ABC Company misstates its ending inventory at the end of Year 1. ABC does not discover and correct the error until Year 3. The companys annual report includes comparative financial statements for Years 2 and 3. (Ignore the impact on income taxes.) Which of the following statements about this error is true?

• A disclosure note is needed to describe the nature of the error.

• A disclosure note is needed to describe the impact of the error on net income, each line-item affected, and earnings per share.

• A journal entry to correct the error is needed.

• The Year 2 financial statements are not required to be retrospectively restated.