Required Disclosure For Error Restatements – FAQ | IFRS

Required Disclosure for error restatements

If an error (either accidental or intentional in nature) is subsequently discovered that affected a prior period, the nature of the error, its effect on previously issued financial statements, and the effect of its adjustment on current period’s net income and EPS should be disclosed in the period in which the error is adjusted. In addition, any comparative financial statements provided must be adjusted. Required Disclosure for error restatements

In accounting for events after the reporting period errors easily occur because adjusting events are not properly recognised or the difference between adjusting events and non-adjusting events is not correctly made. Adjusting events are those providing evidence of conditions existing at the end of the reporting period, whereas non-adjusting events are indicative of conditions arising after the reporting period (the latter being disclosed where material).Prior period errors Prior period errors Prior period errors

See also Examples of adjustments of errors for many examples and their adjustment to restore the correct accounting of these transactions. Errors are different from change in accounting policies and changes in accounting estimates, in that accounting policies and estimates are choices made for a longer term to be consistently applied, but they can change due to circumstances such as new information. Errors are not a choice, they are wrong and need to be adjusted.

An example of the disclosure provided when an error adjustment is made through a prior-period adjustment is given below; the error adjustment (intentional errors in this instance) was made in 2000 by Xerox. Xerox provides extensive disclosure as to the effect of the errors on the income statement and the balance sheet for each year affected. As you read over the business like a description of the accounting errors uncovered at Xerox, keep in mind that underlying these long-fold disclosures are the destroyed careers of many accountants and managers at Xerox who stepped over the earnings management line into the area of earnings misstatement. Between the lines of this note, one can also sense the lost trust of Xerox shareholders, customers, suppliers, and regulators. Required Disclosure for error restatements

Xerox Disclosure for Error Restatements

Leave a comment