(2) Revision of Prior Period Financial Statements

During the quarter ended September 30, 2013, the Company identified certain prior period errors that affected the years ended December 31, 2012 and 2011. The Company has reflected in the financial information included in this Note the correction of all identified prior period errors in the years in which they originated. The prior period errors relate to:

•

Adjustments to the Company’s share of operating results in one of the technology-related investment funds in which the Company holds an interest, which adjustments are principally a result of information received by the Company from the fund after the applicable reporting periods. The Company records a portion of the fund’s operating results, based on the Company’s ownership interest in the fund, as investment gains (losses). The adjustments to the gains (losses) on investments were $0.5 million and ($1.4) million for the years ended December 31, 2012 and 2011, respectively. The effect of this error has been reflected in other assets in the revised consolidated balance sheet and in net (gains) losses from investments in the revised consolidated statement of cash flows presented below.

•

Adjustments to revenue for historical insignificant variances in deferred revenue for reconciling items between the Company’s general ledger and sub-ledger system. The increase (decrease) to revenue was $0.1 million and ($0.4) million for the years ended December 31, 2012 and 2011, respectively. The effect of this error has been reflected in deferred revenue in the revised consolidated balance sheet and statement of cash flows presented below.

•

An adjustment of $0.1 million for the year ended December 31, 2011 to increase the amount of research services revenue related to recognition of revenue for the event ticket included in the Company’s RoleView and Forrester Leadership Board subscription products. The effect of this error has been reflected in deferred revenue in the revised consolidated balance sheet and statement of cash flows presented below.

In addition, during the quarter ended December 31, 2013, the Company identified certain prior period errors related to income taxes that affected the year ended December 31, 2012. The Company has reflected in the financial information included in this Note the correction of all identified prior period errors. The prior period errors relate to:

•

Adjustment of $0.4 million to decrease income tax expense for the year ended December 31, 2012 to correct the amount of net operating losses as a result of a settlement of a tax audit at the Company’s German subsidiary. The effect of this error has been reflected in other assets in the revised consolidated balance sheet and in deferred taxes in the revised consolidated statement of cash flows presented below.

•

Adjustment of $0.1 million to increase income tax expense for the year ended December 31, 2012 to correct for insignificant errors. The effect of these errors has been reflected in prepaid expenses and other current assets, other assets and non-current liabilities in the revised consolidated balance sheet and in the related accounts in the revised consolidated statement of cash flows presented below.

In evaluating whether the Company’s previously issued consolidated financial statements were materially misstated, the Company considered the guidance in ASC Topic 250, Accounting Changes and Error Corrections, ASC Topic 250-10-S99-1, Assessing Materiality, and ASC Topic 250-10-S99-2, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. The Company concluded that these errors were not material individually or in the aggregate to any of the prior reporting periods, and therefore, amendments of previously filed reports are not required. As such, the revisions for prior period corrections are reflected in the financial information for the applicable prior periods and are revised in the financial statements herein. See Note 14, “Summary Selected Quarterly Financial Data (unaudited)” for the impact of the revision on each of the applicable prior periods.

The effects of these prior period errors on the consolidated financial statements are as follows (in thousands, except per share amounts):

Revised Consolidated Statements of Income


	Year Ended December 31, 2012								Year Ended December 31, 2011
	As Previously Reported			Adjustments			As Revised		As Previously Reported		Adjustments			As Revised
Revenues:
Research services	$	202,998		$	93		$	203,091	$	191,648	$	(153	)	$	191,495
Advisory services and other		89,932			8			89,940		91,968		(128	)		91,840

Total revenues		292,930			101			293,031		283,616		(281	)		283,335
Income from operations		30,659			101			30,760		36,997		(281	)		36,716
Gains (losses) on investments, net		(449	)		543			94		1,018		(1,417	)		(399	)
Income before income taxes		31,510			644			32,154		38,645		(1,698	)		36,947
Income tax provision		5,936			(78	)		5,858		15,635		(679	)		14,956
Net income	$	25,574		$	722		$	26,296	$	23,010	$	(1,019	)	$	21,991

Basic income per common share	$	1.14		$	0.03		$	1.17	$	1.02	$	(0.05	)	$	0.97

Diluted income per common share	$	1.12		$	0.03		$	1.15	$	0.99	$	(0.04	)	$	0.95

Revised Consolidated Statements of Comprehensive Income

The consolidated statements of comprehensive income for the years ended December 31, 2012 and 2011 are impacted by the same amounts as net income for the respective period.

Revised Consolidated Balance Sheet


	As of December 31, 2012
	As Previously Reported		Adjustments		As Revised
Current Assets:
Prepaid expenses and other current assets	$	18,846	$	58	$	18,904
Total current assets		336,565		58		336,623
Other assets		9,123		125		9,248
Total assets	$	487,832	$	183	$	488,015

Current Liabilities:
Deferred revenue	$	150,479	$	16	$	150,495
Total current liabilities		181,329		16		181,345
Non-current liabilities		9,433		30		9,463
Total liabilities		190,762		46		190,808
Retained earnings		117,648		137		117,785
Total stockholders’ equity		297,070		137		297,207
Total liabilities and stockholders’ equity	$	487,832	$	183	$	488,015

Revised Consolidated Statements of Cash Flows


	Year Ended December 31, 2012									Year Ended December 31, 2011
	As Previously Reported			Adjustments			As Revised			As Previously Reported			Adjustments			As Revised
Cash flows from operating activities:
Net income	$	25,574		$	722		$	26,296		$	23,010		$	(1,019	)	$	21,991
Net (gains) losses from investments		449			(543	)		(94	)		(1,018	)		1,417			399
Deferred income taxes		(10,385	)		(582	)		(10,967	)		15,137			—			15,137
Prepaid expenses and other current assets		6,279			331			6,610			(7,805	)		(679	)		(8,484	)
Accrued expenses and other liabilities		376			173			549			2,485			—			2,485
Deferred revenue		1,807			(101	)		1,706			16,364			281			16,645