Error corrections which involve restatement of prior period income must be reported

Question

Quizplus · Accepted Answer

Restatement of prior period income should be reported as a prior period adjustment on the statement of changes in retained earnings. This reflects the correction to the opening balance of retained earnings, resulting in a change to the closing balance of the prior period, which is then carried forward to the current period. Disclosure should also be made in the footnotes to describe the nature of the error and the impact on the financial statements.

Error Corrections Which Involve Restatement of Prior Period Income Must