Financial Statement Restatement Paper

Companies must follow specific accounting and reporting requirements, set forth by the FASB when addressing changes and errors to the financial statements to ensure comparability (Kieso, Weygandt, & Warfield 2007). The four categories in the FASB framework include; 1. Change in Accounting Principle, 2. Change in Accounting Estimate, 3. Change in Reporting Entity, 4. Errors in Financial Statements (Kieso, Weygandt, & Warfield 2007). This paper will focus on a company with an error.

According to an article published by Roy Harris and Stephen Taub in CFO.com, May 21, 2008, Acxiom Corporation announced they would be restating the financials to correct errors in the company’s accounting for accrued revenue. The company reported that “historically it recorded accrued revenue for certain information services contracts based on a calculated estimate of relative value of performance for business that had occurred, but had not yet been recognized as revenue” (Harris & Taub, 2008). The method that had been used did not meet the standard set by the Securities and Exchange Commission. This accounting error had a significant effect on the presentation of the financial statements, therefore needed corrected (Kieso, Weygandt, & Warfield 2007). This is not viewed as a change in accounting principle because the method that was used was not a generally accepted accounting principle and it is not considered a change in accounting estimated because the company computed the estimated incorrectly because of lack of expertise (Kieso, Weygandt, & Warfield 2007). The article stated that Acxiom reported “that policies and procedure to estimate performance completed for information-services contract were not designed to provide sufficient support for the recognition for revenue under U.S. generally accepted accounting principles” (Harris & Taub, 2008).

This particular error resulted in a reduction of earnings by $7.95 million and a reduction of revenue by $12.83 million over a...