ifrs1 100629024139-phpapp01

IFRS-1 (R) First-time adoption of international financial reporting standards

Introduction

The webinar aims to- Provide an overview of IFRS 1 Discuss the mandatory exceptions to IFRS 1 Summarize the optional exemptions to IFRS 1

2

OBJECTIVES

© 2010 KNAV P.A. All rights reservedIFRS 1: First-time adoption of international

financial reporting standards

Overview

Transparency for users and comparability over all periods presented;

Provides a suitable starting point for accounting under IFRS; and

Can be generated at a cost that does not exceed the benefits to users.

Entities are required to apply IFRS 1 in their first IFRS financial statements and in each interim financial report, if any, prepared in accordance with IAS 34 Interim Financial Reporting for part of the period covered by those first IFRS financial statements.An entity’s first IFRS financial statements are the first annual financial statements in which it adopts IFRSs by including an explicit and unreserved statement of compliance with IFRSs.

3

OBJECTIVE & SCOPE



Overview

Opening IFRS balance sheet at the date of transition. Opening balance sheet prepared in accordance with IFRSs effective at the end of reporting period.

The entity recognizes all assets and liabilities in accordance with the requirements of the IFRSs and derecognizes assets and liabilities that do not qualify for recognition under IFRS.

All adjustments above are adjusted to opening retained earning (date of transition).

Estimates on the date of transition under IFRS should be consistent with estimates made for the same date under previous GAAP.

An entity’s first IFRS financial statements include at the least Three statement of financial position including one at the date of the transition two statements of comprehensive income, two income statements (if presented), two statements of cash flows, and two statements of changes in equity.

Four mandatory exception and more than 16 optional exemption.

4

IMPLEMENTATION



Overview

Complete compliance with IAS 1 Presentation of Financial Statements requirements

Explanation of the transition to IFRS by providing reconciliations as at the date of transition and for the periods covered by the financial statements-equity reconciliations and comprehensive income (Profit) reconciliations.

Interim reporting

Comparative financial statements

5

PRESENTATION & DISCLOSURE REQUIREMENT



Overview

First-time adopter has optional exemption from retrospective application

6

IFRS 1 IMPLEMENTATION ILLUSTRATED

20X1 20X2

Comprehensive IncomeIncome Statement

Cash flow statementChanges in equity

Profit reconciliation*

Comprehensive IncomeIncome Statement

Cash flow statementChanges in equity

Profit reconciliation*



Mar 31, 2010

Balance SheetEquity reconciliation*

April 1, 2009

Balance SheetEquity reconciliation*

Mar 31, 2011

Balance Sheet

* Reconciliation equity and comprehensive income or profit/loss under previous GAAP to equity and comprehensive income respectively reported under IFRS

Overview

GAAP differences Revenue recognition Fair value measurement liasion Financial instruments Business combinations Share based compensation Property, plant and equipment

Significant investments in systems, processes and people

Regulatory amendments to Companies Act and Income tax Act

7

TRANSITION CHALLENGES



Overview

Accounting estimates De-recognition of financial assets

and financial liabilities Hedge accounting Non-controlling interests

8

MANDATORY EXCEPTIONS & OPTIONAL EXEMPTIONS



MANDATORY EXCEPTIONS OPTIONAL EXEMPTIONS

Business combinations Share-based payment transactions Insurance contracts Deemed cost Leases Employee benefits 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 recognized financial instruments Fair value measurement of financial assets or financial 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

Mandatory exceptions

Change in estimates mandated only for transition to IFRS 1

Changes in estimates due to new information available subsequent to balance sheet date to be treated as non-adjusting.

