Treatment Of Prior Period Item under Indian Accounting Standard and IFRS- By CA. Brijesh Thakar

As per AS-5, Prior Period Item has been defined as,

“Prior period items are income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods.”

AS-5 requires separate disclosure of prior period item in financial statements of current year, whereas as per IFRS we have to restate comparative figure of prior period in case of prior period item.

Lets take an example to understand the treatment under Indian accounting standard and IFRS.

X ltd is having monthly salary expenditure of Rs. 10000. However due to omission it did not provide for salary expense of March, 2008. This omission was detected in 2008-09. Hence as per Indian Accounting standard, salary expense will be shown in financial statement as

2007-08
Salary Expense 110000 (10000*11)
2008-09
Salary Expense 120000(10000*12)
Prior Period Item 10000

Under IFRS instead of showing Rs. 10000 as prior period item, we will restate the comparative figure of 2007-08. Hence we will show salary expenses of Rs. 120000 in 2008-09 and related comparative figure of 2007-08 will be made Rs. 120000.