Iphone backup restore won't on new iphone 5s?

Ok so i had a 5s and it broke and i had a warranty so i got a new one. I backed up the old one and i tried to restore it on the new one but itunes said it couldnt because the software of the old one wasn't updated (old one was ios 7.1 and new is ios 7.2). It told me i had to set it up as a new iphone and then restore so i did that and only the restore from my first iphone showed up (which is weird because that software isn't updates). Now Its only restored from 2012 and the newest backup restore won't show up. Should i restore the whole new iphone so its back to factory settings or?

Just set it up as a new phone. You'll lose all your text messages but that's not really a huge issue.