The Accountant in Preparation for the Financial Statement for the Year

question 32

Multiple Choice

The accountant in preparation for the financial statement for the year 2013 realised an error in the determination of recoverable amounts in last year's financial statements.This error had it been detected in 2012 would have required the recognition of impairment losses amounting to £500 000.To comply with IAS 8 Accounting Policies,Changes in Accounting Estimates and Errors,the accountant should:

• A)make a prospective change to the 2013 figures, on the basis that he has made an error in 2012.
• B)make a prospective change to the 2013 figures, on the basis that he is making a change to an estimate in 2012.
• C)make a retrospective change to the 2013 figures, on the basis that that this is a change in accounting estimates.
• D)make a retrospective change to the 2013 figures, on the basis that he has made an error in 2012.

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Definitions:

Default Risk

The risk associated with a borrower failing to make required payments on debt.

Liquidity Risk

The risk that an entity will not be able to meet its financial obligations as they come due because it cannot convert assets to cash quickly.

Deferred Consumption Risk

The risk associated with postponing consumption today in order to invest, with the potential of not having enough resources in the future.

Liquidity Risk

The risk that an entity will not be able to meet its short-term financial obligations due to the inability to quickly convert assets to cash without significant loss.