Prior Period Errors

omissions and misstatements in the entity's financial statements for one or more periods
applied RETROSPECTIVELY---meaning: restating comparative amounts; from the earliest period presented
Balance Sheet errors
1. Errors affecting REAL ACCOUNTS
Income Statement errors
1. Errors affecting NOMINAL ACCOUNTS
Combined Balance Sheet and Income Statement errors
1. Counterbalancing Errors
  1. If not detected, errors will counterbalance themselves over the next/successive period
  2. Income Statement for two periods are incorrect; Balance Sheet for first year incorrect; Balance Sheet for second year correct
  3. Includes misstatement of
    1. Inventory
    2. Prepaid/accrued expense
    3. Deferred/accrued income
2. Non-counterbalancing Errors
  1. Errors that, if not detected, will not counterbalance themselves over the next periods
  2. Income statement in which error was detected is incorrect; succeeding, not affected; Balance sheet are incorrect until it is corrected
  3. Most common example: misstatement of depreciation

Resource summary

	Created by Joen Jacob Ramas about 11 years ago