IFRS 1 First Time Adoption of IFRS Guide

IFRS 1 : First Time Adoption of IFRS
04 2011
01
Delhi 15th March,2010

Compiled & Presented By CA Yagnesh Desai
IFRS 1 : Snap Shot
Total Clauses :………………………… 40
Appendices forming integral part of the Standard
A = Defined terms.
B = Exceptions to the retrospective
application of other IFRSs.
C = Exemptions for business combinations.
D = Exemptions from other IFRSs.
E = Short-term exemptions from IFRSs.
Breaking News..Roadmap
by MCA
Convergence to IFRS is spread over three
Phase.
TWO SEPARATE SETS OF ACCOUNTING STANDARDS
U/S SECTION 211(3C) OF THE COMPANIES ACT FOR
CONVERGENCE OF INDIAN ACCOUNTING
STANDARDS WITH IFRS
Separate roadmap for banking and insurance companies

will be submitted by the Sub-Group I in consultation with
the concerned regulators by 28th February, 2010.

Two Sets of Accounts

Phase I
The following categories of companies will convert
their opening balance sheets as at 1st April, 2011, if
the financial year commences on or after 1st April,
2011 in compliance with the notified accounting
standards which are convergent with IFRS. These
companies are:-
a. Companies which are part of NSE – Nifty 50
b. Companies which are part of BSE - Sensex 30
c. Companies whose shares or other securities are
listed on stock exchanges outside India
d. Companies, whether listed or not, which have a
net worth in excess of Rs.1,000 crores.
Phase II
The companies, whether listed or not, having a

net worth exceeding Rs. 500 crores but not
exceeding Rs. 1,000 crores will convert their
opening balance sheet as at 1st April, 2013, if the
financial year commences on or after 1st April,
2013 in compliance with the notified accounting
standards which are convergent with IFRS.

Phase III
Listed companies which have a net worth
of Rs. 500 crores or less will convert their
opening balance sheet as at 1st April, 2014,
if the financial year commences on or
after 1st April, 2014, whichever is later, in
compliance with the notified accounting
standards which are convergent with IFRS.

Separate roadmap for banking and insurance companies
will be submitted by the Sub-Group I in consultation
with the concerned regulators by 28th February, 2010.
Revised Schedule VI in line with IFRS will be

announced shortly.
Convergence of all the accounting standards will be

completed by ICAI by 31st March, 2010and NACAS will
submit its recommendations to the Ministry
by 30th April 2010.

This presentation is based on IFRS 1

introduced in 2008 and :-
¾is effective for entities applying IFRSs for the

first time.
¾for annual periods beginning on Or after 1 July

2009.
IFRS 1 : Objective
To ensure that an entity’s first IFRS financial statements, and its
interim financial reports for part of the period covered by those
financial statements, contain high quality information that:
(a) is transparent for users and comparable over all periods

presented;
(b) provides a suitable starting point for accounting in accordance

with International Financial Reporting Standards (IFRSs); and
(c) can be generated at a cost that does not exceed the benefits.
Interim
Compiled &Financial Statements
Presented By only if IAS 34 is applicable or followed by entity.
CA Yagnesh Desai
Applicability of IFRS 1
IFRS 1 applies when an entity adopts IFRSs for
the first time by an explicit and unreserved
statement of compliance with IFRSs.
This means compliance with ALL IFRSs
Partial Compliance is not enough to make an

entity IFRS Compliant.
Nothing
Compiled & Presentedlike “Subject
By CA Yagnesh Desai to” or “ Except for”
IFRS 1 : Definitions
First Time Adopter : An entity is referred to as a first-time adopter in the
period in which it presents its first IFRS financial statements.
Date of Transition : The beginning of the earliest period for which

an entity presents full comparative information under IFRS in its “First
IFRS Financial Statements”.
First Time IFRS Financial Statement : The first annual financial statements in
which an entity adopts IFRS by making an
explicit and unreserved statement of compliance with IFRS.
Reporting Date : The end of the latest period covered by financial

statements or by an interim financial report

Requirements
General Specific
To comply with each IFRS To recognise, De-recognise,

effective at the measure & re-classify in the
end of its first IFRS opening IFRS statement of
reporting period. financial position that it
prepares------------------->
IFRS 1 : Specific Requirement
As a starting point IFRS 1.10 requires an entity to do the
followings :
(a)recognise all assets and liabilities whose recognition is required by IFRSs;
(b) not recognise items as assets or liabilities if IFRSs do not permit such
recognition;
(c) Reclassify items that it recognised under previous GAAP as one type of
asset, liability or component of equity, but are a different type of asset,
liability or component of equity under IFRSs; and
(d) apply IFRSs in measuring all recognised assets and liabilities.

