LECTURE WEEK TWO. FINANCIAL INFORMATION 1 INCOME STATEMENT. ERRORS: FRS 108 (2006). Errors can arise in respect of: Recognition Measurement Presentation or; Disclosure Financial statement not comply with FRS: Material errors Immaterial errors. Definition of errors:.
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LECTURE WEEK TWO
FINANCIAL INFORMATION 1
Financial statement not comply with FRS:
“errors with significant effect on FS of one or more periods that the FS can no longer be considered as reliable as at the date of their issue ”.
“ are omissions from and misstatements in the entity’s financial statements from one or more prior periods arising from a failure to use, or misuse of reliable information”
FRS 108: Entity shall correct material prior
error retrospectively by:
During 2002, Beta Co discovered that some
products that has been sold in 2001 were
incorrectly included in inventory at 31
December 2001 at RM6,500.
Beta’s accounting records for 2002 shows sales of
RM104,000,cost of goods sold of RM86,500
(including RM6,500 for the error) and income tax
2001 opening retained earnings was
RM20,000 and closing retained earnings
Beta Income taxes rate was 30% for 2002
and 2001.It had no other income and
Beta had RM 5,000 of share capital
Throughout and no other equity. Its share
are not publicly traded and does not disclose
“…specific principles, bases, conventions, rules and practices … in preparing and presenting financial statements” 
Consistency in adoption?
A more appropriate presentation?
Eg. Inventory measurement
Change from Lower of cost to replacement cost----- change in accounting policies
Beta Co. purchased an intangible asset for
RM10M in the year 2001. It carried the asset
as a permanent item, i.e. ..at cost and
For a current year 2006, the company
changed its accounting policy to amortize
the intangible asset on a straight line
method over 10 years
DrAmortisation expense (CY)1M
Amortisation expense (PY)5M
Opening retained profit5M