If it is found that an error had been made in a prior period:
A) The error should be rectified by including the item of income or expense in the period in which the error was discovered.
B) AASB 101 does not cover this concept and so no entry is required.
C) AASB 108 requires that errors are corrected via an adjustment to opening balance of retained earnings.
D) Material errors discovered in the current reporting period must be included in that period's statement of comprehensive income, while non-material errors may be corrected with an adjustment to opening retained earnings.

Question

Quizplus · Accepted Answer

According to AASB 108, material errors in prior periods should be corrected via an adjustment to the opening balance of retained earnings in the earliest period presented in the comparative financial statements. This means that the correction of errors has an impact on the opening balances of assets, liabilities and equity, as well as the comparative information in the financial statements. The adjustment should be made retrospectively, which means that the financial statements of prior periods should be restated as if the error had never occurred in order to provide comparability.

If It Is Found That an Error Had Been Made