May 31, 2022

Restatements Soared in 2021 – And It’s All On SPACs!

Last year, Audit Analytics reported that 2020 saw the lowest percentage of financial restatement disclosures (Big R & Little r) in the 20 years that Audit Analytics has been monitoring those disclosures. According to this year’s report from Audit Analytics, things were very different in 2021. Restatements soared, and you can blame that entirely on SPACs. Here are some of the highlights:

– After declining for many years, the total number of restatements and the number of unique companies that disclosed a restatement last year rose to their highest levels since 2006. Total restatements increased by 289%, and unique companies that disclosed a restatement rose by 194%.

– The number of restatements filed increased significantly to 1,470, due to SPAC restatements. 77% of all restatements last year were SPAC-related, and excluding those restatements, there was a 10% year-over-year decrease.

– 62% of restatements were “Big R” reissuance restatements. Again, SPACs distort the picture here – backing out SPAC restatements, 24% were Big R, but that’s still up 3% over the prior year.

– The top reason for restating last year in both SPAC & non-SPAC settings was debt and equity accounting issues. Revenue recognition held the top spot for each of the three prior years

As always, the report contains a lot of other data on restatements, including the impact of restatements on net income, the average length of time required to restate financials and the average days restated.

John Jenkins