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Financial Statement Restatement Paper

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Financial Statement Restatement Paper
Financial Statement Restatement Paper Justina Kabanuk University of Phoenix ACC/537 Financial Accounting Steven Hall July 5, 2010

Financial Statement Restatement Paper Financial statement users depend on accurate financial statements from corporations to make proper decisions in regard to financial activities. In rare situations, financial statement users find that the information they had depended on for their decisions was not accurate. Companies required to restate their financial reports risk losing the trust and confidence of the financial statement users. Overstock.com is an example of a company that knows the effects of restating their finances all too well. Following is an overview of the issues that led to the most recent restatements of Overstock.com’s financial statements. Additionally discussed are the accounting principles involved, the effect of the errors and changes to the financial statements, and the effects on the company’s stockholders. In October 2008, Overstock.com publicly announced that it would be restating financial results for a five-and-a-half-year period. The needed revisions to Overstock.com’s Q1 2003 to Q2 2008 financial statements were estimated to reduce revenues by $12.9 million and increase cumulative net loss by $10.3 million. This news was not the first announcement of a restatement for Overstock.com. In 2006, Overstock.com announced a restatement because the company expensing the cost of delivery freight to its warehouses immediately rather than capitalizing the costs as a component of inventory and expensing them as inventory sold. The restatement in 2008 was faulted by errors in the company’s upgraded ERP accounting system. “The short version is:


References: Antar, Sam E. (2010, February 7). Overstock.com must restate finances, again. Seeking Alpha. Retrieved from http://seekingalpha.com/article/187066-overstock-com-must-restate-finances-again on June 28, 2010. Newquist, Caleb. (2010, February 2010). Overstock.com to restate financial statements; reassures profitability for 2009. Going Concern. Retrieved from http://goingconcern.com/2010/02/overstock-com-to-restate-financial-statements-reassures-profitability-for-2009/ on June 28, 2010. Taub, Stephen. (2008, October 24). Botched ERP hookup spurs restatement. CFO. Retrieved from http://www.cfo.com/article.cfm/12494875?f=search on June 28, 2010.
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