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Errors
41. Errors can arise
in respect of the recognition, measurement, presentation or
disclosure of elements of financial statements. Financial
statements do not comply with IFRSs if they contain either
material errors or immaterial errors made intentionally to
achieve a particular presentation of an entity’s financial
position, financial performance or cash flows. Potential
current period errors discovered in that period are corrected
before the financial statements are authorised for issue.
However, material errors are sometimes not discovered until a
subsequent period, and these prior period errors are corrected
in the comparative information presented in the financial
statements for that subsequent period (see paragraphs 42-47).
42. Subject to
paragraph 43, an entity shall correct material prior period
errors retrospectively in the first set of financial
statements authorised for issue after their
discovery by:
(a) restating the
comparative amounts for the prior period(s) presented
in which the error occurred; or
(b) if the error
occurred before the earliest prior period presented,
restating the opening balances of assets, liabilities
and
equity for the earliest prior period presented.
Limitations on
Retrospective Restatement
43. A prior period
error shall be corrected by retrospective restatement except
to the extent that it is impracticable to determine either the
period-specific effects or the cumulative effect of the
error.
44. When it is
impracticable to determine the period-specific effects of
an error on comparative information for one or more
prior periods presented, the entity shall
restate the opening balances of assets, liabilities
and equity for the earliest period for which retrospective
restatement is practicable (which may be the current
period).
45. When it is
impracticable to determine the cumulative effect, at the
beginning of the current period, of an error on all
prior periods, the entity shall restate the
comparative information to correct the error prospectively
from the earliest date practicable.
46. The correction
of a prior period error is excluded from profit or loss for
the period in which the error is discovered. Any information
presented about prior periods, including any historical
summaries of financial data, is restated as far back as is
practicable.
47. When it is
impracticable to determine the amount of an error (eg a
mistake in applying an accounting policy) for all prior
periods, the entity, in accordance with paragraph 45, restates
the comparative information prospectively from the earliest
date practicable. It therefore
disregards the portion of the cumulative restatement of assets,
liabilities and equity arising before that date. Paragraphs
50-53 provide guidance on when it is impracticable to correct
an error for one or more prior periods.
48. Corrections of
errors are distinguished from changes in accounting estimates.
Accounting estimates by their nature are approximations that
may need revision as additional information becomes known. For
example, the gain or loss recognised on the outcome of a
contingency is not the correction of an error.
Disclosure of Prior
Period Errors
49. In applying
paragraph 42, an entity shall disclose the following:
(a) the nature of
the prior period error;
(b) for each prior
period presented, to the extent practicable, the
amount
of the correction:
(i) for each
financial statement line item affected; and
(ii) if IAS 33
applies to the entity, for basic and diluted earnings
per share;
(c) the amount of
the correction at the beginning of the earliest prior
period presented; and
(d) if retrospective
restatement is impracticable for a particular prior
period, the circumstances that led to the existence of
that condition and a description of how and from when
the error has been corrected.
Financial statements
of subsequent periods need not repeat these disclosures.
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