DipIFR Syllabus A. International sources of authority - First time adoption of a body of standards - Notes 8 / 8
Here we look at 1st time adoption of IFRS
An entity’s first IFRS financial statements must:
be transparent for users and comparable over all periods presented
provide a suitable starting point for IFRS accounting
be generated at a cost that does not exceed the benefits
An opening IFRS based SFP (using the same accounting policies as the future IFRS based FS) is needed at the date of moving to IFRSs. This is the suitable starting point.
The opening IFRS based SFP shall...
recognise all assets and liabilities (where IFRSs say they should be recognised)
not recognise assets or liabilities (where IFRSs say they should not be recognised)
Reclassify items (that IFRS say needs reclassification)
apply IFRSs in measuring all recognised assets and liabilities
Limited exemptions
Where the cost of complying is likely to exceed the benefits to users of financial statements.
Retrospective Application
This is applying IFRS to previous periods - this is restricted if it means management judgements (about past conditions) are needed when the actual outcome is now in fact known.
Disclosures
Needed to explain how the transition from previous GAAP to IFRSs affected the entity’s reported financial position, financial performance and cash flows