1. First-Time Adoption of International Financial Reporting Standards: IFRS 1

2. JOIN KHALID AZIZ

3. JOIN KHALID AZIZ FRESH CLASSES OF ICMAP STAGE 1,2,3,4
ICAP MODULE B & D
PIPFA
KARACHI, PAKISTAN

4. JOIN KHALID AZIZ ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM.
FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.
CONTACT:
R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN.

5. First-Time Adoption of International Financial Reporting Standards
Related standards
IFRS 1
Current GAAP comparisons
Looking ahead
End-of-chapter practice

6. IFRS 1 – Overview Objective and scope Recognition and measurement
Presentation and disclosure

7. IFRS 1 – Objective and Scope
This standard is meant to provide relief from the onerous task of conversion and provides guidance on how to transition over to IFRSs
Application
An entity would apply this the first time it issues statements with an explicit and unreserved statement that it is in compliance with IFRSs
In general, the standard requires retrospective application
This will allow users to have greater comparability
Two Warnings:
1. Cost benefit
-Difficult and time consuming to go back and collect the information needed to apply IFRSs
-Information may never have been captured by the entity’s accounting information systems
2. No hindsight
-Bias might be introduced when applying the standards retrospectively
-Only information that was available at the time may be used for estimates

8. IFRS 1 – Objective and Scope
The overall objective of the IFRS:
• Transparency
• Suitable starting point
• Costs do not exceed the benefits
First IFRS Statements
Two components:
1. Full adoption of IFRS
2. Explicit and unreserved statement of compliance with IFRSs
An entity’s financial statements are the first IFRS statements if
• Most recent financial statements were presented
o under national GAAP,
o in conformity with IFRSs but with no explicit statement to that effect,
o under national GAAP with partial application of IFRSs, or
o under national GAAP with a reconciliation of some amounts to IFRSs;
• Entity has prepared IFRS statements for internal use only;
• Entity has prepared an IFRS reporting package for consolidation purposes only; or
• Entity did not prepare financial statement at all previously

9. IFRS 1 – Recognition and Measurement
Opening IFRS Statement of Financial Position
Date of transition
Beginning of the first period for which comparative statements are presented
Accounting Policies
First reporting period
Period in which the entity first presents its IFRS statements
In Canada, this would be 2011 (with the balance sheet date December 31, 2011 for entities with a calendar year end)
The opening statement of financial position will
• Recognize all and only assets/liabilities required/allowed under IFRSs
• Present all assets/liabilities in accordance with IFRSs
• Measure all assets/liabilities in accordance with IFRSs
Any adjustments should be recognized through retained earnings at the date of transition

10. IFRS 1 – Recognition and Measurement
Exemptions from other IFRSs
1. Business combinations
2. Fair value or revaluation as deemed cost
3. Employee benefits
4. Cumulative translation differences
5. Compound financial instruments
6. Assets and liabilities of subsidiaries, associates, and joint ventures
7. Designation of previously recognized financial instruments
8. Share-based payment transactions
9. Insurance contracts
10. Decommissioning liabilities included in the cost of property, plant, and equipment
11. Leases
12. Fair value measurement of financial assets or financial liabilities at initial recognition
13. Financial asset or an intangible asset accounted for in accordance with IFRIC 12
14. Borrowing costs
Exemptions are meant to provide some relief from the fairly onerous task of transitioning to IFRSs

11. IFRS 1 – Recognition and Measurement
Illustration 37-1 summarizes the exemptions under IFRS 1

12. IFRS 1 – Recognition and Measurement

13. IFRS 1 – Recognition and Measurement

14. IFRS 1 – Recognition and Measurement
Exemptions from the retrospective application
1. Derecognition of financial assets and financial liabilities
2. Hedge accounting
3. Estimates
4. Assets classified as held for sale and discontinued operations
5. Some aspects of accounting for non-controlling interests

15. IFRS 1 – Recognition and Measurement
1. Derecognition of financial assets and financial liabilities
Applied prospectively for transactions occurring on or after January 1, 2004
Financial instruments already derecognized prior to that would not be rerecognized
Entity is allowed to apply the derecognition provisions retrospectively
only if sufficient information is and was available at the time of initial transaction
2. Hedge accounting
Hedging relationships (under a previous GAAP) that do not qualify as such under IFRS should not be recognized on transition
Entity may not retrospectively designate hedges
3. Estimates
Entity may not use hindsight for estimates

16. IFRS 1 – Recognition and Measurement
4. Assets classified as held for sale and discontinued operations
IFRS 5 is to be applied retrospectively
Not available to entities with transition dates after January 1, 2005
5. Some aspects of accounting for non-controlling interests
Entity applies certain requirements from IAS 27 prospectively from the date of transition
If it elects to apply IFRS 3 and IAS 21 retrospectively, it must also apply IAS 27 retrospectively

17. IFRS 1 – Presentation and Disclosure
Comparative information
Non-IFRS Comparative Information and Historical Summaries
Entities often present summary information of selected data
Not required under IFRSs
Where the entity provides additional comparatives under previous GAAP, the entity must clearly label this as non-IFRS and provide additional disclosures
Explanation of transition to IFRSs
General rule
Entity should explain how the transition affects its financial statements

18. IFRS 1 – Presentation and Disclosure
Reconciliations
• Equity under previous GAAP to equity under IFRSs
• Total comprehensive income under previous GAAP to comprehensive
income under IFRSs
• Must include additional information about impairment booked on transition
Designation of financial assets or financial liabilities
Designating a financial instrument as FVTPL
Additional information is required regarding fair values of those specific instruments

19. IFRS 1 – Presentation and Disclosure
Use of fair value as deemed cost
Entity must disclose additional information, including the amount of the adjustment
Interim financial reports
Entity must present interim information for the period covered by its first IFRS statements
IFRS 1 provides detail about the additional requirements relating to interim information

20. Looking Ahead Derecognition of financial assets and liabilities
AcSB
Revision of transactions that occurred prior to ‘the date of transition to IFRSs’
Address the transitional issues of countries whose transition date to IFRSs is significantly later than January
IASB
Noted that January 2004 is the date the derecognition requirements of IAS 39 became effective and is therefore not related to transition dates
Agreed and decided not to change paragraph 27 of IFRS 1
Reassessment of accounting under previous GAAP
Proposed precluding reassessment of previous GAAP accounting when it adopted the respective IFRS word for word and provided the same transitional provision
Decided to proceed with the proposal
AcSB was asked to redraft the proposal to clearly identify the scope

21. Looking Ahead Retrospective restatement of fair values
AcSB
Recommended a principle prohibiting the retrospective restatement of fair values
Unless the information determined or available as at the date IFRSs required the fair value to be determined
IASB
Agreed and asked the AcSB staff to draft an amendment for future
Oil and gas industry issue: Full cost accounting
Proposal
Allow these entities allocating the existing carrying amount of each cost centre to the oil and gas assets within that cost centre
‘CGU approach’
Decided to proceed with this proposal and asked AcSB to prepare a comprehensive description of the issue

22. End-of-Chapter Practice