Certain estimates due to transition to IFRS- Reflect conditions at the date of transition or in case of certain transactions (leases, intangibles, etc,) should reflect the conditions at the date of the transactions

9

ACCOUNTING ESTIMATES




Apply the de-recognition rules in IAS 39 Financial Instruments Recognition and Measurement prospectively from 1 January 2004 unless it chooses to apply the de-recognition rules of IAS 39 retrospectively from a date of its choosing

10

DE-RECOGNITION OF FINANCIAL ASSETS & FINANCIAL LIABILITIES



Mandatory exception

A first-time adopter is required in its opening IFRS statement on financial position to: measure all derivatives at fair value; and eliminate all deferred gains and losses arising on derivatives that were reported under

previous GAAP as assets and liabilities.

IAS 39 specifies number of restrictive criteria including appropriate designation and documentation of the effectiveness at the inception of the hedge and subsequently.

11

HEDGE ACCOUNTING




The exception stipulates that a first-time adopter should apply the following requirements of IAS 27(2008) prospectively from the date of transitionto IFRSs: The requirement that total comprehensive income be attributed to the owners

of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance;

The requirements regarding the accounting for changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control; and

The requirements regarding the accounting for a loss of control over a subsidiary, and the related requirements in paragraph 8A of IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

12

NON-CONTROLLING INTEREST



Optional exemptions


13

IFRS 3: BUSINESS COMBINATIONS – TRANSITION DATE

2004 2005 2006 2007 2008 1-Jul-2009

Acquired XYZLimited

Acquired LMN Limited

Acquired ABCLimited

IFRS 3 effective



Optional exemptions


14


2004 2005 2006 2007 2008 1-Jul-2009

Acquired XYZLimited


Acquired ABCLimited

IFRS 3 effective

Apply IFRS for all acquisitions since incorporation, starting with acquisition of XYZ Ltd



Optional exemptions


15


2004 2005 2006 2007 2008 1-Jul-2009

Acquired XYZLimited


Acquired ABCLimited

IFRS 3 effective

Apply IFRS for all acquisitions since 1-Jan-2005 (LMN Limited and later)Apply

guidance in Appendix C of IFRS 1



Optional exemptions


16


2004 2005 2006 2007 2008 1-Jul-2009

Acquired XYZLimited


Acquired ABCLimited

IFRS 3 effective

Apply IFRS for all acquisitions since 1-Jan-2006 (ABC Limited)Apply guidance in Appendix C of IFRS 1



Optional exemptions


17


2004 2005 2006 2007 2008 1-Jul-2009

Acquired XYZLimited


Acquired ABCLimited

IFRS 3 effective

Apply IFRS for all acquisitions since 1-Jan-2007 (ABC Limited and later)

Apply guidance in Appendix C of IFRS 1



Optional exemptions


18


2004 2005 2006 2007 2008 1-Jul-2009

Acquired XYZLimited


Acquired ABCLimited

IFRS 3 effective

Apply IFRS for all acquisitions since 1-Jan-2008 (ABC Limited and later)




Optional exemptions


19


2004 2005 2006 2007 2008 1-Jul-2009

Acquired XYZLimited


Acquired ABCLimited

IFRS 3 effective

Apply IFRS for all acquisitions since 1-Jul-2009




Optional exemptions

Application of IAS 21 The Effects of Changes in Foreign Exchange Rates Continue the same classification as in its previous GAAP financial statements Exception to recognition of assets and liabilities at the date of acquisition:

De-recognition requirement in accordance with IAS 39 Differences in recognition principle per previous GAAP and IFRS

Fair value as measurement basis Cost-based measurement Adjustments to goodwill Measurement of non-controlling interest and deferred tax Subsidiary not consolidated per previous GAAP.

