A company discovers an error in its financial statements from the previous year. How should this prior period adjustment be handled under both GAAP and IFRS?

• A. Adjust the current year's net income to reflect the error.
• B. Restate the financial statements for the current year only.
• C. Make a note in the current year's financial statements without adjusting figures.
• D. Adjust retained earnings in the current period.

Answer: (D)