Why Do Companies Restate Financial Results?

Every year, research firm Audit Analytics publishes a study about financial restatement trends. In 2018, the number of public companies that amended their annual reports increased by 18%.

Many of these amendments were due to minor technical issues, however. Of the 400 public companies that amended their returns in 2018, only 30 amended 10-Ks (or 8%) were due to financial restatements. But this was up from 13 amended 10-Ks (or 4%) in 2017. Any time a company restates its financial results, it raises a red flag and prompts stakeholders to dig deeper.

Reasons for restatement

The Financial Accounting Standards Board (FASB) defines a restatement as a revision of a previously issued financial statement to correct an error. Whether they’re publicly traded or privately held, businesses may reissue their financial statements for several “mundane” reasons. Management might have misinterpreted the accounting standards, requiring the company’s external accountant to adjust the numbers. Or they simply may have made minor mistakes and need to correct them.

Leading causes for restatements include:

  • Recognition errors (for example, when accounting for leases or reporting compensation expense from backdated stock options),
  • Income statement and balance sheet misclassifications (for instance, a company may need to shift cash flows between investing, financing and operating on the statement of cash flows),
  • Mistakes reporting equity transactions (such as improper accounting for business combinations and convertible securities),
  • Valuation errors related to common stock issuances,
  • Preferred stock errors, and
  • The complex rules related to acquisitions, investments, revenue recognition and tax accounting.

Often, restatements happen when the company’s financial statements are subjected to a higher level of scrutiny. For example, restatements may occur when a private company converts from compiled financial statements to audited financial statements or decides to file for an initial public offering. They also may be needed when the owner brings in additional internal (or external) accounting expertise, such as a new controller or audit firm.

Audit Analytics reports that “material restatements often go hand-in-hand with material weakness in internal controls over financial reporting.” In rare cases, a financial restatement also can be a sign of incompetence — or even fraud. Such restatements may signal problems that require corrective actions.

Communication is key

The restatement process can be time consuming and costly. Regular communication with interested parties — including lenders and shareholders — can help businesses overcome the negative stigma associated with restatements. Management also needs to reassure employees, customers and suppliers that the company is in sound financial shape to ensure their continued support.

Your in-house accounting team is currently dealing with an unprecedented number of major financial reporting changes, which may, at least partially, explain the recent increase in financial restatements. We can help accounting personnel understand the evolving accounting and tax rules to minimize the risk of restatement, as well as help them effectively manage the restatement process. Contact us at (818) 789 1179.

© 2019

 

5 responses to “Why Do Companies Restate Financial Results?

  1. You actually make it seem so easy with your presentation but I find this matter to be reallysomething that I think I would never understand. It seems too complexand extremely broad for me. I am looking forward for your next post,I’ll try to get the hang of it!

