Transcript Document

IFRS 1
FIRST TIME ADOPTION OF
IFRS
Asish K Bhattacharyya
Slide 1
First-time Adoption of IFRS Introduction and Overview
Objective
• is transparent for users and comparable over all periods presented;
• provides a suitable starting point for accounting under International
Financial Reporting Standards (IFRSs); and
• can be generated at a cost that does not exceed the benefits to
users.
Application
• to the first IFRS financial statements (March 31, 2012); and
• each interim financial report under IFRS in the first period (2011-12)
Slide 2
First-time Adoption of IFRS Introduction and Overview (Contd..)
Requires
Identification of date of transition (April 1, 2010)
Selection of accounting policies that comply with IFRS
Preparation of an opening IFRS balance sheet as at April 1, 2010
The first IFRS financial statements are:
The first financial statements to contain “an explicit and unreserved statement of
compliance with IFRSs”
Slide 3
First-time Adoption of IFRS Introduction and Overview (Contd..)
IFRS 1 requires retrospective adoption of most IFRSs, but
• the guidance is more comprehensive
• there are specific exemptions
• the latest version of each IFRS will be applied
• there is guidance on the use of previous estimates
• the disclosure requirements are more extensive
Financial statements are not IFRS financial statements when
• there is no explicit statement of compliance with IFRSs
• they do not comply with all aspects of IFRSs
• IFRSs are used to fill gaps in local guidance
Slide 4
RECOGNITION AND
MEASUREMENT
Slide 5
Key Dates
• Transition date:
– April 1,2010
– First balance sheet to be prepared (not to be
published)
• Adoption date: April 1, 2011
• First financial statements under IFRS:
March 31, 2012
• Apply all IFRSs applicable on March 31,
2012
Slide 6
First-time Adoption of IFRS Opening IFRS balance sheet
• An entity need not present its opening IFRS balance sheet in its first IFRS financial
statements.
Adjustments are required to move from previous GAAP to IFRS
(except where an exemption or exception allows or requires otherwise)
• recognition of some new assets and liabilities
• derecognition of some old assets and liabilities
• reclassification previous-GAAP opening balance sheet items into the appropriate
IFRS classification
• apply IFRSs in measuring all recognised assets and liabilities
Slide 7
First-time Adoption of IFRS Accounting policies
Accounting policies based on current version of IFRSs at the reporting date
• All standards that will be mandatory in the first year of IFRS financial statements
• Early adoption of other standards is permitted
• Retrospective application to opening IFRS balance sheet and all periods, subject to
• Optional exemptions; and
• Mandatory exceptions
Transitional guidance in IFRSs not used by first time adopters unless specifically
directed
Slide 8
EXEMPTIONS AND
EXCEPTIONS
Slide 9
IFRS 1
Exemptions summary
Sixteen optional exemptions
Business combinations
Compound instruments
Property, plant and equipment,
investment properties, intangibles
Comparatives for financial
Instruments*
Employee benefits
Cumulative translation adjustment
Standards
in force at
reporting date
Designation of financial assets and
Financial liabilities
Share-based payments
Transition date for subsidiaries,
associates and joint ventures
Decommissioning liabilities
Leases
Insurance contracts*
Borrowing cost
Service concessions arrangements
Exploration and Evaluation – O&G
Fair value measurement of financial
Instruments on initial recognition
*Relief is for “2005 adopters” only
Slide 10
IFRS 1
Exceptions summary
Four mandatory exceptions
Derecognition of financial
assets and liabilities
Estimates
Standards
in force at
reporting date
Assets held for sale
Hedge accounting
Slide 11
First-time Adoption of IFRS Optional exemptions from other IFRSs
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
Unrecognised gains and losses at date of transition
need not be recognised
Cumulative translation differences
May be set to zero for all subsidiaries
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
Designation as “at fair value through profit or loss” at
transition
Slide 12
First-time Adoption of IFRS Optional exemptions from other IFRSs - (Contd..)
Exemption
Impact
Share-based payments
Only apply IFRS 2 to share-based payments vested/settled
after date of transition/1 January 2005
Decommissioning liabilities
Adjustments to the asset cost required by IFRIC 1 need not
be applied to changes to the liability occurring before
transition
Leases
Apply the transitional provisions in IFRIC 4 Determining
whether an Arrangement contains a Lease.
