Page 5 - 28. COMPILER QB - IND AS 8

Issue 1:
The company had presented certain material liabilities as non-current in its financial statements for periods
as on 31st March, 20X2. While preparing annual financial statements for the year ended 31st March, 20X3,

management discovers that these liabilities should have been classified as current. The management intends
to restate the comparative amounts for the prior period presented (i.e., as at 31st March, 20X2).
Issue 2:
The company had charged off certain expenses as finance costs in the year ended 31st March, 20X2. While
preparing annual financial statements for the year ended 31st March, 20X3, it was discovered that these

expenses should have been classified as other expenses instead of finance costs. The error occurred because
the management inadvertently misinterpreted certain facts. The entity intends to restate the comparative
amounts for the prior period presented in which the error occurred (i.e., year ended 31st March, 20X2).
What is your analysis and recommendation in respect of the issues noted with the previously presented set of
financial statements for the year ended 31st March, 20X2?

SOLUTION
As per Ind AS 8 ―Accounting Policies, Changes in Accounting Estimates and Errors‖, errors can arise in respect
of the recognition, measurement, presentation or disclosure of elements of financial statements. Financial

statements do not comply with Ind AS if they contain either material errors or immaterial errors made
intentionally to achieve a particular presentation of an entity‖s financial position, financial performance or cash
flows. Potential current period errors discovered in that period are corrected before the financial statements
are approved for issue. However, material errors are sometimes not discovered until a subsequent period, and

these prior period errors are corrected in the comparative information presented in the financial statements for
that subsequent period.
Accordingly, the stated issues in question are to dealt as under:
Issue 1
In accordance with the same, the reclassification of liabilities from non-current to current would be considered
as correction of an error under Ind AS 8. Accordingly, in the financial statements for the year ended March

31, 20X3, the comparative amounts as at 31 March 20X2 would be restated to reflect the correct
classification.
Ind AS 1 requires an entity to present a third balance sheet as at the beginning of the preceding period in
addition to the minimum comparative financial statements, if, inter alia, it makes a retrospective restatement
of items in its financial statements and the restatement has a material effect on the information in the

balance sheet at the beginning of the preceding period. Accordingly, the entity should present a third balance
sheet as at the beginning of the preceding period, i.e., as at 1 April 20X1 in addition to the comparatives for
the financial year 20X1-20X2.
Issue 2
The reclassification of expenses from finance costs to other expenses would be considered as correction of an
error under Ind AS 8. Accordingly, in the financial statements for the year ended 31 March, 20X3, the

comparative amounts for the year ended 31 March 20X2 would be restated to reflect the correct classification.
Ind AS 1 requires an entity to present a third balance sheet as at the beginning of the preceding period in
addition to the minimum comparative financial statements if, inter alia, it makes a retrospective restatement
of items in its financial statements and the restatement has a material effect on the information in the

balance sheet at the beginning of the preceding period.
28. 4