Question Tag: Prior Period Errors

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CR – Nov 2014 – L3 – SC – Q7 – Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8)

Discuss IAS 8 provisions for accounting policy changes and implications of prior period errors.

Question

International Accounting Standard 8 (IAS 8) Accounting Policies, Changes in Accounting Estimates and Errors prescribes the criteria for selecting and changing accounting policies, accounting for changes in estimates, and reflecting corrections of prior period errors. Changes in accounting policies and corrections of errors are generally accounted for retrospectively unless this is impracticable; whereas changes in accounting estimates are generally accounted for prospectively.

Required:

(a) Advise the CFO on the circumstances where an entity may change its accounting policies, setting out how a change in accounting policy is applied and the difficulties faced by entities when a change in accounting policy is made. (8 Marks)

(b) Discuss why the current treatment of prior period errors could lead to earnings management by companies, together with any further arguments against the current treatment. (7 Marks)

Answer

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Tags: Accounting Policies, Comparability, Earnings Management, IAS 8, Prior Period Errors, Retrospective Application
Level: Level 3

Topic: Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)
Series: NOV 2014

FR – May 2024 – L2 – SB – Q5 – Segment Reporting

Explanation of prior period errors, examples, and correction methods as per IAS 8, along with practical application to inventory errors in Lagos Company Nig. Limited.

Question

a. Errors might happen when preparing financial statements. If such errors are discovered quickly, they are corrected before the finalised financial statements are published. When this happens, the correction of the error is of no significance for the purpose of financial reporting.

However, when an error is discovered that relates to a prior accounting period, a problem may arise.

Required:
Explain prior period errors, giving examples, and discuss how such errors are corrected in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates, and Errors. (7 Marks)

b. During the year 2022, Lagos Company Nig. Limited discovered that certain items had been erroneously included in inventory at December 31, 2021. The amount was valued at ₦16.8 million, which had been sold before the year-end.

The following figures for the year 2021 (as reported) and 2022 (draft) are available as follows:

	2022 (Draft)	2021 (Published)
Revenue	₦268,800,000	₦189,600,000
Cost of sales	(₦223,200,000)	(₦138,280,000)
Profit before tax	₦45,600,000	₦51,320,000
Income tax expense	(₦13,600,000)	(₦15,520,000)
Profit for the year	₦32,000,000	₦35,800,000

The retained earnings at January 1, 2021, were ₦52 million. The cost of sales for the year 2022 includes a ₦16.8 million error in the opening inventories. The company income tax rate is 30%.

Required:
Prepare a statement of profit or loss and other comprehensive income for the year ended December 31, 2022, and retained earnings extracts showing comparative figures. (8 Marks)

Answer

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Tags: Financial Reporting, IAS 8, Prior Period Errors, Retrospective Adjustments
Level: Level 2

Topic: Segment Reporting (IFRS 8)
Series: MAY 2024

FA – May 2023 – L1 – SB – Q3b – Regulatory Environment of Accounting, IAS 8

Defining accounting policies and changes in accounting estimates with examples, and outlining the required accounting treatment.

Question

IAS 8 deals with the measurement, recognition, and disclosure of accounting policies, changes in accounting estimates, and correction of prior period errors.

i. Define an accounting policy and change in accounting estimates, with TWO examples each. (6 Marks)

ii. Outline the accounting treatments required to record a change in accounting estimates. (2 Marks)

Answer

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Tags: Accounting estimates, Accounting Policies, IAS 8, Prior Period Errors
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: MAY 2023

FR – Nov 2021 – L2 – Q2d – Financial Reporting Standards and Their Applications

This question covers the procedures for selecting and applying accounting policies in accordance with IAS 8.

Question

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors is applied in selecting and applying accounting policies, accounting for changes in estimates, and reflecting corrections of prior period errors.

Required:
Describe the procedures an entity shall apply in selecting an accounting policy.

Answer

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Tags: Accounting Policies, Changes in Estimates, IAS 8, Prior Period Errors
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2021

FR – Aug 2022 – L2 – Q2b – Financial Reporting Standards and Their Applications

Explain the key concepts of accounting policies, changes in accounting estimates, and prior period errors as per IAS 8.

Question

IAS 8: Accounting Policies, Changes in Accounting Estimates, and Errors is applied in selecting and applying accounting policies, accounting for changes in estimates, and reflecting corrections of prior period errors. The standard requires compliance with any specific IFRS applying to a transaction, event, or condition, and provides guidance on developing accounting policies for other items that result in relevant and reliable information.

Required:

Explain the following in accordance with IAS 8:

i) Accounting policies (2 marks)
ii) A change in accounting estimate (2 marks)
iii) Prior period errors (2 marks)

Answer

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Tags: Accounting estimates, Accounting Policies, Financial Statements, IAS 8, Prior Period Errors
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: AUG 2022

CR – Nov 2014 – L3 – SC – Q7 – Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8)

Discuss IAS 8 provisions for accounting policy changes and implications of prior period errors.

