If it is found that an error had been made in a prior period.
A) The error should be rectified by including the item of income or expense in the period in which the error was discovered.
B) AASB 101 does not cover this concept and so no entry is required.
C) AASB 108 requires that errors are corrected via an adjustment to opening retained earnings.
D) Material errors discovered in the current reporting period must be included in that period's income statement, while non-material errors may be corrected with an adjustment to opening retained earnings.
E) None of the given answers.

Question

Quizplus · Accepted Answer

AASB 108 requires that material errors are corrected via an adjustment to opening retained earnings. This means that the correction of the error is reflected in the opening balance of the earliest financial statement presented, rather than in the current period's income statement. This is because the error occurred in a prior period and should not affect the current period's financial statements. Non-material errors can be corrected in the current period's income statement.

If It Is Found That an Error Had Been Made