Financial Restatement JP Morgan Chase

Financial Statement Restatement Paper This paper will discuss the financial statement restatement of J.P. Morgan Chase and Company from 2012. When discussing J.P. Morgan Chase and Company from this point, it will be shorten to Chase. Chase was found to have discrepancies in their first quarter 2012 income statement. The restatement relates to valuations of certain positions in the synthetic credit portfolio of the Firm’s Chief Investment Office (CIO) (JPMorgan Chase & Co. – Current Report July 12, 2012). The adjustment to the net income amount will be reduced by $459 million. Chase overstated the value of a financial activity. "We are no longer confident that the trader marks reflected good faith estimates of fair value at quarter end and we decided to remark the positions utilizing external 'mid-market' benchmarks, adjusted for liquidity considerations," the global investment firm said (JP Morgan forced to re-evaluate Q1 earnings, Moore, Bela. Super Review (Jul 2012)). This restatement was a failure of internal controls.
The financial report that was restated was the income statement. The income statement gives you the profits versus losses at a given point in time for the company. The net income of its Selected Consolidated Financial Information was corrected from $5.383 billion to $4.924 billion.
This restatement can be classified as changes in accounting. Changes in accounting are errors that result from mathematical mistakes, mistakes in applying accounting principles, or oversight or misuse of facts that existed when preparing the financial statements.. This fourth category necessitates changes in accounting, though it is not classified as an accounting change (Kieso, Wyegandt, Warfield. Intermediate Accounting (12th ed.).
As soon as a company discovers an error, it must correct the error. Companies record corrections of errors from prior periods as an adjustment to the beginning balance of retained earnings in the current period. Such corrections