Correction to prior period errors.

[Acid]

Hi

-Self examination Question 2 . The accounting error was occured in the year 20X4 and was noticed in 20X6. So why have we restated the figures for 20X6 and 20X5 instead of 20X4?

Thanks

Acid

[Geetanjali]

Hi Acid,

Here is the answer to your query:

“In the financial statement for 2006, the comparative figures for one year (2005) are stated. Therefore, those figures are restated. The figures for 2004 would normally not be included in the financial statements of 2006. Hence there is no need to restate the figures for 2004. It is sufficient to restate the opening balances for 2006 and the comparative figures for 2005.



In a rare situation, if the mistake is so grave as to vitiate the fairness of the financial statements for 2004, the statements already issued for 2004 may be restated. However, that does not appear to be the case here.”

Hope it helps.

Wish you all the best for your F7 exam.

Regards
Geetanjali