Subject to limited Exemptions & Mandatory Exceptions >
IFRS 1 : Exemptions & Exceptions
¾Limited exemptions from these requirements in specified
areas where the cost of complying with them would be likely
to exceed the benefits to users of financial statements.
¾Also prohibits retrospective application of IFRSs in some

areas, particularly where retrospective application would
require judgements by management about past conditions
after the outcome of a particular transaction is already
known.
Exemptions
Compiled & Presented By & Exceptions
CA Yagnesh Desai discussed in details later
IFRS 1 : Applicability
An entity shall apply this IFRS in:
(a) its first IFRS financial statements; and

(b) each interim financial report, if any,
that it presents in accordance with IAS 34
Interim Financial Reporting for part of the
period covered by its first IFRS financial
statements.
IFRS 1 : Opening IFRS Statement of Financial Position
An entity’s statement of financial position at the date

of transition to IFRSs.-prepared in accordance with
the requirements of IFRS 1 as of the “date of transition
to IFRS.”
Under Revised IFRS 1 Opening IFRS Statement of

Financial Position is ALSO to be presented with the
First Time IFRS Statements.
This is the starting point for its accounting in accordance
with IFRSs.
Scope & Applicability
An entity’s first IFRS financial statements refer to
the first annual financial statements in which the
entity adopts IFRS by making an explicit and
unreserved statement (in the financial statements) of
compliance with IFRS.
IFRS-compliant financial statements presented in the

current year would qualify as first IFRS financial
statements if the reporting entity presented its most
recent previous financial statements :

• Under national GAAP or standards that were inconsistent with
IFRS in all respects;
• In conformity with IFRS in all respects, but without an explicit and

unreserved statement to that effect;
• With a categorical statement that the financial statements

complied with certain IFRS, but not with all applicable standards;
• Under national GAAP or standards that differ from IFRS but

using some individual IFRS to account for items which were not
addressed by its national GAAP or other standards;
• Under national GAAP or standards, but with a reconciliation of

selected items to amounts determined under IFRS.

Other examples of situations where an entity’s current year’s financial
statements would qualify as its first IFRS financial statements are :
• Financial Statements prepared under IFRS but only “for

internal use only”
• Where IFRS-compliant financial reporting had been produced

in earlier years, with explicit and unreserved statement of this fact,
but national GAAP, not IFRS, was used in the period immediately
preceding the preparation of the current year’s first IFRS financial
statements;
• The entity prepared a reporting package in the previous

period under IFRS for consolidation purposes without preparing a
complete set of financial statements as mandated by IAS 1; and
• Where the entity did not present financial statements for the
previous periods at all.

Exceptions to IFRS 1 – Means IFRS 1 will Not
Apply – hence no exemptions will apply.
1. When an entity presented its financial

statements in the previous year that contained
an explicit and unreserved statement of
compliance with IFRS, and its auditors qualified
their report on those financial statements;

2.When an entity in the previous year presented its
financial statements under national requirements
(i.e., its national GAAP) along with another set of
financial statements that contained an explicit or
unreserved statement of compliance with IFRS,
and in the current year it discontinues this
practice of presenting under its national GAAP
and presents only under IFRS; and
3.When an entity in the previous year presented its
financial statements under national requirements
(its national GAAP) and those financial
statements contained (improperly) an explicit
and unreserved statement of IFRS compliance.
IFRS 1 : Accounting Policies
Use the same accounting policies in its opening IFRS
statement of financial position and
Throughout all periods presented in its first IFRS

financial statements.
Those accounting policies shall comply with each IFRS

effective at the end of its first IFRS reporting period,
with some exceptions. Para 13-19 & Appendices B-
E. Compiled & Presented By CA Yagnesh Desai
IFRS 1 : Parallel Reporting
IFRS transition requires
parallel reporting in local
GAAP and IFRS for at least 1
year. Multi-GAAP accounting
functionality is required and
needs to be implemented in
the ERP system.