  2. Scotland is certainly a truly stunning country, and also every year it is actually seen by crowds of tourists coming from the United States, France, and even Italy or even Spain. Rarely any person taking leave of absence in July, August or September are going to think of Scotland. Possibly it is actually good to believe concerning it straight currently, when the market value of the pound is dropping, as well as thereby our team will pay out less for a vacation in Scotland? Glen Affric in early springtime Why is it worth it? Scotland is actually predominantly a remarkable landscape in the north of the country. In Scotland, I have actually already been actually able to enjoy seals, dolphins or also deer. Yet Scotland is also a historically appealing property (that checked out Brave Heart?), Where you can easily see spectacular rock castles (Edinburgh, Stirling, Linlithgow, Eilean Donan). The financing on its own, the impressive Edinburgh, also is entitled to attention, particularly in the course of the summer celebrations. country Scotland, scottish Scotland, application Scotland, tory Scotland, information Scotland, scotland Scotland, our team Scotland, edinburgh Scotland, child Scotland, creed Scotland, map Scotland, iona Scotland, menu Scotland, traveling Scotland, data Scotland, record Scotland, vehicle Scotland, ship Scotland, uk Scotland, learn Scotland, celtic Scotland, glasgow Scotland, shetland Scotland, lifestyle Scotland, tay Scotland, bus Scotland, news Scotland, education Scotland, bit Scotland, navigating Scotland, biscuit Scotland, covid Scotland, sport Scotland, access Scotland, online videos Scotland, highland games Scotland, area Scotland, golf Scotland, scots Scotland, meals Scotland, whisky Scotland, spending plan Scotland, visitscotland Scotland, museum Scotland, newsletter Scotland, arbroath Scotland, heck Scotland, street Scotland, distilleries Scotland, street andrews Scotland, beverage Scotland, visit scotland Scotland, europe Scotland, castles Scotland, potential Scotland, encounter Scotland, weblog Scotland, dundee Scotland, steering Scotland, sports Scotland, covid-Scotland9 Scotland, transport Scotland. Edinburgh – Some concepts for visiting Scotland Traveling in Scotland need to certainly begin with its funds. Edinburgh is actually a stunning medieval a town with characteristic stone buildings. From the major street, the so-called The Royal Mile connecting the previous imperial castle along with the Queen’s summer months palace (Palace of Holyroodhouse) operates off a system of interesting little streets (the alleged shut), making a labyrinth through which it is definitely worth obtaining dropped. It takes around two times to explore Edinburgh, yet you can easily expand this opportunity as much as 4. In the situation of a short see to Scotland, you can easily additionally restrict your own self to Edinburgh only, spending someday on a big salami by bus in the Scottish mountainous (just about every holiday company in the financing provides it). Thus, a minimum of for a minute we will certainly really feel the environment of a genuine property of mists. An even far better suggestion is actually to rent an auto for 1 day and also go on an individual journey (the plan and attribute of the managed trips carry out not necessarily suit everyone). Such a self-guided scenic tour is going to perhaps take our team at the very least 10 hours. Arran is called Scotland in mini. Loch Lomond is one of Scotland’s two nationwide playgrounds, a stunning lake bordered by forests as well as hillsides. On the technique, you may likewise check out Stirling Castle. country Scotland, scottish Scotland, application Scotland, tory Scotland, information Scotland, scotland Scotland, our team Scotland, edinburgh Scotland, little one Scotland, cult Scotland, map Scotland, iona Scotland, menu Scotland, trip Scotland, records Scotland, past history Scotland, auto Scotland, ship Scotland, uk Scotland, train Scotland, celtic Scotland, glasgow Scotland, shetland Scotland, lifestyle Scotland, tay Scotland, bus Scotland, updates Scotland, education and learning Scotland, bit Scotland, navigating Scotland, cookie Scotland, covid Scotland, sport Scotland, access Scotland, video clips Scotland, highland video games Scotland, community Scotland, golf Scotland, scots Scotland, food items Scotland, whisky Scotland, finances Scotland, visitscotland Scotland, museum Scotland, email list Scotland, arbroath Scotland, heck Scotland, road Scotland, distilleries Scotland, street andrews Scotland, drink Scotland, browse through scotland Scotland, europe Scotland, castles Scotland, potential Scotland, experience Scotland, blog Scotland, dundee Scotland, steering Scotland, sports Scotland, covid-Scotland9 Scotland, transport Scotland. Scotland, like the whole of Great Britain, is actually not one of the most cost effective destinations. In add-on, in Scotland the tent can be specified up essentially anywhere, thus travelers can likewise sleep in the crazy. The most widely known as well as one of the very most gorgeous exploring tracks in Europe is actually the alleged West Highland Way. Longer journey? Exactly how approximately north along the west coastline and after that