Financial Re-Enstatement

Financial Re-Enstatement

Financial Re-enstatement

Financial statement restatement
Stacey Jordan
ACC 537
May 23, 2011
Neil David

Financial Statement Restatement
      ArthroCare Corp is a muti-business medical device company that develops, manufactures and markets invasive surgical products.   ArthroCare significantly improves existing surgical procedures based on patented Coblation technology, which uses low-temperature radiofrequency energy to gently and precisely dissolve rather than burn soft tissue and minimizes damage to healthy tissue (Gluk & Frank, 2008).   Like cases before, the company has admitted to having errors in their accounting practices by recognizing revenues on sales to distributors, and customers prematurely, and inevitability overstating their net income for the fiscal years of 2006-2007 (Gluk & Frank, 2008).
      The restatement of financial occurs when a company has to implement a new accounting principle due to accounting errors made on the company’s financial statements.   Financial statement users depend on accurate financial statements from corporations to make proper decisions in regards to financial activities (Kimmel, Weygandt, & Kieso, 2007).   There have been situations where financial statements users find that the information provided to them for their decision making process was inaccurate.   Companies that are required to restate their financial reports risk losing the trust and confidence of the end users, ArthroCare Corp happens to be o of those companies.   This paper outlines the issues that led to the restatement of ArthroCare Corp financial statements while discussing the accounting principle involved the effects of the errors and the changes to the financial statements as well as the effect to the company’s stockholders.
      The accounting principles involved with ArthoCare Corp’s financial statements consisted of the way the company recognized revenue on sales from distributor, and customers, over a two year span, errors that were...