NIF B-1 establishes as a general rule that:

“All changes in particular standards, reclassifications and corrections of errors must be recognized through their retrospective application”

When the financial statements of a prior period are compared with those of the current period and have been affected by an accounting change or the correction of an error, they should be adjusted retrospectively.

The provisions of the preceding paragraph mean that the balances of assets, liabilities and capital must be modified as if the new standard or correction had always been in use. In exceptional cases where it is not possible to apply these adjustments, special provisions must be followed as discussed in this article.

Changes in Specific Rules

Changes in the particular standards used by an entity are permitted only under justified circumstances, such as the issuance of a new standard. NIF or the improvement in the quality of financial information.

In some situations, certain changes should not be applied retrospectively, such as those on new operations or those that did not have a significant impact in prior periods.

Reclassifications

According to the NIF B-1 reclassifications No They do not modify the amounts of net or comprehensive income (loss), or net change in equity, or the total capital or accounting equity.

On certain occasions, reclassifications and groupings different from the information previously issued must be made. In these cases, the necessary reclassifications must be made so that the information presented is comparable.

Bug fixes

NIF B-1 establishes that Errors in financial statements of prior periods must be corrected from the moment they are known., and arise from situations such as omissions or misuse of information, arithmetic errors in the processing and recording of transactions and in the preparation of financial statements, omissions or incorrect applications of particular standards or other deviations relating to figures and fundamental concepts clearly corresponding to prior periods, the information of which was or could have been known at the date of issue of the financial statements.

It is also worth mentioning that changes in accounting estimates are not considered errors.

That is to say, NIF B-1 establishes that, if errors are found in the financial statements of previous years, they must be corrected as soon as they are discovered. These errors may be, for example, forgetfulness when recording information, incorrect calculations, or the inadequate application of accounting standards. It is important to mention that changes in accounting estimates, such as adjusting projections or assumptions, are not considered errors, since they are legitimate decisions based on new information.

Impractical

Only when applying the retrospective method is impractical may the entity perform partial retrospective recognition.

It will be considered impractical to apply accounting retrospectively when:

1. It is not possible to determine the effect of retrospective application, despite management's best efforts.

• The application requires an assumption of what the intention of the administration in charge of the entity during the affected period would have been.

• Retrospective application involves making significant estimates of a prior period, and it cannot be objectively determined whether the information used for such estimates was available at the date on which the affected transactions were to be recognized in the financial statements.

Conclusions

In conclusion, NIF B-1 provides a comprehensive framework for the treatment of both accounting errors and changes in financial statements, in order to ensure accuracy and transparency in an entity's financial information.

This standard states that errors should be corrected as soon as they are discovered, and that changes in accounting policies should be applied retrospectively, whenever possible.

We invite you to continue learning about relevant topics of the NIF for the proper generation of financial information.