Until FRS102 basically an error had to be Fundamental for a Prior Year adjustment to be justified
‘Fundamental’ is defined in paragraph 63 of FRS 3 as an error of such significance as to destroy the truth and fairness and hence validity of a set of financial statements
Or you could make a change as a result of a change in Accounting Policy.
This position is about to change with arrival of FRS 102. Paragraph 10.21 states that ‘an entity shall correct a material prior period error retrospectively in the first financial statements authorised for issue after its discovery’. This means that, on adoption of FRS 102, the threshold for correcting an error by use of a prior period adjustment has reduced from fundamental to material (ICAEW)
The ACCA have a useful factsheet on prior year adjustments – Factsheet 188
steve@bicknells.net
Reblogged this on Global Thinking Business Systems and commented:
This will make a few people happy! Journal to opening balances in the first financial period after it is discovered. If this adjustment is in your ERP/EBS system make sure you journal to the correct accounts and no it does not give you an excuse not to close the year end.