20

IFRS 3: BUSINESS COMBINATIONS- TRANSITION GUIDELINES



Optional exemptions

Adjustment to goodwill on account of: Differences in recognition principles of previous GAAP and IFRS Impairment test on the date of transition

Goodwill not to be adjusted for: Research and development acquired Previous amortization of goodwill Adjustments per previous GAAP not allowed by IFRS 3

Goodwill recognized as deduction from equity per previous GAAP Such goodwill will not be recognized in the opening IFRS balance sheet Adjustments as a result of subsequent resolution of contingency affecting purchase

consideration

21

IFRS 3: BUSINESS COMBINATIONS- TRANSITION GUIDELINES FOR GOODWILL



Optional exemptions

Equity-settled transactions

22

IFRS 2: SHARE-BASED PAYMENT : EQUITY -SETTLED TRANSACTIONS



Granted on or before 7 November 2002

Granted after 7 November 2002 and vesting before the date of transition

Granted after 7 November 2002 and vesting after the date of transition

IFRS 2 may be applied if fair value has previously been disclosed; however, it is not required

IFRS 2 may be applied if fair value has previously been disclosed; however, it is not required

IFRS 2 must be applied retrospectively with restatement of comparative information

Disclosure requirements in IFRS 2 (paragraphs 44 & 45) apply for all transactions that existed during the period, irrespective of grant and vesting dates

Optional exemptions

Cash-settled transactions

23

IFRS 2: SHARE-BASED PAYMENT: CASH -SETTLED TRANSACTIONS



Liabilities settled before date of transition

Other liabilities

IFRS 2 may be applied; however, notrequired

IFRS 2 must be applied retrospectively with restatement of comparative information

Optional exemptions

Applies to Property, plant & equipment, investment property, intangible assets, and oil and gas assets.

IFRS 1 permits any one of the following amounts as the ‘deemed cost’ at the date of transition : Fair value at the date of transition to IFRS A revaluation under previous GAAP that meets the following criteria:

If it is comparable to fair value, or Cost or depreciated cost under IFRS, adjusted to reflect, for example change in general or specific price index

A deemed cost measurement recognized under previous GAAP based on fair value at the date of an event such as a privatization or an initial public offering (an ‘event-driven’ value).

24

DEEMED COST



Optional exemptions

For assets acquired in a business combinations could fall in either of the following category: Property, plant and equipment, investment property and intangible assets recognized under

previous GAAP Property, plant and equipment, investment property and intangible assets not recognized

under previous GAAP Retrospective application of IFRS 3

25

DEEMED COST



Optional exemptions

In preparation of separate financial statements, a first-time adopter that measures an investment at cost under (a) above is permitted to measure the investment either at cost determined in accordance with IAS 27 or at ‘deemed’ cost. The deemed cost of an investment for this purpose is either its: fair value (determined in accordance with IAS 39) at the date of transition in the entity’s

separate financial statements; or previous GAAP carrying amount at the date of transition in the entity’s separate financial

statements.

26

INVESTMENTS IN SUBSIDIARIES, JOINTLY CONTROLLED ENTITIES AND ASSOCIATES



Optional exemptions

If subsidiary, associate or joint venture becomes first-time adopter later than the parent, it may measure its assets and liabilities at either: the carrying amount that would be included in the parent’s consolidated financial statements,

based on the parent’s date of transition to IFRSs, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary; or

the carrying amounts required by IFRS 1 based on the subsidiary’s date of transition to IFRSs.

If a parent becomes a first-time adopter later than its subsidiary, associate or joint venture the parent should, in its consolidated financial statements, measure the assets and liabilities of the subsidiary at the same carrying amount as in the financial statements of the subsidiary, after adjusting for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary

27

ASSETS & LIABILITIES OF SUBSIDIARIES, ASSOCIATES & JOINT VENTURES



Convergence with IFRS in India

Listed entities, banks and insurance entities and certain other large-sized entities.

Categories of IFRS

Reasons for departures from IFRSs Legal and regulatory requirements Economic environment Level of preparedness Conceptual difference

28

ROADMAP



Summary

You should now be able to: Provide an overview of IFRS 1 Discuss the mandatory exceptions to IFRS 1 Summarize the optional exemptions to IFRS 1

29

OBJECTIVES



Contact us

30

OUR CONTACT INFO

© 2010 KNAV P.A. All rights reserved

IFRS lead Partners

MUMBAI | Khozema [email protected]

ATLANTA | Atul [email protected]

LONDON |Irfan [email protected]

WWW.KNAVCPA.COM