Accounting standards

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Renu Mishra (Querist)
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04 August 2010 please answer this question with reason its urgent!

A company contracted for laying pipeline for an oil company,deep beneath the earth for Rs.100lakhs on 31st aug 2000.They estimated the cost to be Rs.80lakhs,while doing the boring work in nov 2001 it had met a rocky surface for which it was estimated that there would be extra cost of Rs.50lakhs.What would be its treatment will it be treated as a prior period item as per AS-5 in 2001?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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04 August 2010 No. it will not be treated as prior period item, AS-5 the conditions, expenses or income arising out of any error,omission during the previous period can be treated as prior period item, according to me it is not prior period item

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CA SMR

CA SMR (Expert)
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05 August 2010 I agree to the above opinion.

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CA Ravi Sisodia

CA Ravi Sisodia (Expert)
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05 August 2010 it is simply change in estimation. change in estimate is not treated as error or omission therefore it will not be treated as prior period item.

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