8/6/2019 First Time Adoption of IFRS

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First Time Adoption of IFRSIn our previous articles, we explainedWhat is IFRSand theDifference between IFRS Conversion and IFRS

Conversion. And in this article well be guiding you with how to apply IFRS for the first time.

IFRS 1, First Time Adoption of IFRS (International Financial Reporting Standards), is the guidance that is

applied during the preparation of a companys first time IFRS based statements. IFRS 1 was created to help

companies easily convert to IFRS and provides practical accommodations intended to make first time

adoption cost-effective.

What does IFRS 1 require?

The key principle of IFRS 1 is Full Retrospective application of all IFRS Standards that are effective as of the

closing balance sheet or the reporting date of the first IFRS financial Statements. IFRS 1 requires companies

to

1. Identify the first IFRS Financial Statements2. Prepare an opening balance sheet at the date of transition to IFRS3. Select accounting policies that comply with IFRS and apply those policies retrospectively to all the

periods presented in the first IFRS Statements4. Consider whether to apply any of the optional exemptions from retrospective application5. Apply the 4 Mandatory exceptions from retrospective application6. Make extensive disclosures to explain the Transition to IFRSThere are currently 16 optional exemptions to ease the burden of retrospective application. Theseexemptions are available to all first time adopters, regardless of their date of transition. Additionally, theStandard provides for Short-Term exemptions which are temporarily available to users and often addresstransition issues related to new standards. There are 4 mandatory exceptions for which retrospectiveapplication is not permitted.

The Opening IFRS Balance Sheet

The Opening IFRS Balance Sheet is the standing point for all subsequent accounting under IFRS and isprepared at the date of transition, which is beginning of the earliest period for which full comparative

information is presented in accordance with IFRS.

IFRS 1 requires that the opening IFRS Balance Sheet should:-

1. Include all of the Assets and Liabilities that IFRS requires2. Exclude any IFRS or Liability that IFRS does not permit3. Classify all Assets and Liabilities that IFRs does not permit4. Measure all items in accordance with IFRs5. Be prepared and presented with an entities first IFRS Financial StatementsThese General Principles are to be followed unless any one of the Optional Exemptions or Mandatory

Exemptions does not require or permit recognition, classification and measurement in line with the above.

Consideration of Choices under IFRS

A number of IFRS Standards allow companies to choose between alternate policies. Companies should select

carefully the Choices of Accounting Policies to be applied to the opening balance sheet and have a ful

understanding of the implications to current and future periods. The Companies should take this opportunity

to evaluate their IFRS Accounting Policies with a Clean Sheet of Paper mindset

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