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

Delta Co, a parent, discovers in 20X7 that a fair value adjustment to land of a subsidiary acquired in 20X4 was omitted, which is a material error that would have increased goodwill. The land is still held. Which is the correct approach in the consolidated financial statements?

Once the measurement period has ended, the omitted fair value adjustment is a material prior period error. Delta restates comparatives retrospectively, increasing land and goodwill from the acquisition date. Because land is not depreciated there is no profit effect, and nothing is taken through 20X7 profit or other comprehensive income.

  1. AIncrease goodwill and land in the current year with the effect on profit or loss in 20X7
  2. BRestate comparatives retrospectively, correcting goodwill and land at the acquisition date and subsequent periods, with no current-year profit effect since land is not depreciatedCorrect
  3. CRecognise a gain in other comprehensive income in 20X7
  4. DIgnore the omission because acquisition accounting is final after 12 months

Explanation

After the measurement period an omission is a prior period error under IAS 8, not a measurement period adjustment. It is corrected retrospectively by restating comparatives and opening balances. Land is not depreciated so no profit effect arises, though goodwill and land are restated. Option 0 wrongly takes it through current profit.

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