Copyright © 2003 McGraw-Hill Ryerson Limited, Canada 22-28 Prior Period Adjustments Prior to 1996, companies were permitted, under certain circumstances, to make prior period adjustments A prior period adjustment was a gain or a loss that was credited or charged directly to retained earnings instead of appearing in the income statement Since 1996 all charges and credits must flow through the income statement The only adjustments that can be made directly to retained earnings are for retroactively applied changes in accounting policy and for corrections of errors in prior periods
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