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CMA Intermediate · Corporate Accounting and Auditing · Presentation of Financial Statements (Ind AS 1)

Aarav Textiles Ltd discovers in the current year that depreciation of a prior year was understated by ₹4,00,000 because of an error. Ind AS 8 requires retrospective restatement to the extent practicable. How is this shown under Ind AS 1 in the Statement of Changes in Equity?

The ₹4,00,000 correction is an adjustment to the opening balance of retained earnings, and the total adjustment from correction of errors is disclosed separately in the Statement of Changes in Equity. Retrospective restatements are not changes in equity during the period under Ind AS 1.

  1. AAs an adjustment to the opening balance of retained earnings, with the total adjustment from error corrections disclosed separatelyCorrect
  2. BAs an item of other comprehensive income for the current year
  3. CAs a distribution to owners in the current year
  4. DAs a charge to current year profit or loss with no separate disclosure

Explanation

Paragraph 110 says retrospective restatements are not changes in equity but adjustments to the opening balance of retained earnings, unless an Ind AS requires another component to be adjusted. Paragraph 106(b) requires the total adjustment to each component from error corrections to be disclosed separately. Charging current profit would ignore retrospective restatement.

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