會計問題 financial statement

According to HKAS 8, prior period adjustments should be made for all material prior period errors.

In your case a, the write off of CU80,000 inventory may not be an error in prior period. It is because the write down of inventory is a matter of judgment. Unless we can prove that a decision had been made to write off the stock at 31 Dec 2004, the write down in 2004 is not necessary. As there was no error in 2004, no prior period adjustment is required. However, if the Company's policy explicitly states that inventory held for more than one year should been written off, then the failure to write off the CU80,000 inventory in 2004 was an error. If the error is material, prior period adjustment should be made.

The accounting error of CU27,000 regarding the inventory at 31 Dec 2004 is an accounting error, if this error is material or the accumulated effect of all prior period error is material, prior period adjustment should be made.

In case of b, understatement of sales in 2004 may or may not be an error. It depends on whether the recognition of sales in 2004 was justifed based on then available information. Some sales, such as contract revenue, are measured based on the level of completion of a construction contract. The sales may be determined based on surveyor's report at a date nearby the balance sheet date. Accordingly, sales measured by reference to this surveyor's report may not be accurate and usually does not count as an error. However, if the understatement of the sales is really an accounting error and if the error or the accumulated error is material, prior period adjustment should be made.

Suppose that all of the disoverings mentioned in cases a and b are errors and are material, the retained profits as at 31 Dec 2004 should be reduced by CU47,000 (or CU80,000 + CU27,000 - CU60,000). As a result, the prior period adjustment in ABC company's financial statements for the year to December 31,2005 is CU47,000

for a.
I THINK:

80,000 - 27,000 / 2
and it counts as an amortization expense or depreciation