The correction of a material error in the prior year's financial statements is considered a:

Step 1: Define the Problem

Identify the key components of the question that need to be addressed:

• Determine what the correction of a material error in prior year's financial statements is considered as per accounting standards.

Step 2: Break Down the Problem

Divide the problem into smaller, manageable parts:

• Understand the nature of a material error in financial statements.
• Identify how such errors are typically corrected according to accounting principles.

Step 3: Apply Relevant Concepts

Use appropriate academic theories or formulas to solve each part of the problem:

• According to accounting standards, particularly the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), the correction of a material error in prior financial statements is treated as a "prior period adjustment."

Step 4: Analysis, Verify and Summarize

Analyze each part in detail if necessary, carry out the calculations by steps. Verify the calculations result and summarize the findings:

• Material errors are significant inaccuracies or omissions in financial statements that can affect the decision-making of users.
• Such errors are corrected by restating the prior period financial statements to reflect the accurate information.

Final Answer

The correction of a material error in the prior year's financial statements is considered a "prior period adjustment."