31st March 1st April 2010 31st March 31st March
2010 2011 2012
IGAAP IFRS IGAAP – IFRS
Published
Published Presented with IFRS – Published along
Financial Presented with with Statement of
Financial Position
Statements of Financial
as at 31st
31st March Statements of March,2011 & as
2012 31st March at 1st April,2010
2012

Transition Adjustments
Exception
Retained Another
category of
Earnings
Equity
Goodwill
Tax Impact

Adjustment to Intangible Assets
Are there some relief for 1st time adopter ?
Yes
NO
For Recognition & Measurement
Exemptions or Exceptions for
Limited Voluntary
Exemptions ,and Presentation & Disclosures
Few Mandatory Exceptions Requirements in other

IFRSs

General Rule Retrospective Application
Exceptions to the retrospective

application of other IFRSs.
This IFRS prohibits retrospective application

of some aspects of other IFRSs. These
exceptions are set out in paragraphs 14–17 and
Appendix B. ( IFRS 1.13)

IFRS 1 : Mandatory Exceptions…..
…… from Retrospective Applications , contained

in Appendix C to IFRS 1
De-recognition of financial assets and

liabilities
Hedge accounting
Non Controlling Interest
Para 14 -17 of IFRS – Estimates.

Mandatory Exceptions : Dercognition of Financial
Assets & Financial Liabilities
If a first-time adopter derecognized financial assets or financial
liabilities under its previous GAAP in a financial year prior to
January 1, 2001, it should NOT recognize those assets and
liabilities under IFRS.
However, a first-time adopter should recognize all derivatives

and other interests retained after derecognition and still existing,
and consolidate all special-purpose entities (SPE) that it controls
at the date of transition to IFRS (even if the SPE existed before
the date of transition to IFRS or hold financial assets or financial
liabilities that were derecognized under previous GAAP).
Mandatory Exceptions :Hedge Instruments
On the date of Transition an entity should
(a)measure all derivatives at fair value; and
(b) eliminate all deferred losses and gains arising

on derivatives that were reported in accordance
with previous GAAP as if they were assets or
liabilities.
BUT not permitted to reflect a hedging relationship in

its opening IFRS statement of financial position if it does
not qualify for hedge accounting under IAS 39.
Net Position designated as a hedged item under its

previous GAAP, an individual item within that net
position may be designated as a hedged item
under IFRS, provided it does so prior to the
date of transition to IFRS.
Transitional provisions of IAS 39 apply to

hedging relationships of a first-time adopter at
the date of transition to IFRS. This is an
Exception to Para 9:
Transactions entered into before the date of transition

to IFRSs shall not be retrospectively designated as
hedges.

Mandatory Exception :Non-controlling interests
A first-time adopter shall apply the following requirements of IAS 27

(as amended in 2008) prospectively from the date of transition to
IFRSs:
(a) the requirement in paragraph 28 that total comprehensive income
is attributed to the owners of the parent and to the non-controlling
interests even if this results in the non-controlling interests having a
deficit balance;
(b) the requirements in paragraphs 30 and 31 for accounting for
changes in the parent’s ownership interest in a subsidiary that do not
result in a loss of control; and
(c) the requirements in paragraphs 34–37 for accounting for a loss of
control over a subsidiary, and the related requirements of paragraph
8A of IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations.

Mandatory Exception :Non-controlling interests
If a first-time adopter elects to apply IFRS 3 (as revised

in 2008) retrospectively to past business combinations,
it shall also apply IAS 27 (as amended in 2008) in
accordance with paragraph C1 of this IFRS.
In other words, this restriction shall not apply.

Estimates - Hindsight prohibited
Estimates in accordance with IFRSs at the

date of transition to IFRSs shall be
consistent with estimates made for the same
date in accordance with previous GAAP
(after adjustments to reflect any difference
in accounting policies),unless there is
objective evidence that those estimates were
in error.

