Ensure that an entityā€™s first IFRS financial statements, and its interim reports for part of that period, contain high-quality information that:
Is transparent for users and comparable over all periods presented.
Provides a suitable starting point for accounting under International Financial Reporting Standards (IFRS).
Can be generated at a cost that does not exceed the benefits to users.
IFRS 1 applies when an entity adopts IFRS for the first time through an explicit and unreserved statement of compliance with IFRS in its financial statements.
The entityā€™s first IFRS financial statements.
Each interim financial report, if any, that it presents under IAS 34 for part of the period covered by its first IFRS financial statements.
An entity's first IFRS financial statements are the first annual statements where compliance is explicitly stated. An entity might have previously claimed compliance with some standards or a national GAAP based on IFRS, but this standard applies only to the first *full*, explicit, and unreserved adoption.
Opening IFRS Statement of Financial Position:
General Principle: Apply IFRS retrospectively at the date of transition, subject to exceptions and exemptions.
An entity must prepare an opening IFRS statement of financial position at its date of transition to IFRS.
Accounting policies used in this opening statement must:
Comply with each IFRS effective at the end of its first IFRS reporting period.
Be applied consistently across all periods presented.
In preparing the opening statement, the entity must, as a general rule:
Recognize all assets and liabilities whose recognition is required by IFRS.
Derecognize items as assets or liabilities if IFRS does not permit such recognition.
Reclassify items recognized under previous GAAP according to IFRS classifications.
Apply IFRS in measuring all recognized assets and liabilities.
Adjustments arising from applying IFRS retrospectively are recognized directly in retained earnings (or another equity category, if appropriate) at the date of transition.
Exemptions and Exceptions:
IFRS 1 grants limited exemptions from retrospective application (optional) and prohibits retrospective application in certain areas (mandatory exceptions) to balance comparability with cost-benefit.
Optional Exemptions (Examples - Entity chooses whether to apply):
Business combinations (IFRS 3) - can elect not to restate past combinations.
Fair value or revaluation as deemed cost for PPE (IAS 16), Investment Property (IAS 40), or Intangibles (IAS 38).
Employee benefits (IAS 19) - can recognize all cumulative actuarial gains/losses at transition date.
Cumulative translation differences (IAS 21) - can deem cumulative translation differences to be zero at transition date.
Share-based payment transactions (IFRS 2) - applies only to equity instruments granted after Nov 7, 2002 and not yet vested at transition date.
Compound financial instruments (IAS 32) - may not need to separate components if liability component not outstanding at transition date.
Leases (IFRS 16) - various practical expedients available.
Decommissioning liabilities included in cost of PPE (IFRIC 1).
Mandatory Exceptions (Retrospective application prohibited):
Estimates: Estimates under IFRS at the date of transition must be consistent with estimates made for the same date under previous GAAP (after adjustments for policy differences), unless objective evidence shows those estimates were in error. No hindsight allowed.
Derecognition of financial assets and liabilities: Apply derecognition criteria in IFRS 9 prospectively from transition date (or earlier if elected).
Hedge accounting: Apply IFRS 9 hedge accounting rules prospectively from transition date. Cannot retrospectively designate hedging relationships.
Non-controlling interests: Apply IFRS 10 requirements prospectively from transition date.
Classification and measurement of financial assets (IFRS 9).
Reconciliations of equity reported under previous GAAP to equity under IFRS at:
The date of transition to IFRS.
The end of the latest period presented in the entity's most recent annual financial statements under previous GAAP (i.e., the comparative period end).
Reconciliation of total comprehensive income reported under previous GAAP to total comprehensive income under IFRS for the latest period presented under previous GAAP (the comparative period).
Explanation of material adjustments made to the statement of cash flows upon adoption of IFRS (if cash flow statement was presented under previous GAAP).
Disclosures explaining the nature of the main adjustments that would make the reconciliations understandable.
If any optional exemptions were used (e.g., deemed cost), disclose this fact and the related impact.
Disclosures about the fair value measurement used for deemed cost, if applicable.
Disclosure requirements related to interim financial reports if applicable.
Determining the correct date of transition to IFRS.
Selecting appropriate accounting policies that comply with IFRS effective at the first IFRS reporting date.
Deciding whether to apply the various optional exemptions (e.g., deemed cost, business combinations) based on cost-benefit analysis.
Correctly applying the mandatory exceptions (e.g., estimates, derecognition, hedge accounting).
Preparing accurate and understandable reconciliations and explanatory disclosures to bridge previous GAAP and IFRS.
Ensuring estimates used at the date of transition are consistent with previous GAAP estimates (unless erroneous) and avoiding the use of hindsight.
