ifrs 1 first time adoption of ifrs
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In The Name Of ALLAH The Most Compassionate , Ever Merciful
PRESENTER : MIRZA IMRAN ALI
IFRS 1 :First Time Adoption Of International Financial Reporting Standards
1960s
1970s
1990s
2000s
No international study group exist
First international standards-setting body International Accounting Standards Committee (IASC),
IASC Formalizes and Expands its International affiliations
April, 2001 International Accounting Standards Committee (IASC) to International Accounting Standards Board (IASB)
COMPARABLE OVER ALL PERIODS
SUITABLE STARTING
COST BENEFICIAL
OBJECTIVE
FIRST FINANCIAL STATEMENTS UNDER IFRSS
EACH INTERIM FINANCIAL REPORT, IF ANY, PRESENTED IN ACCORDANCE WITH IAS 34
SCOPE
Prepared most recent financial
statements
ConformityWith nationalrequirement
StatementContaining
Un-reservedStatement ofCompliance
NO
YES
Conformity With Specific IFRSs
Specific Reconciliation
With IFRSs
YES
DATE OF TRANSITION
• ADJUSTMENTS TO OPENING BALANCE SHEET
• OPENING IFRS BALANCE SHEET
FIRST IFRS REPORTING DATE
• SELECT POLICIES
• USE STANDARDS IN FORCE AT THIS DATE
• FIRST IFRS FINANCIAL STATEMENTS
Use the same accounting policies for all periods presented in first IFRS financial statements(except where specific relief given)
• Date of Transition
01 Jan 2012
• Date of adoption
01 Jan 2013
• Reporting Date
31 Dec 2013
All Assets And Liabilities Required Under IFRS
Recognize
Derecognize
Measure
Reclassify
ADJUSTMENTS
ARE THERE SOME RELIEF FOR 1ST TIME ADOPTER ?
FOR RECOGNITION & MEASUREMENT
LIMITED VOLUNTARY EXEMPTIONS ,AND
FEW MANDATORY EXCEPTIONS
EXEMPTIONS OR EXCEPTIONS FOR
PRESENTATION & DISCLOSURES
REQUIREMENTS IN OTHER IFRSS
Comparatives for financialInstruments
Designation of financial assets andfinancial liabilities
Insurance contracts
OPTIONAL EXEMPTIONS
Business combinations
Property, plant and equipment,investment properties, intangibles
Employee benefits
Cumulative translation adjustment
Compound instruments
Transition date for subsidiaries,associates and joint ventures
Share-based paymentsDecommissioning liabilities
Fair value measurement of financial instruments at initial recognition
Exploration costs
EXEMPTIONS SUMMARY
Exemption Impact
Business combinations Previous business combinations need not be restated
Property, plant and equipment,investment properties, intangibles
Fair value or revaluation as deemed cost
Employee benefits (IAS-19) Unrecognised gains and losses at date of transition need not be recognised
Cumulative translation differences (IAS-21)
May be set to zero for all subsidiaries
Decommissioning liabilities (IFRIC-1)
Adjustments to the asset cost required by IFRIC 1 need not be applied to changes to the liability occurring before transition
EXEMPTIONS SUMMARY WITH IMPACT
Exemption Impact
Date of transition for some entities
Balances already reported by subsidiary to parent need not be restated
Compound financial instruments
Circumstances at inception, but equity element not identified if liability is not outstanding
Designation of financial assets and liabilities (IAS-39)
Designation as “at fair value through profit or loss” at transition, where permitted
Comparatives for financial instruments
Comparatives need not be restated for IAS 32 and IAS 39
EXEMPTIONS SUMMARY WITH IMPACT
Exemption Impact
Share-based payments Only apply IFRS 2 to share-based payments issued after Nov 2002 and vested / settled by 1 January 2005
Insurance contracts Comparatives need not be restated for IFRS 4
Exploration costs Comparatives need not be restated for IFRS 6
Leases Assessment of whether an arrangement contains a lease need not be applied to periods before transition date.
