8.1 Prior-Period Adjustments
ASC 260-10
Prior-Period Adjustments
55-15 If authoritative literature requires that a restatement of the results of operations of a prior period be included in the income statement or summary of earnings, then EPS data given for the prior period or periods shall be restated. The effect of the restatement, expressed in per-share terms, shall be disclosed in the period of restatement.
55-16 Restated EPS data shall be computed as if the restated income or loss had been reported originally in the prior period or periods. Thus, it is possible that common stock assumed to be issued upon exercise, conversion, or issuance of potential common shares in accordance with the provisions of this Subtopic may not be included in the computation of restated EPS amounts. That is, retroactive restatement of income from continuing operations could cause potential common shares originally determined to be dilutive to become antidilutive pursuant to the control number provision in paragraph 260-10-45-18. The reverse also is true. Retroactive restatement also may cause the numerator of the EPS computation to change by an amount that differs from the amount of the retroactive adjustment.
An entity may restate its previously reported net income as a result of the
correction of an error. In addition, an entity may retrospectively adjust previously
reported net income for other reasons (e.g., a change in accounting principle). In
these situations, previously reported amounts of basic and diluted EPS must be
adjusted as if the restated or retrospectively adjusted income or loss had been
originally reported in the prior period(s). As noted in ASC 260-10-55-16, a
restatement or retrospective adjustment of previously reported net income may affect
whether potential common shares are dilutive in the calculation of diluted EPS in
accordance with the antidilution sequencing requirements, as discussed in Section 4.1.2. Furthermore,
since the numerator used in the calculation of basic and diluted EPS is affected, an
entity would be required to recalculate EPS amounts under the two-class method, if
applicable. The effect of the restatement (or adjustment) should be disclosed in
per-share amounts in the period of the restatement. See Section 9.2.2.2 for discussion of disclosure
considerations.
Subsequent events and other information obtained after the date on
which an entity’s financial statements were issued or available to be issued, when
such events and information do not result in a restatement of the entity’s previous
financial statements, have no impact on previously reported amounts of EPS. For
example, if a contingency is resolved in a subsequent period and that resolution
would have altered a prior-period calculation of EPS if it had been resolved in that
prior period, the resolution of the contingency does not result in the requirement
to restate previously reported EPS amounts. An entity may, however, be required to
disclose pro forma EPS amounts. See Section B.2.2 for more information.