1. Which one of the following items is classified as an error correction related to a prior period?

A. An error in a prior periods financial statement arising from a mistake in the application of an accounting principle.

B. Gains or losses on disposal of an operating segment of a business.

C. Gains or losses resulting from major devaluations and revaluations of foreign currencies.

D. Out-of-court settlements of litigation.

2. When financial statements for prior periods are to be restated because of the correction of errors,

A. The cumulative effect of the errors is recognized in current income.

B. All adjustments are made as of the end of the latest period reported.

C. The beginning balance of retained earnings of the current period is adjusted for the error effects on all prior periods, and the corrections are made directly to the prior-period financial statements.

D. The restatement must be in pro forma presentations presented in the notes to the financial statements.