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