Final answer:
When an error from a prior period is found in the current period, the previous financial statements must be retrospectively corrected by adjusting the opening balance of retained earnings and restating the affected figures. This needs to be clearly disclosed in the notes to the financial statements.
Step-by-step explanation:
If comparative financial statements (FS) are presented and an error from a prior period is discovered in the current period, the treatment of this error should be handled according to accounting standards. Typically, it involves retrospectively correcting the prior period financial statements to reflect the error correction, as if the error had never occurred. The correction is made by restating the prior period's financial statements, which requires an adjustment to the opening balance of retained earnings for the earliest period presented.
This process also involves disclosure of the nature of the error, the impact on each financial statement line item, and the effect of the correction on earnings per share if applicable. All these changes should be disclosed in the notes to the financial statements. The goal is to provide a true and fair view of the financial position and performance of the entity, as if the error had been corrected timely.