Financial Statement Renstatement Paper
Business and Management
Submitted By jolene79
Running head: FINANCIAL STATEMENT RESTATEMENT
Financial Statement Restatement Paper
Financial Statement Restatement Paper Companies must often restate their financial statements to address certain issues that have occurred within the company including changes in accounting principles, changes in accounting estimates, changes in the reporting entity, and errors in their financial statements. “The FASB classifies changes in these categories because each category involves different methods of recognizing changes in the financial statements” (Kieso, Weygandt, & Warfield, 2007, p. 1153). Zynga is the social gaming company responsible for games including Farmville and Mafia Wars. In August of 2011 the company was faced with restating their financial statements for the first quarter of that year due to the detection of certain errors regarding their stated deferred revenue balances.
On August 11, 2011 Zynga, “restated Q1 revenue to reflect an accounting error in its original IPO registration. The new Q2 revenue figure is $242.89 million, which represents more than a 3% increase over the previously-reported figure” (Primack, 2011). Zynga stated that they initially stated their most current estimate for paying players for the current period. However, they did not adjust their ending balance in the account deferred revenue to reflect estimates for the related sales of prior periods. The company determined that ASC 250 required this adjustment of the ending balance for deferred revenue. “As a result, we restated our March 31, 2011 financial statements and determined we had a material weakness in internal control over financial reporting as of March 31, 2011. The impact of this restatement was to increase revenue by $7.5 million and increase the provision for income taxes by $2.5 million for the three months ended March 31, 2011 and to decrease...