Restatement of Financial Statements Due to Reclassification of Liabilities

The management of the company realised that they had wrongly classified the Non-current liabilities as Current liabilities up till last year. This year while drawing the financial statement the management is looking for guidance on whether the reclassification of liability from current to non-current in the comparative financials be considered as the “correction of an error” under Ind AS 8 and needs restatement.

This story provides the answer to the above query with an analysis of the provisions involved in answering the question. Para 42 of Ind AS 8 deals with this type of restatement. It requires that an entity shall correct material prior period errors retrospectively in the first set of financial statements approved for issue after their discovery by-

(a) restating the comparative amounts for the prior period(s) presented in which the error occurred; or

(b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.

Further, Ind AS 1 requires to present a third balance sheet in certain circumstances. To understand how Ind AS 1 and Ind AS 8 relate to this situation and whether a third balance sheet is required in this case.

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