First Time Adoption Of IFRS

Question 0

When does IFRS 1 apply?

Answer 0

When an entity prepared it’s most recent financial statements using any of the below criteria:

In compliance with US GAAP.
In conformity with IFRS in all respects except that an explicit and unreserved statement of compliance was not presented.
In compliance with US GAAP with reconciliation to IFRS.
In conformity with IFRS but for internal use only.
In conformity with IFRS for consolidation purposes only.

Question 1

Which IFRS applies to first time adopters?

Answer 1

IFRS 1

Question 2

How should a first time adopter of IFRS recognize the adjustments required to present its opening IFRS statement of financial position?

Answer 2

All of the adjustments are recognized directly into retained earnings or, if appropriate, in another category of equity.

Question 3

Key dated for first time adopters if IFRS.

Answer 3

There are 2 key dates under IFRS 1. The “First Reporting Date” is the year end date for the period for which IFRS is first applied. The “transition date” is the opening date of the earliest period for which full comparative financial statements under IFRS are presented.

Example:

If the first adoption is 12/31/2010, then that is the first reporting date for the entity. The transition date is the earliest period for which full comparative financial statements under IFRS are presented. If 3 years of balance sheet are required, 01/01/2008 is the transition date.

The entity must also apply IFRS 1 to any interim period report that is prepared in the first IFRS reporting period.

Continue the assumption that the first IFRS reporting is 12/31/2010, and interim FS are required. The interim statements must be in compliance with IFRS along with comparatives. Therefore , the March 31, 2010 interim reporting must be IFRS compliant as well as comparative for March 31, 2009.

Question 4

What are mandatory exceptions to the retrospective application of IFRS?

Answer 4

IFRS 1 specifically prohibits restatement for certain transactions upon the initial adoption of IFRS because the application of IFRS guidance in these areas would require judgement about past transactions that are not feasible on post-hoc basis.

1- Derecognition of financial assets and liabilities.
2- Hedge accounting
3- Assets held for sale and discontinued operations
4- Certain aspects of accounting for non-controlling interests
5- Uses of certain estimates

Question 5

What are voluntary exceptions to retrospective IFRS application for the first time adopters?

Answer 5

1- Business combinations
2- Share based payments
3- insurance contracts
4- PPE
5- Leases
6- Employee benefits
7- Effects of foreign exchange rates
8- Compound financial instruments
9- Assets and Liabilities of subsidiaries and joint ventures.