Estimates
Information received after the date of transition to
IFRSs
About estimates that it had made under previous

GAAP.
To be treated as non-adjusting events after the

reporting period in accordance with IAS 10 Events
after the Reporting Period.

Estimates
For example, assume that an entity’s date of transition
to IFRSs is 1 April,2010
The new information on 15 April,2010 requires the

revision of an estimate made in accordance with
previous GAAP at 31 March,2010
.
The entity shall not reflect that new information in its
opening IFRS statement of position (unless there is
objective evidence of Error ).
Instead, the entity shall reflect that new information in

profit or loss (or, if appropriate other comprehensive
income) for the year ended 31 March,2011
Estimates II
Estimates made under previous GAAP needs to be
revised to comply with IFRS.
For Example a provision made for Warranties but

at nominal value under previous GAAP , now need
to be discounted

Estimates – Not Required under
Previous GAAP but Required under IFRS
Will reflect the conditions at the date of Transition
For Example ,the provision on opening balance sheet for an

onerous rental contract in a foreign operation should be
calculated using
¾Rental rates
¾Interest rates and
¾Exchange rates
Prevailing as at the date of the Transition.

ESTIMATES – SUMMARY
ESTIMATE
EVIDENCE OF CALCULATION
REQUIRED BY Yes No
ERROR CONSISTENT
PREVIOUS GAAP
WITH IFRS ?
No Yes Yes No
USE PREVIOUS
MAKE ESTIMATE USE PREVIOUS ESTIMATE &
REFLECTING ESTIMATE & ADJUST
CONDITIONS AT PREVIOUS CALCULATIONS
RELEVANT DATE CALCULATIONS TO REFLECT
IFRS

Voluntary Exemptions : Implications
Entity is exempt from making

retrospective calculations to make the
transition simpler. In all 14 Voluntary
Exemptions.

Voluntary Exemptions - General
D1 An entity may elect to use one or more of the

following exemptions:
(a) Share-based payment transactions (D2 –D3)
(b) Insurance contracts (D4)
(c) Fair value or revaluation as deemed cost(D5-D8)
(d) Leases (D9)

(e) employee benefits (D10-D11);
(f) cumulative translation differences (D12 -D13);
(g) investments in subsidiaries, jointly

controlled entities and associates (D14-D15);
(h) assets and liabilities of subsidiaries,
associates and joint ventures (D16-D17);
(i)compound financial instruments (D18);

(j) designation of previously recognised financial
instruments (D19);
(k) fair value measurement of financial assets or financial

liabilities at initial recognition (D20);
(l) decommissioning liabilities included in the cost of

property, plant and equipment (D21);
(m) financial assets or intangible assets accounted for in

accordance with IFRIC 12 Service Concession
Arrangements (D22);
(n) borrowing costs (D23).

An entity shall not apply these exemptions by analogy to other
Compiled & Presented By CA Yagnesh Desai items.
VE – IFRS 2 – Equity Instruments
For Equity Instruments Granted
Before 7th November 2002 After 7th November 2002 and
vested before the later
of (a) the date of transition to
IFRSs and (b) 1 January
2005…
Not required but encouraged to apply IFRS for such

instruments – BUT shall disclose the information
required by para 42 and 45 of IFRS 2.
VE IFRS 2 Liability
Liabilities Settled Liabilities Settled
before January 1, 2005 before the date of
transition.
Not required but encouraged to apply

For Liabilities to which IFRS 2 is applied an entity not
required to restate comparative information to the
extent that the information relates to a period or date
that is earlier than 7 November 2002.
VE – Insurance Contracts IFRS 4
A first-time adopter may apply the

transitional provisions in IFRS 4 Insurance
Contracts.

VE Fair Value or Revaluation as Deemed Cost
Plant Property & Equipment
Fair Value as the deemed Revaluation at or before the
cost of that asset date of transition as the
deemed cost of that asset
Revaluation broadly
comparable to fair value or
cost of depreciated cost in
accordance with IFRS.
Disclosure as per Para 30 of IFRS 1

VE : Intangible Asset & Intangible Assets
Same as the Plant, Property and equipment
Investment Property Intangible Assets
If Entity follows Cost Model If IA meets he recognition

criteria under IAS 38, i.e.
cost measured reliably
AND criteria for
revaluation.
An entity shall not use these elections for
other assets or for liabilities.
PPE IFRS 1.30
Use of fair value as deemed cost
The entity’s first IFRS financial statements
shall disclose, for each line item in the
opening IFRS statement of financial position:
(a) the aggregate of those fair values; and

(b) the aggregate adjustment to the carrying
amounts reported under previous
GAAP.
PPE
Its “ one –off exercise” and an

entity can have cherry-pick
approach . Regardless of the
Model Followed after adoption.

