Restatement

Definition

A restatement is the revision and publication of one or more of a company's previous financial statements. It typically occurs when there are material inaccuracies, often due to errors or fraud, that need correction.

5 Must Know Facts For Your Next Test

1. Restatements can impact both the balance sheet and income statement.
2. They often lead to a decrease in investor confidence and can negatively affect stock prices.
3. Restatements must be disclosed publicly to ensure transparency with shareholders.
4. The causes for restatements include accounting errors, fraud, misapplication of accounting principles, or clerical mistakes.
5. Corporations must provide detailed explanations for why a restatement was necessary in their financial filings.

Review Questions

• What are common reasons that might necessitate a financial restatement?
• How can a restatement impact investor confidence and stock prices?
• What disclosures must a corporation make following a financial restatement?

Related terms

Material Misstatement: A significant error or omission in financial statements that could influence the economic decisions of users.

Financial Statement: A written record that conveys the business activities and the financial performance of an entity.

Accounting Principles: The rules and guidelines that companies must follow when reporting financial data.