Earnings Restatements

Most days the Wall Street Journal reports a list of the companies that are restating earnings for whatever purpose. January 31, 2005 had ten companies restating earnings and these restatements realated to the following:

Software Revenue Recognition issues - three companies
Other revenue issues - one company
Contingently convertible debt - one company
SFAS No. 140 - one company
Variable interest issue - one company
miscellaneous error(s) - one company
Deferred tax liab. - one company
Leases - one company (Pep Boys)

All of these are intermediate issues and provide great examples for the classroom. Right now my class is covering leases so I used the restatement that pertained to Pep Boys as an example in class. The restatement relates to property leases in which PepBoys has made improvements. This issue affects many companies in the restaurant and retail industry and results in most companies recognizing more rent expense or depreciation.

For a good article on the subject see this story in CFO Magazine