Prior Period Adjustments

Local regulatory rules often specify local deadlines that differ from corporate deadlines. For example, they might require local entities to adjust period balances beyond the deadline specified by rules imposed on the corporate headquarters. This can create what is called a prior period adjustment from the standpoint of corporate books.

In the classic sense, a prior period adjustment is any adjusting entry made to a closed period for which financial results have been published and usually comes as the result of an audit finding that an adjustment must be made. For this discussion, prior period adjustments are entries that are mandated by local accounting rules that require that certain entries be made to the local books for a specified period of time after corporate books must be closed and not necessarily as the result of an audit finding.