The correction of a material error that occurred in a previous period must be accounted for by:

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According to Generally Accepted Accounting Principles (GAAP), a material error in a previous period must be corrected by a retrospective restatement in the first financial statements issued after the discovery of the error. This means that the financial statements of the previous period must be restated as if the correction had been made in that period. This is the only correct way to correct a material error in accordance with GAAP. Disclosure in the notes to the financial statements or adjustment in future accounting periods are not sufficient to correct a material error. Prospective adjustment may apply to non-material errors but not for material errors.

The Correction of a Material Error That Occurred in a Previous