a. Explanation of prior-period errors 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 that:

i. was available when financial statements for those periods were authorised for issue; and

ii. could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.

Correction of prior-period errors

i. According to the provision of IAS 8, an entity shall correct material prior-period errors retrospectively in the first set of financial statements authorised for issue after their discovery by:

 Restating the comparative amounts for the prior period(s) presented in which the error occurred; or

 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.

ii. The correction of a prior period is excluded from the statement of profit or loss in the period when the error was discovered.

Examples of prior-period errors:

i. The effects of mathematical mistakes;

ii. Mistakes in applying accounting policies;

iii. Oversights or misinterpretations of facts; and

iv. Fraud.

b. Lagos Company Nigeria Limited

Statement of profits or loss and other comprehensive income for the year ended December 31

Statement of movement in retained earnings for the year ended December 31

Working note

Wk 1: Cost of sales

Wk 2: Income tax expense

Wk 3: Opening retained earnings