Adopting New Accounting Standards

Question 1

What are the key issues to consider when an entity first applies IFRS Standards (as per IFRS1)?

Answer 1

-date of the transition
-applying IFRS Standards
-reporting gains and losses

Question 2

What is the date of transition?

Answer 2

The beginning of the earliest period for which an entity presents full comparative information under IFRS Standards in it’s first financial statements produced using IFRS Standards.
A company must produce an opening statement of financial position in accordance with IFRS Standards as at the date of transition

Question 3

At the date of transition, how does an entity apply the IFRS Standards?

Answer 3

-recognise all assets and liabilities
-derecognise assets and liabilities not permitted
-reclassify assets, liabilities and equity
-measure assets and liabilities
Gains or losses arising on the adoption of the standards at the date of transition should be recognised directly in RETAINED EARNINGS

Question 4

What practical factors should an entity consider before adopting new accounting standards?

Answer 4

BICEPS
-Bonuses and performance related pay - impact of profit changes?
-IT systems - require updating/replacing?
-Covenants on loans - will they be breached?
-Earnings per share - will it reduce?
-Perception - will analysts view the move positively?
-Staff knowledge - is it sufficient?