Copy of Quantifying financial statement misstatements

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    Quantifying financial  statement misstatements SAB 108
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    Effects of prior year errors Quantify effects on each financial statement Related disclosures Prior year misstatements should be considered Rollover vs. iron curtain approach
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    Rollover approach Quantifies misstatement based on amount of error originating in current year income statement Ignores effects of correcting balance sheet misstatement that originated in prior years
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    Iron Curtain approach Quantifies misstatement based on the effects on the end of year balance sheet Does not consider the correction of prior year misstatements in the current year as errors Reversal of carryover effects
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    Requirements Registrants must quantify the impact of correcting all misstatements including both the carryover and reversing effects of prior
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Unformatted text preview: year misstatements, on the current year financial statements Quantify errors under both the rollover and iron curtain approaches Adjust when either method results in material misstatement. Example 1 $20 overstatement of expense for 5 years Liability overstated by $100 Rollover method--$20 Iron curtain method $100 ($80 from prior years) If $80 is material, restate prior years Example 2 Sales cut-off error last year $110 (immaterial) Sales cut-off error this year $50 AR overstated by $50 Revenue understated $60 Misstatement Iron curtain approach $50 (Understate revenues by $110) Rollover approach $60 (increase A/R to $110) If remaining misstatement is material correct prior year...
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