Error-correction disclosure

The disclosure says what was wrong in accounting terms: for example, a cutoff error omitted goods received before year-end and the related payable. It then shows the correction for each presented period. The affected items may include inventory, liabilities, cost of goods sold, tax, net income, and EPS. The note also gives the opening retained-earnings effect when applicable.

Avoid unsupported explanations about motive, fraud, or control severity. Those are separate investigations and communications. The accounting note is complete only when its numbers tie to the corrected statements and the ledger entry.

Name and reconcile the error

ASC 250-10-50-7 requires a restating entity to say that its previously issued statements were restated. It must describe the error and disclose each affected line item and per-share amount for every presented period. ASC 250-10-50-8 addresses the gross and net-of-tax effects of prior-period adjustments.

A useful note lets a reader follow the cause to the corrected amounts. It distinguishes the origin period from later reversals and the current booking entry. The disclosure should use the same sign, period labels, and rounding rule as the statements and correction ledger.