EXEMPTIONS SUMMARY WITH IMPACT
Exceptions
summary to retrospectiv
e application
Assets held for
sale
Derecognition
offinanci
al assets
andliabiliti
es
Hedge accoun
ting
Estimates
Mandatory exception - Estimates
Estimate required by
previous GAAP?
Evidence oferror?
Calculation consistent with IFRS?
Make estimate reflecting conditions
at relevant date
NO
YES NO
YES
Adjust previousestimate toreflect IFRS
YES NO
Use previous estimate
• Retrospective application of IAS 39 is PROHIBITED for
– Financial assets and liabilities derecognised before 1 January 2004 but:
• Recognise all derivatives and other interests retained from transition date (Servicing);
• Consolidate all SPEs controlled at transition date
– Hedge accounting post 1 January 2005
• Where the relationship does not qualify
• Not applied until the documentation is in place
• Otherwise transitional guidance in IAS 39
Note : No restatement of hedge comparative required
Mandatory exception – (IAS -39)
• Assets held for sale / discontinued operations
– Apply IFRS 5 from 1 January 2005: no restatement of comparatives except:
• May apply from earlier date only if information obtained at earlier date
– First-time adopters after 2005 must apply retrospectively and restate comparatives
Mandatory exception – (IFRS-5)
Disclosures Annual Inormation
• Reconciliation of equity from GAAP to IFRS at transition and last year end (e.g. 1 Jan 2013 and 31 Dec 2013)
• Reconciliation of last year’s net profit under GAAP to IFRS
• Sufficient detail to understand adjustments to each line item
• Errors made under GAAP and identified during transition
• Fair value as deemed cost and the amount of the adjustment
• IAS 36 disclosures for impairment identified during transition
Disclosures Interim Information
• Interim financial information– Reconciliation of equity/net profit as above for
previous full year – Reconciliation of equity and net profit for
comparative interim period (eg 6 months to 30 June 2013 )
– Further information to comply with IAS 34
Extracts from financial statements of CEMEX 2011
QUESTION IF ANY ?
ITS MY TURNABC Limited presented its financial statements under the
national GAAP until 2009. It adopted IFRS from April 1, 2010 and is required to prepare an opening IFRS balance sheet as at April 1, 2010. In preparing the IFRS opening balance sheet of ABC Limited noted:
1. Under its previous GAAP, had classified proposed dividend of Rs.5,00,000 as a current liability.
2. It had not made a provision for warranty of Rs. 200,000 in the financial statements presented under previous GAAP since the concept of “constructive obligation” was not recognized under its previous GAAP.
3. In arriving at the amount to be capitalized as part of cost necessary to bring an asset to its working condition, XYZ Limited had not included Professional fees of Rs. 300,000 paid to architects at the time when the building it currently occupies as its head office was being constructed.
Required: Advise ABC Limited on the treatment of all the above items under IFRS1
Solution :For opening IFRS balance sheet at April 1, 2010, ABC Limited would need to make these adjustments to its balance sheet at March 31, 2009, presented under IGAAP: 1. IAS 10 does not allow proposed dividend to be recognized as a liability; but to be disclosed in the Notes . Indian GAAP allowed proposed dividend to be treated as current liability. Therefore proposed dividend of Rs.500,000 should be disclosed in footnotes.2. IAS 37 requires recognition of a provision for warranty but GAAP did not allow a similar treatment. Thus, a provision for warranty of Rs.200,000 should be recognized under IFRS-37.3. IAS 16 requires all directly attributable costs of bringing an asset to its working condition for its intended use to be capitalized as part of carrying cost of property, plant and equipment. Thus Rs.300,000 of architects’ fees should be capitalized as part of Property, plant and equipment and cumulative Depreciation needs to be provided.
Q : HL Limited is a first-time adopter under IFRS 1. The most recent financial statements it presented under its previous GAAP were as of December 31, 2011. It has adopted IFRS for the first time and intends to present the first IFRS financial statements as of December 31, 2012. It plans to present two year comparative information for the years 2011 and 2012. The opening IFRS statement of financial position should be prepared as of
• January 1, 2011• January 1, 2009• January 1, 2010• January 1, 2012
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