Scope

  • IFRS 1 does not apply to entities already reporting under IFRSs
  • IFRS 1 applies to the first set of financial statements that contain an explicit and unreserved statement of compliance with IFRSs
  • IFRS 1 applies to any interim financial statements for a period covered by those first financial statements that are prepared under IFRSs.

General Requirements

  • Select IFRS accounting policies using either:
    • IFRSs that are currently effective; or
    • One or more IFRSs that are not yet effective, if those new IFRS permit early adoption.
  • Recognise/derecognise assets and liabilities where necessary so as to comply with IFRSs
  • Reclassify items that the entity recognised under previous accounting framework as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity under IFRS
  • Re-measure all assets and liabilities recognised under IFRSs.

Recognition & Measurement

Optional Exemptions

IFRS 1 does not permit these to be applied by analogy to other items. An entity may elect to use one or more of the following exemptions, which provide specific relief, on adoption of IFRSs:

  • Business combinations
  • Share-based payment transactions
  • Insurance contracts
  • Fair value or revaluation as deemed cost
  • Use of revalued amount as deemed cost for ‘event driven fair values’ between transition date and date of the first IFRSs reporting period
  • Deemed cost for assets used in operations subject to rate regulation
  • Leases
  • Cumulative translation differences
  • Investments in subsidiaries, jointly controlled entities and associates
  • Assets and liabilities of subsidiaries, associates and joint ventures
  • Compound financial instruments
  • Designation of previously recognised financial instruments
  • Fair value measurement of financial assets/liabilities at initial recognition
  • Decommissioning liabilities included in the cost of property, plant and equipment
  • Financial assets or intangible assets accounted for in accordance with IFRIC 12 Service Concession Arrangements
  • Borrowing costs
  • Transfers of assets from customers accounted for in accordance with IFRIC 18 Transfers of Assets from Customers
  • Extinguishing financial liabilities with equity instruments accounted for in accordance with IFRIC 19 -Extinguishing
  • Financial Liabilities with Equity Instruments
  • Joint arrangements
  • Severe hyperinflation
  • Government loans
  • Stripping costs in the production phase of a surface mine in accordance with IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine.

Mandatory Exceptions

IFRS 1 prohibits retrospective application in relation to the following:

  • Estimates
  • Derecognition of financial assets and financial liabilities
  • Hedge accounting
  • Non-controlling interests.

Accounting Policies

  • Use the same accounting policies in the opening IFRS statement of financial position and throughout all periods presented in the first IFRS financial statements
  • Those accounting policies have to comply with each IFRS effective at the end of the first IFRS reporting period.
  • Changes in accounting policies during first year of IFRS. If, between the date of an entity’s interim financial report (prepared in accordance with IAS 34 Interim Financial Reporting) and the issue of its first annual IFRS financial statements, and entity changes accounting policies and/or adopts exemptions:
    • The requirements of IAS 8 Accounting Policies, Changes
      in Accounting Estimates and Errors do not apply
    • The reconciliation between IFRSs and previous GAAP
      has to be updated.

Repeat Application of IFRS 1

An entity that has applied IFRSs in a previous reporting period, but whose most recent previous annual financial statements do not contain an explicit and unreserved statement of compliance with IFRSs, must either apply IFRS 1 or else apply IFRSs retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Opening IFRS Statement of Financial Position

  • An opening IFRS Statement of Financial Position is prepared at the date of transition
  • All IFRSs are applied consistently across all reporting periods in the entity’s first set of IFRS compliant financial statements (i.e. both the comparatives and the current reporting period)
  • If a standard is not yet mandatory but permits early application, an entity is permitted, but not required, to apply that Standard in its first IFRS set of financial statements.

Presentation & Disclosure

An entity’s first set of financial statements are required to present at least three statements of financial position and two statements each of statements of comprehensive income, income statements (if presented), statements of cash flows and statements of changes in equity, related notes and in relation to the adoption of IFRSs, the following:

  • · A reconciliation of equity reported under previous accounting framework to equity under IFRSs:
    • At the date of transition to IFRSs
    • At the end of the latest period presented in the entity’s most recent annual financial statements under previous accounting framework.
  • A reconciliation of total comprehensive income reported under previous accounting framework to total comprehensive income under IFRSs for the entity’s most recent annual financial statements under previous accounting framework
  • Interim financial reports:
    • A reconciliation of equity reported under its previous accounting framework to equity under IFRSs at the end of the comparable interim period, and
    • A reconciliation of total comprehensive income reported under its previous
      accounting framework to total comprehensive income under IFRSs for the comparative interim period, and
    • Explanations of the transition from its previous accounting framework to IFRS.
  • Any errors made under the previous accounting framework must be separately distinguished
  • Additional disclosure requirements are set out in IFRS 1.