If for some reason it turns out there has been a misstatement in your last year Annual Report figures, it’s strongly recommended to adjust them in this year’s report. It’s obviously applicable only if the last year Annual Report wasn’t adjusted already by taking it back for restatements.
In case you did consider the misstatement to be insignificant enough to not take the Annual Report back for restatements, the misstatement to be adjusted in next year’s report is something you should have made a note about soon after. It’s something you can come back to when preparing the new Annual Report.
Note that there isn’t a rule of thumb or a guideline with a percentage of some such about how and what is material. Whether a figure is misstated significantly is entirely up to the management to decide. Where does their limit of “material” stand? As always, it’s pretty much along the lines what the readers of the report would find significant and what would alter their decisions. If the misstatement is potentially at a scale that can mislead the investors, owners or suppliers in their actions and decisions, it’s worthwhile to amend the accounts in the Annual Report or information therein.
Now, if you did not restate the figures back then, in your current year’s Annual Report you should disclose the adjustment to prior year figures and similarly to disclosing changes in accounting policies (see above section “Disclosing changes in accounting principles”) you should disclose the following information:
- What the misstatement was about?
- Which financial statements were affected?
- The amounts – initial figures, adjustments and new figures.
Something to also take a note of, the columns including adjusted figures should have a little addition to their title – either “restated” or “adjusted”. It shows to the readers that there have been some restatements and the first section of the note for accounting policies used is where they know to look for further information.
Please note that in case of obvious typos being adjusted no specific disclosure is required other than just correct the mistake in this year’s report. No specific disclosures or labels above columns etc. The same applies if figures were incorrect within text or notes and the main statements are correct. All of the above about misstatements applies only to actual misstatements in figures.