₦airaland Forum

Sometime last year, I was in a meeting with a Senior accountant where we were discussing about correcting certain prior period errors and to him his argument was as simple as 'Israel we can overlook these errors, they are immaterial', well, indeed they were immaterial, but from my end I understood why he wanted it uncorrected (to conceal 'certain anomalies').

I understood his point on materiality because materiality is very important to an accountant, it is even an auditor's favourite theme song. It makes sense as I will rather bother myself about important stuffs and material stuffs are important stuffs! However, some accountants in order to achieve 'particular representation' tend to leave an immaterial error uncorrected based on the argument that the IFRS is applied to only material items (see IAS 8, Accounting policies, changes in accounting estimates and errors, paragraph .

Well, if you are one of those accountants, I am going to burst your bubbles! I disagreed with him from the technical standpoint as paragraph 8 of IAS 8 also explains that it is inappropriate to make, or leave uncorrected, immaterial departures from IFRSs to achieve a particular presentation. Paragraph 41 of IAS 8 further buttresses this point by making it clear that financial statements do not comply with IFRSs if they contain either material errors or immaterial errors made intentionally to achieve a particular presentation of an entity's financial position, financial performance or cash flows. Paragraph 41 even made a stronger statement.

So IFRSs do not apply solely to material items and not only material errors are of importance.

Thanks for reading....

Usidamen Israel

Thanks

In the computation of deferred tax, applying 30% on the temporary difference to determine the deferred tax is becoming a norm among preparers of financial statements. Am not saying this is wrong, my point is that I think the requirements of paragraph 51 of IAS 12 Income taxes should not be left out before applying any tax rate.

Paragraph 51 of IAS 12 explains that the measurement of deferred tax related to an asset should reflect the tax consequences of the manner in which an entity expects to recover the carrying amount of the asset. Since the carrying amount of an asset may be recovered either through sale, use (or both), it follows that the temporary difference may also take any of those two forms (sale or use).

In Nigeria, the 'use rate' is different from the 'sell rate' hence applying 30% in all cases may not be correct. Sometimes the sell rate of 10% (capital gains tax) may be more appropriate for application on the temporary difference especially where the asset's carrying amount would likely be recovered via sale.

Thanks for reading...

Usidamen Israel

In the computation of deferred tax, applying 30% on the temporary difference to determine the deferred tax is becoming a norm among preparers of financial statements. Am not saying this is wrong, my point is that I think the requirements of paragraph 51 of IAS 12 Income taxes should not be left out before applying any tax rate.

Paragraph 51 of IAS 12 explains that the measurement of deferred tax related to an asset should reflect the tax consequences of the manner in which an entity expects to recover the carrying amount of the asset. Since the carrying amount of an asset may be recovered either through sale, use (or both), it follows that the temporary difference may also take any of those two forms (sale or use).

In Nigeria, the 'use rate' is different from the 'sell rate' hence applying 30% in all cases may not be correct. Sometimes the sell rate of 10% (capital gains tax) may be more appropriate for application on the temporary difference especially where the asset's carrying amount would likely be recovered via sale.

Thanks for reading...


Usidamen Israel