Financial Restatement
ACC 537

Financial Restatement

The financial statement of Green Mountain Coffee Roasters, Inc. is required to be restated due to several errors in accounting practices. The first error was an overstatement of $7.6 million in inventory over one quarter which accounted for a pre-tax income higher than actual. (Vending Market Watch, 2011) This accounting principle violated was either LIFO, FIFO or average cost as the inventory as the error was a result of an overstatement of consolidated inventory and an understatement of the cost of inventory. As a result, income is overstated, which then means that the stockholder's equity is overstated based on the income = liability + stockholder's equity, which in turn means that the value of the stock will be decreased as it lessens the stockholder's equity. This also affects the income statement and the retained earnings statements since the income will need to be adjusted due to the overstatement of income and therefore the retained earnings, which shows the amounts and causes of changes in retained earnings during the period (Kimmel, Weygandt, & Kieso, 2007) and therefore will be adjusted since the earnings for the period had been misstated.
The second error in accounting principles was an overstatement of income due to the change to accounting periods which goes against the time period assumption which has been developed as accounting standard by the FASB. The adjustment of the time frame and the carrying cost of the licensing changing earned revenue periods based upon the sale of the material. The error resulted in a $1.0 million overstatement. Since there was an adjustment in time period in which this income is accounted for, without any adjustment for this, it created an overstated revenue, which again means that the stockholder's equity is overstated and therefore the value of