Financial Statement Restatement Paper
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ACC/537
January 13, 2014

Financial Statement Restatement Paper
MicroStrategy, Inc. went public in June 2008. It is a software company that had been identified as, “a successful, growing company with positive net income” (Krishnan & Mintz, 2007). Like many managers, the managers at MicroStrategy, Inc. wanted to make a quick profit by using aggressive accounting techniques that artificially boosted revenues, inflated earnings, and raised the stock price of shares. The stock price rose from $20 to $333 in one year after the IPO.
The company announced in March 2000, that they were planning to restate financial results for the fiscal years 1998 and 1999 (Krishnan & Mintz, 2007). The company needed to restate its financial statements due to improperly applying early revenue recognition in fiscal periods. The company had been recognizing revenues earlier than what was allowed under GAAP. The company would hold open contracts that had been signed by customers after the close of the quarter until the company obtained the desired quarterly financial results, the company would undersign the contracts and give them an effective date that was in the last month of the previous quarter (Krishnan & Mintz, 2007).
The restatement of MicroStrategy, Inc’s financial statements reduced the companies combined revenues for the years 1998 and 1999 to $247 million down from $312 million. About 83 percent of this change was applied to 1999. This restatement of the financial statements caused the company’s stock to drop 60 percent of its value in one day. The price dropped from $260 to $86. The stock price continued to drop and on April 13, 2000 the stock was at $33 per share. By January 2002 the stock price reached an all-time low of $3.15 per share (Krishnan & Mintz, 2007).
This steep drop in share price in a