Prior period error
/What is a Prior Period Error?
A prior period error is an omission from, or a misstatement of, prior-period financial statements. Such an error must have been caused by the failure to use, or the misuse of, information that was available when the financial statements were authorized for issuance and that could be expected to have been obtained.
When you spot a prior period error, the usual approach to correcting it is to do so in the next set of financial statements to be released. Within those statements, you should restate the comparative amounts for the applicable prior period. This could result in changes to the income statement, balance sheet, and/or the statement of cash flows. The result should be comparative amounts that show the financial statements as they should have been as if no error had arisen.
Examples of Prior Period Errors
Examples of a prior period error are fraud, calculation mistakes, factual misrepresentations or oversights, and mistakes in applying accounting policies.