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IAS 8Workpapers (Step 4 of 5)

Workpaper template

Step 4 of 5

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors — wording before IFRS 18Applicable today

Applies to annual periods beginning before January 1, 2027.

WorkpaperIAS 8 — Accounting Policies, Changes in Accounting Estimates and ErrorsL2 · L3 · L4

Retrospective restatement schedule

5 missions10 sections to document50 min
Prepared by
AI-assisted draft
Reviewed by
Not reviewed — human review required
Status
Published

Objective of the workpaper

For a change in accounting policy applied retrospectively or a prior period error, determine the cumulative pre-tax effect at the beginning of the earliest period presented (or of the earliest practicable period), its tax effect at the rate given by the case and the net adjustment to opening retained earnings; isolate the effect specific to the comparative period, restate the line item concerned and the comparative profit, reconcile restated equity, then post the entries and prepare the disclosures.

10 sections · 52 blocks · 21 calculations · 8 entries

  • IAS 8 §4
  • IAS 8 §22
  • IAS 8 §23
  • IAS 8 §24
  • IAS 8 §42
  • IAS 8 §44
  • IAS 8 §46
  • IAS 8 §53
  • IAS 8 §29
  • IAS 8 §49

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

5 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Provision omitted and discovered the following year: restatement of comparatives and tax effect
Case tasks documented here
  • Isolate the part of the error relating to the 20X4 comparative period.
  • Compute the tax effect at the opening of 20X4 and for 20X4, and the net amounts.
  • Determine restated retained earnings at 1 January 20X4.
  • Restate other operating expenses, provisions and profit for 20X4.
  • Reconcile restated retained earnings at 31 December 20X4.
  • Present the restatement entries: 20X4 opening balances and 20X4 comparative column.
1

Inputs

Inputs

  • Subject of the restatement (error or change in policy) and entity concerned

    TextRequired

    OMITTED_WARRANTY_PROVISION_COOKING_RANGE

  • Periods presented and period whose opening balances are restated

    TextRequired

    20X4_COMPARATIVE_OPENING_1_JANUARY_20X4

  • Tax rate applicable to the adjustments (%)

    Number

    25 %

    Case data: rate and tax treatment come from the case; IAS 8 refers to IAS 12 for the tax effect (para. 4). Enter 0 when the case states there is no tax effect.

  • Reported retained earnings at the opening of the restated period

    NumberRequired

    1,450,000

  • Omitted liability: cumulative pre-tax effect at the opening

    Number

    80,000

  • Overstated asset: cumulative pre-tax effect at the opening

    Number

  • Change in policy: cumulative pre-tax effect at the opening (increase in equity)

    Number

  • Omitted liability: cumulative pre-tax effect at the end of the comparative period

    NumberRequired

    128,000

    Leave blank when the comparative period is not restated (impracticability, change without comparative effect): the comparative calculations are then not produced.

  • Change in policy: cumulative pre-tax effect at the end of the comparative period

    NumberRequired

  • Reported amount of the comparative line item restated

    Number

    2,340,000

  • Reported profit of the comparative period

    Number

    410,000

  • Distributions of the comparative period

    Number

    150,000

  • Reported retained earnings at the end of the comparative period

    Number

    1,710,000

2

Supporting evidence

Evidence

  • Evidence obtained and referenced (category, document reference)

    EvidenceRequired

3

Change in policy: cumulative effect at the opening

Calculations

IAS 8 §22IAS 8 §24

  • Inventory layers (quantity, unit cost), in chronological order

    Table

  • Quantities issued in the period

    Number

  • Previous cost formula

    Choice

    First-in, first-out (FIFO) / Weighted average cost

  • New cost formula

    Choice

    First-in, first-out (FIFO) / Weighted average cost

  • Closing inventory under the previous formula

    Calculation

    Inventory layers (quantity, unit cost), in chronological order ; Quantities issued in the period ; Previous cost formula

  • Closing inventory under the new formula

    Calculation

    Inventory layers (quantity, unit cost), in chronological order ; Quantities issued in the period ; New cost formula

    IFRS rule: the new policy is applied as if it had always been applied (para. 22). Case data: layers, quantities and formulas; the choice of formula is an IAS 2 matter.

  • Cumulative pre-tax effect: inventory difference between formulas

    Calculation

    0

    Closing inventory under the new formula ; − Closing inventory under the previous formula

  • Effects specific to each prior period (pre-tax)

    Table

  • Cumulative effect: sum of the period-specific effects

    Calculation

    0

    Effects specific to each prior period (pre-tax)

4

Restated opening balances

Calculations

IAS 8 §4IAS 8 §22IAS 8 §24IAS 8 §42IAS 8 §44

  • Tax effect (omitted liability)

    Calculation

    20,000

    Omitted liability: cumulative pre-tax effect at the opening ; Tax rate applicable to the adjustments (%)

  • Adjustment net of tax (omitted liability)

    Calculation

    60,000

    Omitted liability: cumulative pre-tax effect at the opening ; Tax rate applicable to the adjustments (%)

  • Tax effect (overstated asset)

    Calculation

    Overstated asset: cumulative pre-tax effect at the opening ; Tax rate applicable to the adjustments (%)

  • Adjustment net of tax (overstated asset)

    Calculation

    Overstated asset: cumulative pre-tax effect at the opening ; Tax rate applicable to the adjustments (%)

  • Tax effect (change in policy)

    Calculation

    Change in policy: cumulative pre-tax effect at the opening (increase in equity) ; Tax rate applicable to the adjustments (%)

  • Adjustment net of tax (change in policy)

    Calculation

    Change in policy: cumulative pre-tax effect at the opening (increase in equity) ; Tax rate applicable to the adjustments (%)

  • Restated opening retained earnings

    Calculation

    1,390,000

    Reported retained earnings at the opening of the restated period ; Adjustment net of tax (change in policy) ; − Adjustment net of tax (omitted liability) ; − Adjustment net of tax (overstated asset)

    IFRS rule: the adjustment is made to the opening balance of equity of the earliest period presented (para. 22 and 42) or of the earliest practicable period (para. 24 and 44), never to profit or loss of the period of discovery (para. 46).

