Question 5
ICAN
•
2024
•
FINANCIAL REPORTING
•
mixed
Case Stimulus
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.
Requirements
(
a
)
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.
(
b
)
During 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 N16.8million which had been sold before the year-end.
The following figures for year 2021 (as reported) and 2022 (draft) are available as follows:
2022(Draft) 2021 (Published)
N’000 N’000
Revenue 268,800 189,600
Cost of sales (223,200) (138,280)
Profit before tax 45,600 51,320
Income tax expense (13,600) (15,520)
Profit for the year 32,000 35,800
The retained earnings at January 1, 2021 were N52million. The cost of sales for year 2022 includes N16.8million error in the opening inventories.
Company income tax rate is 30%.
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About This Question
This is
Ican
2024
Financial Reporting
Question 5.
It is one of the
mixed
questions from the
2024
Ican
Financial Reporting
examination.