Accounting Changes Assignment Example | Topics and Well Written Essays - 750 words

Accounting Changes - Assignment Example Michael Ramos (2008) professional opined the primary reason for restatement is to present a more realistic picture of the company’s financial statement reports in compliance with the Sarbanes-Oxley Act of 2002 and accounting standards. The company’s plan to restate the financial statements generated a corresponding -35% decline in its sales figure. The company has been desperately using all its collection expertise to force one of its major clients, Sinovel Wind Group, to pay for its long overdue liabilities to American Superconductor. Sinovel is strategically located Chinese company. The financial statements were restated to reflect the adjustments on American Semiconductor’s results of business operations for the year 2010. The financial statement restatement precipitated to the reduction of the company’s revenues from U.S. $ 215.7 million to only U.S. $ 74.7 million for the year 2010. The restatement precipitated to the reduction of its 2011 1st quarter financial statement revenue from $360 million to only $307 million.... The restatement was overdue because the financial statements were originally prepared to present projected data that had to be adjusted. Specifically, American Superconductor had booked its sales before the revenues were received. Question 3. There are changes that American Superconductor is expected to introduce related to the company’s internal control and accounting principles as a result of the need to restate the company’s balance sheet, income statement, and statement of cash flows. Orice Williams (2007) reiterated the changes are needed to comply with the stock exchange policy of ensuring public confidence is not reduced. The change includes the implementation of the new accounting data as a basis for the preparation of the next accounting period’s financial statements. The next accounting period will no longer take into consideration data which had not been included in the restated financial statements. The auditing and accounting officers must adopt the restated financial statement accounts for all future financial statements accounts in compliance with the financial accounting principle of consistency and understanding. Consistently prepared financial statements enable the users of the financial statements to compare and contrast financial statement data between two accounting periods. Management must explain the reason for accounting change as well as the effects of the accounting change to dispel any doubts among the financial statement users. For example, the users can scrutinize the difference in the revenues for 2010 and 2011. Question 4. John Tracy emphasized (2009) the restatement of the company’s leadership will cast doubts on the need to restate the financial statements. The trustworthiness