5

Comparative period and equity reconciliation

Calculations

IAS 8 §22IAS 8 §42IAS 8 §46

  • Omitted liability: share of the comparative period (pre-tax)

    Calculation

    48,000

    Omitted liability: cumulative pre-tax effect at the end of the comparative period ; − Omitted liability: cumulative pre-tax effect at the opening

  • Tax effect for the comparative period (error)

    Calculation

    12,000

    Omitted liability: share of the comparative period (pre-tax) ; Tax rate applicable to the adjustments (%)

  • Net effect on comparative profit (error)

    Calculation

    36,000

    Omitted liability: share of the comparative period (pre-tax) ; Tax rate applicable to the adjustments (%)

  • Change in policy: effect specific to the comparative period

    Calculation

    Change in policy: cumulative pre-tax effect at the end of the comparative period ; − Change in policy: cumulative pre-tax effect at the opening (increase in equity)

  • Tax effect for the comparative period (policy)

    Calculation

    Change in policy: effect specific to the comparative period ; Tax rate applicable to the adjustments (%)

  • Net effect on comparative profit (policy)

    Calculation

    Change in policy: effect specific to the comparative period ; Tax rate applicable to the adjustments (%)

  • Restated amount of the comparative line item

    Calculation

    2,388,000

    Reported amount of the comparative line item restated ; Omitted liability: share of the comparative period (pre-tax)

  • Restated comparative profit

    Calculation

    374,000

    Reported profit of the comparative period ; − Net effect on comparative profit (error) ; Net effect on comparative profit (policy)

  • Restated retained earnings at the end of the comparative period

    Calculation

    1,614,000

    Restated opening retained earnings ; Restated comparative profit ; − Distributions of the comparative period ; Reported retained earnings at the end of the comparative period

  • Reported − restated difference at the end of the comparative period

    Calculation

    96,000

    Restated opening retained earnings ; Restated comparative profit ; − Distributions of the comparative period ; Reported retained earnings at the end of the comparative period

    Check: the difference must equal the cumulative net effect of the restatement at the end of the comparative period.

6

Journal entries

Entries

  • Correction of an omitted liability (opening balances)

    Entry

    AccountDebitCredit
    Retained earnings (opening)80,000
    Liability concerned80,000

  • Correction of an overstated asset (opening balances)

    Entry

    Debit Retained earnings (opening) ← Overstated asset: cumulative pre-tax effect at the opening ; Credit Asset concerned ← Overstated asset: cumulative pre-tax effect at the opening

  • Deferred tax asset on the liability correction

    Entry

    AccountDebitCredit
    Deferred tax asset20,000
    Retained earnings (opening)20,000

  • Deferred tax asset on the asset correction

    Entry

    Debit Deferred tax asset ← Tax effect (overstated asset) ; Credit Retained earnings (opening) ← Tax effect (overstated asset)

  • Change in cost formula: opening inventory

    Entry

    Debit Inventories ← Change in policy: cumulative pre-tax effect at the opening (increase in equity) ; Credit Retained earnings (opening) ← Change in policy: cumulative pre-tax effect at the opening (increase in equity)

  • Deferred tax liability on the change in policy

    Entry

    Debit Retained earnings (opening) ← Tax effect (change in policy) ; Credit Deferred tax liability ← Tax effect (change in policy)

  • Comparative period: omitted expense (restated comparative column)

    Entry

    AccountDebitCredit
    Expense of the comparative period48,000
    Liability concerned48,000

  • Comparative period: deferred tax income

    Entry

    AccountDebitCredit
    Deferred tax asset12,000
    Deferred tax income (comparative period)12,000

    Teaching assumption: the tax effect of the comparative period is presented as deferred tax income of that period, using the case's tax data.

7

Disclosures

Disclosure

IAS 8 §29IAS 8 §49

  • Points reviewed

    ChecklistRequired

    • Amount of the adjustment for each line item and each period presented
    • Amount of the correction at the beginning of the earliest period presented
    • Circumstances and how the error was corrected when impracticable
    • Disclosures not repeated in later financial statements
8

Conclusion

Conclusion

  • Restatement, equity reconciliation and points submitted to the reviewer

    ConclusionRequired

9

Effect on the financial statements

FS impact

  • Effect of the entries, line by line (derived from the entries)

    TableRequired

10

Normative references

References

  • Normative references

    References

11

Checks and financial statement impact

  • Restated opening balances determinedPass
  • Balanced entryPass
  • Balanced entryNot evaluated
  • Balanced entryPass
  • Balanced entryNot evaluated
  • Balanced entryNot evaluated
  • Balanced entryNot evaluated
  • Balanced entryPass
  • Balanced entryPass
Assets
32,000
Liabilities
128,000
Profit or loss
-36,000
OCI
0
Equity
-96,000