Application of the Prior Year Adjustment

1. • Facilitated By; W.M. Prasanna Walisundara
• FCA,ACMA –SL, MBA, BSc. Business
Administration

2. Prior Period error
Depending of time of occurrence Two Types;
 Error committed and discovered in the current
year
 Error committed earlier but discovered in the
current year (Also known as prior period error)
Prior period errors are omissions from, and
misstatements in, the entity’s financial statements
for one or more prior periods arising from a failure
to use, or misuse of reliable information.

3. Errors includes;
Mathematical mistakes.
Mistakes in applying accounting policies
Oversights or misinterpretations of facts
Fraud

4. Prior period adjustments are
adjustments which;
Relate to prior period
Are made due to correction of an error or change
in accounting policy
Have a material impact on the financial
statements
**Prior period adjustments do not apply to
transactions, which are accounted do not apply to
transactions which are accounted for based on
estimated.

5. Depreciation Rate Change
• Depreciation rate change from 10% to 15% is
not qualify for a prior period adjustment.
• Since it is not a correction or an error or a
change in the accounting policy
• The determination of the rate of depreciation
is based on estimates.

6. Accounting for correction of errors &
Change in Accounting Policies;
 If material errors committed earlier are discovered in
current year,
-Accounting for correction of prior period errors
retrospectively in the first set of financial statements
authorized for issue after their discovery by;
(a) Restating the comparative amounts for the prior
period presented in which the error occurred or
(b) If the error occurred before the earliest prior period
presented, restating the opening balances of assets,
liabilities and equity for the earliest prior period
presented.

7. Accounting for changes to accounting
policies
 If the changes is due to initial application of an IFRS?
 If the answer is yes
 Then need to validate whether the IFRS indicate specific
transitional accounting method??
 If yes Apply the transitional Provisions.
 If not Apply the change in accounting policy retrospectively
 If its practicable
 Need to change the retrospectively
 If not practicable then apply the change from the earliest
date.