IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

58

Wiley IFRS: Practical Imp lementation Guide and Workbook

200X $45 000 $225000

200Y $225 000 $375 000

Retainedearnings, beginningof the year Retainedearnings, ending of the year

(d) Vigilant lnc.'s income tax rate was 20% for both years. Required Present the accounting treatment prescribed by lAS 8 for the correction of the errors . Solution

As an illustration of the accounting treatment and presentation of financial statements in accordance with lAS 8, a condensed version of Vigilant Inc.' s Income Statement and Statement of Changes in Equity follow s: Vigilant lnc. INCOME STATEMENT For the Year Elided December 31, 200Y

200X restated $345,000 (150000) 195,000 (39000) $.I.5.6.QQQ

200Y $300,000

Gross profit General and administrative expenses and Selling and distribution expenses in– cluding amortization (see Explanation below) Net income before income taxes Incometaxes Net profit

(]50000) 150,000 (30000) $llQJ)QQ

Yigilant Inc. STATEMENT OF CHANGES IN EQUITY (RETAINED EARNINGS COLUMNS ONLY) For the Year elided December 31, 200Y

200X

200Y

restated $ 45,000

Retained earnings, beginning, as reported previously Correction of error, net of income taxes of $6,000 (see Explanation below) Retained earnings, beginning, as restated Net profit Retained earnings, ending

$225,000

(24 000)

--- 45,000 156000 $2Qlj)QQ

201,000 120000 $321000

Vigilant Inc. For the Year Ended December 31, 200Y

Notes to the financial statements (extract) Note XX: The company omitted to record an amortizati on charge in the amount of $30,000 in 200X. The financial statements for 200X have been restated to correct this error. Explanation According to the revised lAS 8, the amount of correction of an error that relates to prior periods should be reported by adjusting the opening balance of retained earnings. Comparative information should be restated unless it is "impracticable" to do so. The steps in preparing the revised financial statements and related disclosures are (I) As presented in the Statement of Changes in Equity (retained earnings columns only), the opening retained earnings was adjusted by $24,000, which represented the amount of error, $30,000, net of income tax effect of $6,000. (2) The comparative amounts in the Income Statement were restated as General and administrative and Selling and Distribution expenses, including depreciation, before correction $120,000 Amount of correction 30 000 As restated $illJ!l!l! Income taxes before correction $ 45,000 Amountof correction (60001 As restated $~