IAS 8: Accounting Polices, Changes in Accounting Estimates and Errors lays down criteria for the selection of accounting policies and prescribes circumstances in which an entity may change an accounting policy. The standard also deals with accounting treatment of changes in accounting policies, changes in accounting estimates and correction of errors.
The following are steps required to correct previous years errors discovered in the financial statements:
- Restate 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, restate the opening balances of assets, liabilities and equity for the earliest prior period presented,
- Adjust the opening balance in the statement of changes in equity