2005 ifrs 1 – first-time adoption international financial reporting standards

2005

IFRS 1 – FIRST-TIME ADOPTION

INTERNATIONAL FINANCIAL REPORTING STANDARDS

2005

Provide high-quality information

Transparency

Comparability (between reporting periods)

Adequate introduction to accounting in IFRS

No excessive cost

MAIN OBJECTIVES OF IFRS 1MAIN OBJECTIVES OF IFRS 1

IFRS 1 - FIRST-TIME ADOPTION OF IFRS

1. BACKGROUND

2005


2. GENERAL PRINCIPLES

Publication on 19 June 2003 of IFRS 1: First-Time Adoption (FTA)

Effective date: reporting periods from 1 January 2004

IFRS 1 concerns all companies adopting IFRS for the first time

It will be used by all European companies for transition purposes

EFFECTIVE DATEEFFECTIVE DATE

2005

Retrospective application mandatory Except specific exemptions (optional or obligatory)

Recognition of adjustments in the opening IFRS balance sheet (as of 1 January 2004)

General case: equity (in line with IAS 8 on accounting changes) Limited exceptions: restatement of goodwill (reclassification

of intangible assets as goodwill or excluded from goodwill)

Financial information specific to the transition Reconciliation of main aggregates between the two systems

APPLICATION PRINCIPESAPPLICATION PRINCIPES


2. GENERAL PRINCIPLES

2005

Optional: Business combinations Fair value or previous valuation such as historic cost Employee benefits Translation differences Compound financial instruments Different adoption dates for the parent company and

subsidiary

Mandatory: Derecognition of financial assets and financial liabilities Recognition of hedging instruments Estimates


3. RETROSPECTIVE APPLICATION: EXEMPTIONS

2005

Enable users to understand the impact of the transition on the balance sheet, the income statement and the cash flow statement

Mandatory financial information:

Opening IFRS balance sheet at the date of transition (1/1/2004)

Comparative prior period (2004)

Publication of an interim financial report in 2005 (in addition to the disclosures required by IAS 34)


4. TRANSITIONAL FINANCIAL INFORMATION

2005

Detailed reconciliation of equity in IFRS and local GAAP as of 31/12/2003

Information on the use of fair value as historic cost by the « deemed cost » convention, if exemption is chosen

Information required by IAS 36 if impairment is reversed in the opening IFRS balance sheet

INFORMATION IN THE OPENING IFRS BALANCE SHEET (1/1/2004)

INFORMATION IN THE OPENING IFRS BALANCE SHEET (1/1/2004)



2005

Detailed reconciliation of equity in IFRS and French GAAP as of 31/12/2004

Detailed reconciliation of net profit or loss for 2004 in IFRS and French GAAP

Explanations of significant adjustments to the cash flow statement

In theory, no impact on cash flow, but possible impact on items in the cash flow statement

INFORMATION ON THE COMPARATIVE PRIOR PERIOD (2004)

INFORMATION ON THE COMPARATIVE PRIOR PERIOD (2004)



2005

Detailed reconciliation of IFRS / local GAAP for each period presented:

Equity at the end of the interim comparative period (ex: 30/03/2004 for the first quarter financial report in 2005)

Net profit or loss for the comparative interim period and cumulative period (ex: income statements for 3 and 6 months as of 30/06/2004 for the second quarter financial report in 2005)

INFORMATION ON AN INTERIM FINANCIAL REPORT IN 2005

INFORMATION ON AN INTERIM FINANCIAL REPORT IN 2005



2005

Recognise all assets and liabilities in accordance with the IFRS framework

Derecognise all assets and liabilities that do not qualify under IFRS

Reclassify some acquired intangible assets as goodwill Extract identifiable intangible assets from goodwill Perform impairment tests Reclassify certain balance sheet or income statement items Modify certain values Modify the presentation of the financial statements Prepare financial information in conformity with IFRS

IFRS 1 - FIRST-TIME ADOPTION OF IFRS 5. CHALLENGES OF FIRST-TIME ADOPTION OF IFRS

S U M M A R YS U M M A R Y

2005

For instance: Recognise previously expensed development costs as

assets, if they qualify

Recognise derivative financial instruments at fair value

Recognise stock options

RECOGNISE ALL ASSETS AND LIABILITIES IN ACCORDANCE WITH IFRS

RECOGNISE ALL ASSETS AND LIABILITIES IN ACCORDANCE WITH IFRS


2005

Derecognition of:

Research costs previously recorded as assets

Start-up and pre-operating costs

Reclassify treasury shares reported as marketable securities as a component of equity.

