A financial restatement, or restatement of financial statements, is the revision of previously issued financial statements to correct an error. When a company's board, audit committee, or authorized officers conclude that earlier statements should no longer be relied upon because of an error, as addressed in FASB ASC Topic 250, the company must disclose that conclusion on Form 8-K under Item 4.02 and then issue corrected statements.
Full guide: How to Find Restatements in SEC Filings
An Item 4.02 report must give the date of the non-reliance conclusion, identify the periods affected, briefly describe the facts known at the time, and state whether the audit committee or board discussed the matter with the independent accountant. If instead the auditor tells the company that its previously issued audit report or interim review should no longer be relied upon, the company must disclose that as well, give the auditor a copy of the disclosure, and request a letter to the SEC stating whether the auditor agrees. That letter is added by amending the 8-K no later than two business days after the company receives it, and is filed as Exhibit 7 under Item 601. Like most 8-K items, an Item 4.02 report is generally due within four business days.
The corrected numbers usually appear either in an amended periodic report, such as a 10-K/A filed under Rule 12b-15 with new officer certifications, or in the company's next annual report. The Form 10-K cover page now carries two related check boxes: whether the included financial statements reflect the correction of an error to previously issued statements, and whether any of those corrections are restatements that required a recovery analysis of executive incentive compensation under Rule 10D-1(b). That recovery analysis is tied to the clawback policy each listed company files as Exhibit 97.
For anyone working with historical financial data, a restatement means the originally filed figures for the affected periods have been superseded, so comparisons should use the corrected values.
A: Look for an 8-K filed under Item 4.02 (Non-Reliance on Previously Issued Financial Statements), an amended report such as a 10-K/A, and the error-correction check boxes on the 10-K cover page.
A: It is a Form 8-K filed under Item 4.02 announcing that previously issued financial statements, or an auditor's report on them, should no longer be relied upon because of an error.
A: It can. Listed companies must maintain a policy for recovering erroneously awarded incentive compensation, filed as Exhibit 97, and the 10-K cover page discloses whether a restatement required a recovery analysis under Rule 10D-1(b).
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