Accounting Changes Case Study Example | Topics and Well Written Essays - 750 words

Accounting Changes - Case Study Example counting principles like Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), clerical errors etc (Arens, Beasley, and Elder, 2009). When restatement occurs, particularly out of negative reasons, then the confidence of shareholders is changed and the stock price is reduced. The organization selected for this report is Ener1 which restated its financial statement of December 31, 2010 and March 31, 2011. In order to reflect the impairments of its investment in Think Holdings the company restated its financial statement of December 31, 2010 as the transaction had been previously recorded in the financial statement of March 31, 2011 instead of financial statement of December 31, 2010. In addition to this, the company restated its financial statement in order to record accounts receivables with Think Global and loan receivables including accrued interest with Think Holdings in the period of December, 2011 (The Wall Street Journal, 2011). Also the revenues with Think Holdings and Think Global have to be recorded within the period they have occurred so that the financial statement of the company follows the Generally Accepted Accounting Principles (GAAP). One of the major responsibilities of the management is to reflect the true value of the company in the financial statement and when financial statements are prepared they should reflect the true financial position of the organization (Khan, 1993). Financial statements of Ener1 did not include revenues, accounts receivables and loan receivables during the period within which they occurred and, therefore, the value showed by the financial statement of Ener1 did not reflect its true value. However, it is the responsibility of the management to ensure that the transactions are recorded within the period when they occur. In addition to this, it is important for the management to ensure that the financial statements of the organization are prepared according to the accepted