve been googling it and still nothing is clicking..

AUD (2/16)-84
REG (05/16)-69 Retake (7/16)-79 (ty ninja MCQ)
BEC-TBD
FAR-9/8/16

[Yolonge]

Let's say book has been closed and financial statement is issued. Later on, a major fraud, noncompliance, GAAP violation is identified that materially affects reported financial statement.

Another 71 Corp, issued financial statement in FY 15. During FY 16 audit, auditors discovered material capitalization issue that were not in compliance with U.S. GAAP for 1 million dollars which should have been expensed. As a result, Asset was overstated, expense was understated, which affects the bottom number (net profit) in FY15.

As a result, beginning balance of FY16, which is ending balance of FY15 is inaccurate to begin with. Restatement can solve this by issuing new statement, or reverse the effect with adjusting entry (retained earning) in FY16 to mitigate the issue; otherwise financial statement is misleading and does not accurately reflect the financials for the period ending/as of the fiscal year end.

I am not really good on this topic, but this is what I know.

Materials: Wiley book + Ninja MCQ

FAR - 83 (Jan 2016)
Study time: 6 weeks
BEC - 87 (April 2016)
Study time: 2 weeks
AUD - 92 (July 2016), (74 Feb 2016), (72 May 2016)
Study time: 4 (Feb) + 2 (May) + 3 (July) = 9 weeks total
REG - (70 April 2016)
Study time: 3 weeks

[Char143]

Mhei, I understand why they get restated or what causes is, I just don't actually understand what restatement means. Do we just go and manually change some numbers on the prior year financial statements, and not actually adjust the books for prior year (so in your example you said “restatement can solve this by issuing a new statement” so the new statement has the asset amount that we just manually changed since we didn't do anything to the actual books)?

I guess maybe my question doesn't make sense, I dunno… Maybe I should have majored in art history or liberal arts :/

AUD (2/16)-84
REG (05/16)-69 Retake (7/16)-79 (ty ninja MCQ)
BEC-TBD
FAR-9/8/16

[Anonymous]

@Mhe, that's an outstanding explanation.

Restated FS would still have the same date: For the year ended FY15, correct?

How about updating and reissuing prior year FS because of the change of engagement service/s rendered in the current year? Is reissuing a simple type of reprinting of prior period reports?

[Yolonge]

Man what I type disapppeared lol.. I will keep it short.

CharleneR – entity issuing F/S will have to adjust their book accordingly if they were to comply with auditors' recommendation via post close/manual adjusting entries on their books. Their G/L will be updated accordingly to reflect the new balance, which then gets made to whole financial statement. So for above case, reissued statement will have lower capital asset as it should have been expensed properly if they were to follow U.S. GAAP and have adjusted expense and retained earning account balance.

Amor D – Reissued statement will have same date. I am not sure if they are required, but they will indicate reissuance somewhere in the report (footnote disclosure, with nature of re-issuance with changes made, etc.) to made it clear to users of financial statement that numbers has been changed. I am not sure “How about updating and reissuing prior year FS because of the change of engagement service/s rendered in the current year?” part; do you mean audit service was changed (say audit prior year to review current year)?

Materials: Wiley book + Ninja MCQ

FAR - 83 (Jan 2016)
Study time: 6 weeks
BEC - 87 (April 2016)
Study time: 2 weeks
AUD - 92 (July 2016), (74 Feb 2016), (72 May 2016)
Study time: 4 (Feb) + 2 (May) + 3 (July) = 9 weeks total
REG - (70 April 2016)
Study time: 3 weeks

[Char143]

So when we restate financial statements we do actually adjust prior years books? Wiley lecturer said we don't actually adjust prior years books we just restate the statements with the correct amounts. I'm so confused.

AUD (2/16)-84
REG (05/16)-69 Retake (7/16)-79 (ty ninja MCQ)
BEC-TBD
FAR-9/8/16

[Anonymous]

You need to adjust the balance sheet accounts that were affected including retained earnings. Since the income statement accounts get closed to RE every year, you wouldn't reopen the year and restate the accounts – it wouldn't be necessary since you adjusted the retained earnings.

Here's a recent example of a company restating their prior year financials:

https://www.sec.gov/Archives/edgar/data/885590/000088559016000101/valeant2015form10-k.htm

[Author]

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