Restatement
Candlefocus EditorFinancial Accounting Standards Board (FASB) calls for companies to make restatements when material errors are revealed in financial reports. The FASB has a series of guidelines for companies to follow when preparing financial data. These provide the foundations for accurate and reliable disclosure of financial information. Companies are expected to adhere to these guidelines, and they must restate inaccurate financial statements promptly when a material error is detected.
Material inaccuracies in financial statements can come in many forms. These errors can include omissions, data entry errors, improper classifications and incorrect statistical inferences. To address this, FASB requires companies to reclassify entries that are reported incorrectly.
Reclassifying certain entries in a company’s financial statements is an important part of the restatement process. It is important for companies to accurately reflect financial information because errors can easily lead investors and creditors to make poor decisions.
Restatement processes are designed to protect the interests of those receiving and evaluating financial statements. When an entity restates its prior financial statements, the focus is on making all information is accurate, complete, and useful to the readers of the financial statements. In order to protect investors from inaccuracies, professional accountants should take all corrective actions to ensure financial statements are presented accurately.