You're directing a third-grade production of The Cow That Mooed. You originally cast little Timmy as the cow. But he couldn't get the moo right. No matter how much you berated him, no matter how much you tried to tap into his buried reservoirs of emotion, he wouldn't commit to the moo in a way that resonated on a spiritual level. Mostly, he just cried in the corner.
Time to recast. Maybe Suzy can do it.
Take that concept to the financial world, and you've got an earnings recast. A company made a mistake the first time it reported its financial figures. So it has to change them. The figures get recast...just like Timmy.
A company reports a profit of $2 million for the second quarter of 2015. Some time passes. It's now 2018 and an accountant is re-reading some old financial documents (for fun, as accountants are wont to do). He discovers a decimal error. The company really only made $200,000 for the second quarter of 2015.
So the company has to change the numbers for the quarter...the quarter that ended three years before. It has to let investors and regulators know about the mistake and report the real figure.
The process is called an earnings recast, or an earnings restatement. It's usually bad news, but a failure to make the restatement once a problem is discovered can lead to regulatory investigations, which are usually worse news.
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Finance: What are retained earnings?26 Views
Finance allah shmoop what are retained earnings You know when
you eat really salty food and the next day you
have cankles it's all that water desperately trying Teo get
youto wiz out the loads of sodium chloride in your
body That's retained water well retained earnings and i'll sort
of work the same way you run a plastic cup
stamping business with catchy little phrases on the cubs Last
year you had a million bucks in sales and one
hundred grand in after tax earnings About eighty grand of
that earnings was in fact cash Why didn't you retain
in cash one hundred percent of your earnings What happened
to the twenty grand in cash there How did evaporate
Well you had to spend cash out of your earnings
on a cup plunging machine and then cost real cash
dough You'll amber ties that cost over time now and
get essentially a tax break because of it meaning you'll
show lesson earning so you'll pay less in taxes but
the cash won't change So this year's hundred grand was
a nice year but last year you had fifty grand
in cash profits and you had twenty grand in cash
Profits the year before then and before then you had
run it just cash flow break even for the previous
five years So it all looked like that So in
total you saved Or rather you retained cash earnings of
eighty plus fifty plus twenty or a sum total of
one hundred fifty grand That all now sits in your
b of a account doing a whole lot of nothing
of intern two percent a year for the privilege that
one hundred fifty grand that you have cumulatively retained Like
ankle's swelling is retained earnings which you will now use
to print more catchy titles in foreign languages Maybe don't
look up What those mean All right let's close the 00:01:49.043 --> [endTime] video now
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