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ACCA Strategic Professional · Strategic Business Reporting (International) · Presentation and disclosure in financial statements

Dalmar discovers in its 20X6 financial statements process that a $1.2m fall in inventory value occurred because of a clerical error in the 20X5 year-end count, which was material. Which presentation is consistent with IAS 1 (together with IAS 8)?

Dalmar should restate the comparative figures and present a third statement of financial position as at the start of the preceding period. A material prior period error requires retrospective correction, and IAS 1 requires the extra statement when the restatement materially affects the opening position.

  1. ACorrect it in 20X6 profit or loss as a change in accounting estimate
  2. BRestate comparatives and present a third statement of financial position at the start of the preceding periodCorrect
  3. CDisclose it only in the notes without adjusting any figures
  4. DAdjust 20X6 opening retained earnings only, leaving comparatives unchanged

Explanation

A material prior period error is corrected retrospectively by restating comparatives. IAS 1 requires a third statement of financial position at the beginning of the earliest comparative period when the restatement has a material effect on that statement. Estimate treatment and notes-only disclosure are incorrect.

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