[vodrldnr]

regarding to Piro pierdo adj which impact on I/S, current asset and liability result it counted balancing error

counter balancing error means the error will be automatically corrected in 2 year period..

my question..

counter balancing error will be corrected automatically even thought accountant doesn’t notice the error in prior or current year ???

[Anonymous]

I could be wrong but from what I remember of my FAR materials was that the only account that counter balance an error after 2 years is Inventory. And for inventory, if you realize it before it fixes, then you have to do a prior period adjustment. But if you realized it when the error fixed itself, then you do not need to do additional fixes.

[vodrldnr]

“But if you realized it when the error fixed itself, then you do not need to do additional fixes.” in this sentence, could you explain what is the additional fix ???

do you mean the retrospective approach that fix all the errors in prior period F/S ??

[Anonymous]

Sorry, I should have clarified better. If there was an error on inventory count during 2013, which was not found until 2016, then no adjustment is needed. The error should have fixed itself.

[vodrldnr]

oh… I see.

when Error was found before 2016 ===> correction is made

when error was NOT found until at the end of 2016 ====> correction is not made as it self-correct ..

am I right ?..

[Anonymous]

Yes, but this only applies to inventory. If its an error in fixed assets, RE, accrued liabilities, or other balance sheet item, then there has to be a prior period adjustment regardless of when it is found.

[vodrldnr]

Loo@, my text book says

current asset / Liability => counter balancing
None current asset/ Liability => X counter balancing

can I just memorize it as my textbook says ?

[Anonymous]

Yes, that is correct. That's the bigger picture of what I explained. I just do not like to think which ones are current and which one are non-current in the middle of the test, and thats why I had them memorized by items.

[vodrldnr]

@Loo, thank you so much. really appreciate your help!!

[Author]

Replies