Understated payables


Joined
Apr 19, 2017
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Namibia
Hi,

Payables (salary) for previous year has been understated.
What's the best way correct them during this year?

Any help appreciated.
Thanks
 
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Joined
Jul 7, 2020
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Germany
Hi,

IFRS approach is as follows:

1. If the amount is not significant, simply correct the error now.

2. If the amount is significant, you need to adjust prior year numbers and repeat carry forward:

2.a. If you have not filed the annual report for the last year yet, you should correct the error directly in the annual report for the last year.

2.b. If you have already filed the annual report for the last year, you should restate the numbers for the prior year when you prepare the annual report for the current year and describe the reason of this restatement:
202020192019 Restated
Payroll12080100
"The numbers for the prior year were restated due to ..."

In IFRS, there is no fixed threshold which amount to consider "significant". It depends on the size and circumstances of the company (e.g. % of the operating result).

- - - - -

This may be treated differently according to the local accounting requirements but I believe, the general idea would be similar.

Because it's related to payroll, you may need to file correction statements to the local authorities, social security, tax office, etc.

Understated operating expenses may also require adjustments of dividends or similar payments to the owners of the company from the results of the last year.
 

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