The Procedure for Correcting Errors of Previous Periods in Financial Reporting According to IFRS
The subject of the study is represented by errors which were made in financial statements of prior periods and order of adjusting them according to International Financial Reporting Standards (IFRS). The objective of the research was set to study out the materiality of errors made in financial statements of prior periods, determination of classification and order of adjusting the errors in accordance with IFRS. Different methods were used for achieving set up goals: induction and deduction, analysis, synthesis, causal relationships, abstractly logical, comparison, studying monographs and other generally accepted methods. According to IFRS errors might be made while recognizing, measuring, submitting and disclosing information about elements of financial statements. IFRS 8 divides such errors to errors of current period and prior reporting periods. Errors of prior reporting periods may influence or not influence the amount of undivided profit, material or not material, also intentional or not intentional. IFRS/IAS do not set up any recommendations about quantity or quality criteria or characteristics of materiality of errors. Every business entity preparing financial reports sets up materiality of errors based on their own criteria of materiality of errors. According to IRFS 8 paragraph 42 business entities adjust material mistakes of the prior period retrospectively in the first set of financial statements confirmed before its disclosing after their revealing. There are two ways to adjust these kind of errors: by transferring comparable sums for prior period (periods) presented when the mistake was made. Also by transferring the residue of assets, liabilities and equity in the beginning of the period for the earliest of the prior period presented, if the errors were made before the earliest of the prior period presented. Information about errors of prior period must be disclosed. Practical use of the research consists in bringing its main ideas to life through methodical innovations and recommendations which may be applied while adjusting errors, by business entities preparing financial statements according to IFRS.
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