Borrowing cost
Use the transition provisions of IAS 23.
Fair value measurement of financial
instruments on initial recognition
Measure fair value based on observable market current
market transactions in the same instrument or based on a
valuation technique.
Service concessions arrangements
A first-time adopter may apply the transitional provisions in
IFRIC 12.
*Relief is for “2005 adopters” only
Slide 13
First-time Adoption of IFRS Business combinations exemption
IFRS 3 need not be applied to combinations before date of transition (April 1, 2010)
• BUT, if one combination is restated, all subsequent combinations are restated
When the exemption is used
• No change in classification
• Post combination carrying amount deemed cost for assets and liabilities measured
at cost
• Assets and liabilities measured at fair value restated at date of transition – adjust
retained earnings
Slide 14
First-time Adoption of IFRS Business combinations exemption - (Contd..)
Assets and liabilities not recognised at the time of a business combination
under previous GAAP are:
• Recognized as if subsidiary adopted IFRSs at the same date
Subsidiaries not consolidated under previous GAAP are:
• Consolidated as if subsidiary adopted IFRSs at the same date
• Goodwill is the difference between cost of investment and net assets recognised at
date of transition
Slide 15
First-time Adoption of IFRS Business combinations exemption – (Contd..)
Goodwill is recognised at the carrying amount under previous GAAP and adjusted for
• Intangibles that are not recognised under IFRS
• Intangibles that must be recognised under IFRS
• Contingent consideration not recognised; and
• Tested for impairment
Goodwill deducted from equity remains in equity
Slide 16
First-time Adoption of IFRS Mandatory exceptions
This IFRS prohibits retrospective application of some aspects of other IFRSs relating
to:
• Derecognition of financial assets and financial liabilities
• Hedge accounting
• Estimates and
• Assets classified as held for sale and discontinued operations.
Slide 17
IFRS 1
Mandatory exceptions
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 1 January 2005;
–
Consolidate all SPEs controlled at transition date (SIC-12)
Hedge accounting
–
Where the relationship does not qualify
–
Until the documentation is in place
Slide 18
First-time Adoption of IFRS Estimates
Estimate
required by
previous GAAP?
YES
NO
Make estimate
reflecting conditions
at relevant date
NO
Evidence of error?
YES
YES
Use previous
estimate
Calculation consistent
with IFRS?
NO
Use previous
estimate and adjust
to reflect IFRS
Slide 19
IFRS 1
Mandatory exceptions
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
Slide 20
IFRS 1
Disclosures
• Reconciliation of equity from previous GAAP to IFRS at transition and last year end
• Reconciliation of last year’s net profit under previous GAAP to IFRS
• Sufficient detail to understand adjustments to each line item
• Errors made under previous GAAP and identified during transition
• Fair value as deemed cost and the amount of the adjustment
• IAS 36 disclosures for impairment identified during transition
Slide 21
First-time Adoption of IFRS Reconciliations
Interim financial Reports
• equity under previous GAAP at the end of that comparable interim period to its
equity under IFRSs at that date; and
• its profit or loss under previous GAAP for that comparable interim period (current
and year-to-date) to its profit or loss under IFRSs for that period.
• further information to comply with IAS 34
Slide 22
First-time Adoption of IFRS Reconciliations
Equity
01.04.20X0
Transition
date
Equity and
net income
Equity and
net income
30.09.20X0
31.03.20X1
Interim –
comparative
Year end –
comparative
30.09.20X1
Interim
date
31.03.20X1
Reporting
date
Slide 23
First-time Adoption of IFRS Existing IFRS subsidiaries
• Subsidiaries already reporting under IFRS do not apply
exemptions
• Use subsidiary’s existing IFRS results for consolidation purposes,
adjusted for
–
Consolidation adjustments
–
Accounting policy differences
However, business combinations exemption is applied as normal
Slide 24
First-time Adoption of IFRS Common implementation issues
•
Identification of Adoption Dates
•
Selection of Options – Multiple Scenarios
•
Enterprise-Wide Adoption for all Reporting Units
•
Needs Pro-active Decisions
Slide 25
Thank You