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CA Final · Financial Reporting · Accounting and Technology

Ananya Services Ltd, a listed company, uses an automated robotic process to post journal entries. During the year it identified that a coding error in the bot, undetected in the prior year, overstated prior-year revenue by Rs 8 lakh, which is material. Under Ind AS 8, how should the correction be made?

The material prior-period error is corrected retrospectively by restating the comparative figures and disclosing its nature and amount. Ind AS 8 does not allow it to be passed through current-year profit or treated as a change in estimate, even though it arose from a system bot.

  1. AAdjust current-year profit or loss with Rs 8 lakh reduction in revenue and disclose it
  2. BRestate prior-period comparatives retrospectively and disclose the nature of the errorCorrect
  3. CTreat it as a change in accounting estimate and apply prospectively
  4. DRecord it directly in other comprehensive income of the current year

Explanation

A material prior period error is corrected retrospectively by restating comparative amounts for the prior period presented, or the opening balances of the earliest period if the error predates it. Disclosure of the nature and amount of correction is required. A current-year charge would distort current results, and the error is not an estimate change.

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