A material prior period error in year ending 2012 was subsequently discovered in 2013.To comply with IAS 8 Accounting Policies,Changes in Accounting Estimates and Errors an entity should:
A)reissue the 2012 financial statements with the error corrected.
B)make a retrospective adjustment in 2012.
C)make a retrospective adjustment in 2013.
D)make a prospective adjustment in 2012.

Question

Quizplus · Accepted Answer

According to IAS 8, the correction of a material prior period error should be made through a retrospective adjustment in the first set of financial statements that are authorized for issue after the discovery of the error. Since the error was discovered in 2013, a retrospective adjustment should be made in 2013 financial statements to correct the error made in 2012. Option A is incorrect because reissuing the old financial statements is not required, but a note or disclosure about the correction should be provided. Option B is incorrect because a retrospective adjustment should be made in the first set of financial statements authorized for issue after the discovery of the error, which is in 2013. Option D is incorrect because a prospective adjustment applies to changes in accounting estimates, not prior period errors.

A Material Prior Period Error in Year Ending 2012 Was