annual adjustments;
According to Iranian accounting standards, annual adjustments, that is, items related to previous years that are included in the adjustment of the accumulated profit (loss) balance at the beginning of the period, are limited to items that result from changes in accounting procedures and errors. The effect of the annual adjustment should be reflected in the financial statements by adjusting the accumulated profit (loss) balance at the beginning of the period. Comparative items of the financial statements should also be restated, unless this is not practical. In such circumstances, the matter should be disclosed in the explanatory notes. Also, the amount of items of senate transactions and reasoning reasons for change in the accounting procedure, as well as the case that the items compared the forms of financial finances have been re-provided (or the implementation of the non-provide) should be disclosed in the explanatory notes.
Change in accounting
In order to achieve the qualitative characteristic of comparability of financial statements, procedural consistency in the way of accounting is necessary during each fiscal period and from one fiscal period to the next. Therefore, no change in the accounting practices should be made unless the change in the accounting practice is justified by the preference of the new practice over the previous practice, in terms of more favorable presentation of the financial statements of the business unit, or the change in the accounting practice is required by law. New, mandatory become. One of the characteristics of a change in accounting practice is that it is the result of a choice between two or more accounting practices. If a transaction or event that is clearly different in nature from previous transactions and events requires the adoption of a new method or modification of an existing method, this adoption or modification of the method shall not be considered a change of accounting procedure.
Correct the error
It is possible that errors related to the financial statements of one or more previous financial periods may be discovered in the current period. These errors can be caused by:
A. Mathematical errors,
b. Errors in the application of accounting procedures,
c. Misrepresentation or ignoring of existing facts at the time of preparing the financial statements, d. Change from a non-standard accounting procedure to a standard accounting procedure, and Cases of fraud.
The correction of these errors, if not material, is included in the net profit or loss of the current period. In some cases, the financial statements published one or more periods ago may contain material errors that distort the favorable picture and, as a result, reduce the reliability of the financial statements. The correction of such errors should not be done by including them in the profit and loss of the current year, but should be achieved by re-presenting the financial statements of the previous year(s). As a result, the opening balance of the accumulated profit (loss) will also be adjusted accordingly.
Annual adjustments resulting from the correction of errors are also reflected as the last item in the comprehensive profit and loss statement.
Mehdi Koh Soltani (Financial Services; Accounting; Tax Financial Advisor):
Audit Accounting Clinic Link
https://telegram.me/joinchat/BnzBsTuioTuSPky30-nUbg