Financial Restatement
The revision of previously published financial statements to correct errors, fraud, or misapplication of accounting standards.
What is Restatement?
A financial restatement occurs when a company revises its previously issued financial statements because they contained material errors, misstatements, fraud, or misapplication of accounting standards. Restatements can be triggered by auditor findings, SEC investigations, internal review, or whistleblower disclosures. The company files amended reports (10-K/A or 10-Q/A) with restated numbers, and must also disclose the restatement in an 8-K filing. Restatements often result in significant stock price declines, management changes, legal liability, and increased regulatory scrutiny. The SEC's Restatement Database tracks public company restatements. A restatement is one of the most serious signals of accounting quality failure and is closely watched by forensic accountants and short sellers.
Example
General Electric restated multiple years of earnings between 2018 and 2021 primarily related to its long-term care insurance reserves and accounting practices at GE Capital, contributing to a dramatic collapse in investor confidence and a major restructuring of the company.
Source: Investopedia — Restatement