A material prior period error in year ending 2009 was subsequently discovered in 2010.To comply with AASB 108 "Accounting policies,changes in accounting estimates and errors" an entity should.
A) re-issue the 2009 financial statements with the error corrected.
B) make a retrospective adjustment in 2009.
C) make a retrospective adjustment in 2010.
D) make a prospective adjustment in 2009.
E) make a prospective adjustment in 2010.

Question

Quizplus · Accepted Answer

As per AASB 108, a material prior period error should be corrected by making a retrospective adjustment in the first set of financial statements that the error affects after its discovery. In this case, the error was discovered in 2010, and therefore, a retrospective adjustment should be made in the 2010 financial statements to correct the error that affected the 2009 financial statements. Thus, the correct choice is to make a retrospective adjustment in 2010.

A Material Prior Period Error in Year Ending 2009 Was