Rebuild comparative statements, tax, and EPS

A $150,000 after-tax error correction is not a complete restatement schedule. It could affect inventory, payables, cost of goods sold, operating expenses, deferred tax, retained earnings, basic EPS, diluted EPS, and the indirect cash- flow reconciliation in different periods. Rebuild from accounts outward.

Use one effect ledger as the source

Each row should carry:

issue ID | route | account | statement caption | period | as reported
signed pretax adjustment | current/deferred tax | after-tax effect
opening-equity flag | cash/noncash flag | EPS numerator effect | source

Generate statement columns from that ledger. Do not type the same adjustment independently into the balance sheet, income statement, and note.

Reconstruct the statements

For each presented period, display as reported, adjustment, and corrected. Then apply independent controls:

• corrected assets equal corrected liabilities plus equity;
• corrected ending retained earnings equals corrected opening retained earnings plus corrected net income less distributions and other supported movements;
• corrected comprehensive income ties to net income and OCI;
• cash-flow change in cash agrees with corrected beginning and ending cash;
• the indirect reconciliation begins with corrected net income and uses corrected operating balance changes; and
• note rollforwards agree with corrected statement balances.

An error may have no effect on total cash while changing operating, investing, or financing classification or the indirect reconciliation. “Cash is unchanged” does not close the cash-flow review.

Rebuild tax from supplied facts

Do not apply one blended rate by habit. The tax file identifies jurisdiction, tax basis, enacted rate for each period, deductibility or taxability, current and deferred components, attributes, valuation allowance, uncertain positions, and statement allocation.

For a bounded direct temporary-difference adjustment of $200,000 at a supplied 25-percent enacted rate:

pretax asset adjustment                         $200,000
deferred tax liability                           (50,000)
after-tax equity or income effect                $150,000

That calculation is permitted only because the facts stipulate the tax route. If tax basis or recognition is unresolved, the model stops rather than defaulting to zero or a statutory headline rate.

Recompute EPS by period

Use each period's corrected numerator, preferred dividends, weighted-average common shares, participating-security allocation, continuing-operations control number, and potential common shares. For a Year 2 after-tax common-income decrease of $150,000 and 500,000 weighted-average common shares, the bounded basic EPS adjustment is $(0.30).

Do not divide a cumulative opening-equity effect by current shares. Do not copy basic EPS into diluted EPS. A correction can change the control number and which potential common shares are dilutive, so the full diluted computation must be rerun for each affected period.

Separate the booking entry

The current correction entry moves the live ledger from recorded to corrected balances. It may include opening retained earnings rather than current income under the supplied route. It must not duplicate effects already reversed or recognized. The comparative statements show what the issued periods should have reported; the entry shows what must be booked now. Reconcile them without collapsing them.

The reconstruction closes only when every statement articulates, tax and EPS use period-specific facts, rounding differences are controlled explicitly, and the current entry ties to corrected ending balances.