PPE
If depreciation methods and rates in
accordance with previous GAAP differs from
those that would be acceptable in accordance
with IFRSs and those differences have a
material effect on the financial statements,
The entity adjusts accumulated depreciation

in its opening IFRS statement of financial
position retrospectively so that it complies
with IFRSs.
VE :Lease IAS 17
A first-time adopter may apply the transitional
provisions in IFRIC 4 Determining whether an
Arrangement contains a Lease. Para D9 provides
transitional exemption.
The entity may determine whether the arrangement

contains a lease by applying the criteria in paragraphs 6–
9 of IFRIC 4 on the basis of facts and circumstances
existing on the date of Transition. IG
VE : Employee Benefits
¾A first-time adopter may elect to recognise all
cumulative actuarial gains and losses at the date of
transition to IFRSs, even if it uses the corridor approach
for later actuarial gains and losses.
¾If a first-time adopter uses this election, it shall apply

it to all plans.

The Interaction Between Employee benefits and The Business
Combinations exemptions
Yes No
Apply Employee Benefits Was plan acquired in
exemption? business combination ?
Yes
No
No
Apply Business combinations
exemption ?
Yes
Restate the past

Recognise all The past acquisition Recompute
acquisition in
cumulative accounted for under corridor from
accordance with IFRS 3
actuarial gains previous GAAP and the the date plan
– IAS 19 applies at the
and losses at the pension liability recognised was established
acquisition date (i.e.
date of transition at the date of acquisition is .
benefit plan included in
and apply the ‘ grandfathered IAS 19. is
the past acquisition are
corridor’ applied from the date of
restated according to
prospectively. acquisition
(IASBy19)
Compiled & Presented CA Yagnesh Desai
VE : Cumulative Translation Differences
IAS 21 The Effects of Changes in Foreign Exchange Rates)
requires an entity:
¾ to recognise some translation differences in other

comprehensive income and accumulate these in a
component of equity
¾ to transfer, on disposal, the cumulative translation

differences for foreign operations to profit or loss as
part of the gain or loss on disposal
VE : Cumulative Transitional Differences
A first-time adopter is exempted from a transfer of the
cumulative translation adjustment that existed on the date of
transition to IFRS.
Upon Exercise of this exemption the cumulative translation

adjustment for all foreign operations would be deemed to be
zero at the date of transition to IFRS.
The gain or loss on subsequent disposal of any foreign

operation should exclude translation differences that
arose before the date of transition to IFRS, but would
include all subsequent translation adjustments.
Investments in subsidiaries, jointly controlled entities
and associates – In Separate Financial Statements
Cost IAS 39
Cost or
Deemed Cost which can be :-
Fair Value as per IAS 39 or
Previous GAAP Carrying Amount

VE : Assets and Liabilities of Subsidiaries,
associates and joint ventures.
Key factor : Who adopts IFRS first –
Parent or
Subsidiary .

Parent - Subsidiary
A first-time adopter consolidates all subsidiaries (as
defined in IAS 27), unless IAS 27 requires otherwise.
If a first-time adopter did not consolidate a subsidiary in
accordance with previous GAAP, then in its consolidated
statements :
Treatment depending on who has adopted IFRS First.
If Subsidiary was Acquired If Subsidiary was not acquired

Parent Recognises Goodwill Parent does not recognised
Goodwill
Consider Income
Compiled & Presented By CA Yagneshtax
Desai & Non Controlling Interest
Parent adopts in 2009 Subsidiary in 2011
Parents Consolidated Financial Subsidiary’s Separate Financial
Statements Statements.
However, the fact that subsidiary The carrying amounts of its
becomes a first-time assets and liabilities are the same in
adopter in 2011 does not change the both its opening IFRS statement of
carrying amounts of its assets and financial position at 1 January 2010
liabilities in parent’s consolidated and parent N’s consolidated
financial statements. statement of financial position
(except for adjustments for
consolidation procedures) and
are based on parent ’s date of
transition to IFRSs. OR

