Restatements at a minimum in 2023

TLDR:

• Financial restatements filed with the Securities and Exchange Commission decreased by roughly 6% in 2023.
• The average restatement period length increased from 393 days in 2022 to 438 days in 2023.

Financial restatements filed with the Securities and Exchange Commission are on the decline for the second consecutive year after a spike in 2021. Restatements decreased by roughly 6%, from 458 in 2022 to 430 in 2023, according to a report from Ideagen Audit Analytics released Tuesday. The annual report analyzed its database of more than 21,000 restatements disclosed by over 11,000 S.E.C. public registrants.

In 2021, the number of restatements filed almost tripled from the prior year, hitting 1,470 and marking a 15-year high since 2006, when there were approximately 1,800. The spike was largely due to the volume of special acquisition company restatements filed. But the total number of restatements from companies, including SPACs, dropped sharply in 2022 and remained low in 2023. In the past year, the average restatement period length increased from 393 days in 2022 to 438 days. Despite the increase, this figure remains lower than the average restatement period seen prior to 2021 (520 days on average from 2008 to 2020).

The report analyzed the accounting issues disclosed per statement, which can indicate to stakeholders whether there’s a systemic issue. The maximum number of issues in a single restatement in 2023 and overall was 19 in a restatement from Tupperware Brands Corp. On average, there are less than two issues cited per restatement annually; 2023 came close to this mark despite a small increase year over year. Issues related to debt and equity accounts (27%) continue to be the most common accounting issues cited in restatements, followed by revenue recognition (12%). Seven of the top 10 most common issues cited since 2004 were also among the top 10 issues for 2023.

The report also reveals that the technology industry made up the largest portion of restatements in 2023, with 76 restatements. Revenue recognition was the most common issue among tech companies and constituted 24% of all restatements within the industry.