The accountant in preparation for the financial statement for the year 2007 realised an error in the determination of recoverable amounts in last year's financial statements.This error had it been detected in 2006 would have required the recognition of impairment losses amounting to $500,000.To comply with AASB 108,Accounting Policies,Changes in Accounting Estimates and Errors,the accountant should.
A) Make a prospective change to the 2007 figures, on the basis that he has made an error in 2006.
B) Make a prospective change to the 2007 figures, on the basis that he is making a change to an estimate in 2006.
C) Make a retrospective change to the 2007 figures, on the basis that that this is a change in accounting estimates.
D) Make a retrospective change to the 2007 figures, on the basis that he is changing the accounting policy in 2006.
E) Make a retrospective change to the 2007 figures, on the basis that he has made an error in 2006.

Question

Quizplus · Accepted Answer

According to AASB 108, when an error is discovered in a previous financial statement, the correction should be made retrospectively. Therefore, the accountant should make a retrospective change to the 2007 figures based on the fact that an error was made in 2006. This means that the financial statements for 2006 should be restated to correct the error and the subsequent financial statements should reflect the corrected balances.

The Accountant in Preparation for the Financial Statement for the Year