IAS8 - correction

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Leo
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Joined: 05 Apr 2020, 22:31

IAS8 - correction

Post by Leo »

Hi guys,

We changed this year to a more effective accounting ERP which allows us to clearly determine the amount of small parts used in construction that need to go into Inventory. Before, those small parts were booked in the P&L as the cost of sales.

We'd like to make the correction in the opening balance of this year in inventory vs equity according to the IAS8 correction of error. Why the opening of this year but not the one at the earliest comparative period which is the opening of the last year? Because that IAS8 stated also that :

"Where it is impracticable to determine the period-specific effects or the cumulative effect of the error, the entity corrects the error from the earliest period/date practicable (and disclose that fact).

Do you think that's acceptable if we only restate the opening of the year (current year) because the amount could not be correctly estimated last year and prior to last year?

Thanks guys!
pub_acco
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Re: IAS8 - correction

Post by pub_acco »

Is it an error? It sounds to me like a legitimate change in accounting policy. Anyway, you will not need to restate the comparative period as long as you can convince stakeholders of the impracticablity, though personally I feel it shouldn't be very difficult to make a fair if not 100% accurate estimate of the beginning inventories balance.

Btw, in practice I usually include minor corrections in the current year P&L just because it's not really fun to restate prior periods and disclose the error. Is your correction that material in your case?
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Marek Muc
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Re: IAS8 - correction

Post by Marek Muc »

Yeah it would be best to recognise this effect in current year P&L, obviously subject to materiality considerations
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