DERECOGNISE ALL ASSETS AND LIABILITIES THAT DO NOT QUALIFY FOR RECOGNITION

UNDER IFRS

DERECOGNISE ALL ASSETS AND LIABILITIES THAT DO NOT QUALIFY FOR RECOGNITION

UNDER IFRS


2005

If they do not meet IFRS criteria Which include:

RECLASSIFY SOME ACQUIRED INTANGIBLE ASSETS AS GOODWILL

RECLASSIFY SOME ACQUIRED INTANGIBLE ASSETS AS GOODWILL

Resource controlled by the company From which future economic benefits flow Which can be measured reliably

Resource controlled by the company From which future economic benefits flow Which can be measured reliably

Identifiable as separate items or

Legally protected

Identifiable as separate items or

Legally protected Goodwill not transferable

separately Market share Unprotected lists or files of

customers ...

Goodwill not transferable separately

Market share Unprotected lists or files of

customers ...

General criteriafor assets

General criteriafor assets

Specific criteria for intangible assets

Specific criteria for intangible assets

Assumed toinclude

Assumed toinclude


2005

Under IAS 38 - In practice Intangible assets not recognised under previous

standards must be recognised as assets It is necessary to determine whether the assets have an

infinite or finite useful life If the useful life is finite: retroactive application of amortisation

+ impairment testing if appropriate (indications of impairment) If useful life is indefinite: impairment testing is obligatory

Example Development costs of an acquired enterprise are expensed

EXTRACT QUALIFYING INTANGIBLE ASSETS FROM GOODWILL

EXTRACT QUALIFYING INTANGIBLE ASSETS FROM GOODWILL


2005

PERFORM IMPAIRMENT TESTSPERFORM IMPAIRMENT TESTS

Systematic testing of goodwill

Including the opening balance sheet for first-time adoption

In compliance with IAS 36 (currently being revised)

Impact on equity


2005

For example

Reclassify subsidies recorded in equity, under either deferred income or as a reduction of assets

Include rehabilitation expenses in the price of the asset and recognise the corresponding provision

For hybrid financial instruments, identify the individual components

RECLASSIFY SOME BALANCE SHEET AND INCOME STATEMENT ITEMS

RECLASSIFY SOME BALANCE SHEET AND INCOME STATEMENT ITEMS


2005

MODIFY CERTAIN VALUESMODIFY CERTAIN VALUES

Classification changes leading to changes in value:

Classification of a building as investment property at fair value

Financial instruments at fair value

Applying IFRS provisions without classification changes:

modification of amortisation period and method (if previous periods were not based on economic criteria)

Change in asset’s net value Discounting effects Recognition of amortised cost


2005

MODIFY THE PRESENTATION OF THE FINANCIAL STATEMENTS

MODIFY THE PRESENTATION OF THE FINANCIAL STATEMENTS

Examples

Balance Sheet: Separate current/non-current balance sheet items

Similar concept to ST/LT Current item: from the operating cycle

Record receivables and tax liabilities on specific lines and separate deferred taxes (not current) from current taxes

Reclassify minority interests as a separate equity item

Balance Sheet: Separate current/non-current balance sheet items

Similar concept to ST/LT Current item: from the operating cycle

Record receivables and tax liabilities on specific lines and separate deferred taxes (not current) from current taxes

Reclassify minority interests as a separate equity item

Income Statement: Present the result of discontinued operations separately Reclassify some financial income as operating income Present a full breakdown of exceptional income

Income Statement: Present the result of discontinued operations separately Reclassify some financial income as operating income Present a full breakdown of exceptional income


2005

DISCLOSE ALL FINANCIAL INFORMATION REQUIRED

DISCLOSE ALL FINANCIAL INFORMATION REQUIRED

As required by all current standards: both throughout the main text of the standards and in the paragraphs on "disclosures"

And particularly the « transitional» financial information required by IFRS 1


2005 ifrs 1 – first-time adoption international financial reporting standards

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