back to the quieter, albeit less amazing east? Several visitors in Glasgow, takes a train to Mallaig (sometimes seeing Glencoe or even Fort William on the technique) at that point sees Isle of Skye (the best beautiful of the Scottish isles), at that point head along the shore in the direction of Ullapool, as for Durness, heading back exploring Inverness, Fort Augustus (Loch Ness), Aberdeen and also Cairngorms National Park, as well as ultimately St Andrews. Is it possible by buses as well as trains? Obviously it is feasible, however you will certainly skip a lot, so it is better to lease a car for at the very least component of the trip. And also do not be tricked through the vacationer catch of Loch Ness– in simple fact, there are actually plenty of far more wonderful locations around Scotland nation Scotland, scottish Scotland, application Scotland, tory Scotland, info Scotland, scotland Scotland, us Scotland, edinburgh Scotland, little one Scotland, cult Scotland, chart Scotland, iona Scotland, menu Scotland, traveling Scotland, data Scotland, history Scotland, car Scotland, ship Scotland, uk Scotland, learn Scotland, celtic Scotland, glasgow Scotland, shetland Scotland, culture Scotland, tay Scotland, bus Scotland, updates Scotland, education Scotland, little Scotland, navigating Scotland, biscuit Scotland, covid Scotland, sport Scotland, access Scotland, video clips Scotland, highland video games Scotland, area Scotland, golf Scotland, scots Scotland, food items Scotland, whisky Scotland, spending plan Scotland, visitscotland Scotland, gallery Scotland, e-newsletter Scotland, arbroath Scotland, heck Scotland, roadway Scotland, distilleries Scotland, st andrews Scotland, drink Scotland, go to scotland Scotland, europe Scotland, castles Scotland, future Scotland, take in Scotland, blogging site Scotland, dundee Scotland, steering Scotland, sports Scotland, transport Scotland Glenelg I bear in mind visiting Scotland for the 1st opportunity at the side of April. It was actually currently spring season in Scotland, the sunlight was heating up, while in Scotland it was actually still wintertime all over. The Highlands were still covered in snowfall in several locations, as well as in Edinburgh it was piercingly rainfall. When taking a trip in Scotland, to begin with of all good, water-resistant, sports shoes. A decent raincoat (and windproof!) Will definitely additionally be available in convenient, often it is also worth adding a thin headscarf, a sports hat and sporting activities gloves to the knapsack (spring as well as fall). In wintertime, I suggest preventing Scotland from a distance. Why? The answer is easy: it pours as well as impacts. Bonus little bit of factors: Umbrellas most definitely do not operate (the wind flexes them in each directions), the camping tent should (MUST!) have a great flysheet, it deserves taking a reusable bottle with you (faucet water, yet additionally drinkable in flows or streams), a minimum of a couple of pairs of belts, a warm fleece and something to ward off vicious flies (I recommend a smidge). When it comes to a low-budget excursion, sleeping in an outdoor tents or remain only in hostels (expense regarding PLN 80 every night). You should make an effort seafood (they are tasty!), Whiskey, visit a minimum of one whiskey and command fish as well as potato chips with white vinegar at least when. I wish that along with this article I urged my close friends (:-RRB-) but likewise strangers to journey to Scotland. It is actually really worth a hundred times! I invite you to explore, if only I am still listed here. Wonderful Scottish beaches. Loch Lomond Backpack. Iona- tiny island, white colored beaches. Island of Skye. Glencoe. Eilean Donan Castle. Island of Arran. Scotland is undeniably a really lovely nation, and every year it is actually explored by crowds of tourists from the United States, France, and also Italy or Spain. Arran is phoned Scotland in miniature. Scotland, like the entire of Great Britain, is not one of the most affordable destinations. It was already spring season in Scotland, the sun was warming up, while in Scotland it was actually still winter all over. I hope that along with this article I encouraged my pals (:-RRB-) however also unknown people to take a trip to https://www.scotland.com/

  3. Very insightful post, thanks. We decided to outsource our accounting and it was another huge savings but we also gained a better 3rd party view of our company’s finances without being influenced internally.

  4. Very insightful post, thanks. We decided to outsource our accounting and it was another huge savings but we also gained a better 3rd party view of our company’s finances without being influenced internally.

  5. Good – I should certainly pronounce, impressed with your web site. I had no trouble navigating through all tabs as well as related info ended up being truly easy to do to access. I recently found what I hoped for before you know it at all. Quite unusual. Is likely to appreciate it for those who add forums or anything, website theme . a tones way for your client to communicate. Nice task..

Leave a Reply

Your email address will not be published.

Share: Share by email
Go to the top of this page.