Question

Required:

(b) Discuss why the current treatment of prior period errors could lead to earnings management by companies, together with any further arguments against the current treatment. (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Policies, Comparability, Earnings Management, IAS 8, Prior Period Errors, Retrospective Application
Level: Level 3

Topic: Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)
Series: NOV 2014

FR – May 2024 – L2 – SB – Q5 – Segment Reporting

Explanation of prior period errors, examples, and correction methods as per IAS 8, along with practical application to inventory errors in Lagos Company Nig. Limited.

Question

However, when an error is discovered that relates to a prior accounting period, a problem may arise.

The following figures for the year 2021 (as reported) and 2022 (draft) are available as follows:

	2022 (Draft)	2021 (Published)
Revenue	₦268,800,000	₦189,600,000
Cost of sales	(₦223,200,000)	(₦138,280,000)
Profit before tax	₦45,600,000	₦51,320,000
Income tax expense	(₦13,600,000)	(₦15,520,000)
Profit for the year	₦32,000,000	₦35,800,000

The retained earnings at January 1, 2021, were ₦52 million. The cost of sales for the year 2022 includes a ₦16.8 million error in the opening inventories. The company income tax rate is 30%.

Required:
Prepare a statement of profit or loss and other comprehensive income for the year ended December 31, 2022, and retained earnings extracts showing comparative figures. (8 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Reporting, IAS 8, Prior Period Errors, Retrospective Adjustments
Level: Level 2

Topic: Segment Reporting (IFRS 8)
Series: MAY 2024

FA – May 2023 – L1 – SB – Q3b – Regulatory Environment of Accounting, IAS 8

Defining accounting policies and changes in accounting estimates with examples, and outlining the required accounting treatment.

Question

IAS 8 deals with the measurement, recognition, and disclosure of accounting policies, changes in accounting estimates, and correction of prior period errors.

i. Define an accounting policy and change in accounting estimates, with TWO examples each. (6 Marks)

ii. Outline the accounting treatments required to record a change in accounting estimates. (2 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting estimates, Accounting Policies, IAS 8, Prior Period Errors
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: MAY 2023

FR – Nov 2021 – L2 – Q2d – Financial Reporting Standards and Their Applications

This question covers the procedures for selecting and applying accounting policies in accordance with IAS 8.

Question

Required:
Describe the procedures an entity shall apply in selecting an accounting policy.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Policies, Changes in Estimates, IAS 8, Prior Period Errors
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2021

FR – Aug 2022 – L2 – Q2b – Financial Reporting Standards and Their Applications

Explain the key concepts of accounting policies, changes in accounting estimates, and prior period errors as per IAS 8.

Question

Required:

Explain the following in accordance with IAS 8:

i) Accounting policies (2 marks)
ii) A change in accounting estimate (2 marks)
iii) Prior period errors (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting estimates, Accounting Policies, Financial Statements, IAS 8, Prior Period Errors
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: AUG 2022

Question Tag: Prior Period Errors

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CR – Nov 2014 – L3 – SC – Q7 – Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8)

Discuss IAS 8 provisions for accounting policy changes and implications of prior period errors.

FR – May 2024 – L2 – SB – Q5 – Segment Reporting

Explanation of prior period errors, examples, and correction methods as per IAS 8, along with practical application to inventory errors in Lagos Company Nig. Limited.

FA – May 2023 – L1 – SB – Q3b – Regulatory Environment of Accounting, IAS 8

Defining accounting policies and changes in accounting estimates with examples, and outlining the required accounting treatment.

FR – Nov 2021 – L2 – Q2d – Financial Reporting Standards and Their Applications

This question covers the procedures for selecting and applying accounting policies in accordance with IAS 8.

FR – Aug 2022 – L2 – Q2b – Financial Reporting Standards and Their Applications

Explain the key concepts of accounting policies, changes in accounting estimates, and prior period errors as per IAS 8.

CR – Nov 2014 – L3 – SC – Q7 – Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8)

Discuss IAS 8 provisions for accounting policy changes and implications of prior period errors.

FR – May 2024 – L2 – SB – Q5 – Segment Reporting

Explanation of prior period errors, examples, and correction methods as per IAS 8, along with practical application to inventory errors in Lagos Company Nig. Limited.

FA – May 2023 – L1 – SB – Q3b – Regulatory Environment of Accounting, IAS 8

Defining accounting policies and changes in accounting estimates with examples, and outlining the required accounting treatment.

FR – Nov 2021 – L2 – Q2d – Financial Reporting Standards and Their Applications

This question covers the procedures for selecting and applying accounting policies in accordance with IAS 8.

FR – Aug 2022 – L2 – Q2b – Financial Reporting Standards and Their Applications

Explain the key concepts of accounting policies, changes in accounting estimates, and prior period errors as per IAS 8.

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