Parent adopts in 2009 Subsidiary in 2011
Parents Consolidated Subsidiary’s Separate
Financial Statements Financial Statements.
The fact that subsidiary O OR ..Measure all its
becomes a first-time
assets or liabilities
adopter in 20X7 does not
change the carrying based on its own date
amounts of its assets and of transition to
liabilities in parent N’s IFRSs (1 January
consolidated financial
2010).
statements
Parent adopts in 2011Subsidiary in 2009
Parents Consolidated Financial Subsidiary’s Separate Financial
Statements Statements.
The carrying amounts of subsidiary
Q’s assets and liabilities at 1 January No Impact on
2009 are the same in both parent ’s
(consolidated) opening IFRS Subsidiary ‘s
statement of financial position
and subsidiary ‘s financial Statements of
statements (except for adjustments
for consolidation procedures) and are Financial Position.
based on subsidiary’s date of
transition to IFRSs

VE : Compound financial instruments
In accordance with IFRS 1 a first-time

adopter need not separate these two
portions if the liability component is no
longer outstanding at the date of transition
to IFRSs.

VE : Decommissioning Liabilities
included in cost of PPE
A first-time adopter need not comply with the IFRIC 1
re any changes that occurred before date of
transition.
If exemption used:
9 Measure liability at date of transition in accordance with IAS 37.
9 Estimate amount that would have been included in Non Current

Asset when liability first arose. Discount using rate applicable to the
intervening period.
9 Calculate accumulated depreciation at date of transition based on

the above amount.
Example next Slide

VE : Compound financial instruments
¾Financial assets or intangible assets accounted for in

accordance with IFRIC 12 – Service Concession arrangement
.
And
¾Borrowing costs
¾An entity MAY apply transition provisions.

VE :Designation of previously recognised
financial instruments
At the date of transition an entity may classify

previously designated Financial Instruments :
(a)As an available-for-sale ; or
(b) As financial asset or financial liability as at

fair value through profit or loss provided the
asset or liability meets the criteria in paragraph
9(b)(i), 9(b)(ii) or 11A of IAS 39 at that date.

Exemptions for business combinations
A first-time adopter may elect not to apply IFRS 3
retrospectively to past business combinations that
occurred before the date of transition.
But if any business combination is restated to comply
with IFRS 3 all later business combinations shall be
restated and entity shall also apply from that same
date.
The exemption for past business combinations also
applies to past acquisitions of investments in associates
and of interests in joint ventures.
If IFRS 3 is not applied retrospectively.
1.The FTA should preserve the same Classification
= as an acquisition by legal acquirer

= a reverse acquisition by the legal acquiree,
= or a uniting of interests.
as in its previous GAAP financial statements.

2. Recognise all its assets and liabilities at the date of transition to
IFRSs that were acquired or assumed in a past business
combination, EXCEPT
(i) Financial assets and Financial liabilities derecognised in
accordance with previous GAAP – covered by mandatory
exceptions ; and
(ii) assets, including goodwill, and liabilities that were not
recognised in the acquirer’s consolidated statement of financial
position in accordance with previous GAAP and also would not
qualify for recognition in accordance with IFRSs in the separate
statement of financial position of the acquiree.
Continued…………
(iii)shall recognise any resulting change by adjusting
retained earnings
¾or, if appropriate, another category of equity,
¾unless the change results from the recognition of an

intangible asset that was previously subsumed within
goodwill.
IFRS 3 is not applied retrospectively Derecognise
Account for the
As adjustment Resulting Change
All other resulting
from from changes in
Goodwill retained earnings.*
If past business combination
accounted as an acquisition and If Intangible asset
recognised as an intangible asset .It not subsumed in
shall reclassify that item and, if any, Goodwill and if
the related deferred tax and non- goodwill not
controlling interests as part of deducted directly
goodwill (unless it deducted
goodwill directly from equity in
from equity
accordance with previous GAAP.
Goodwill ----
----Shall be at carrying amount in accordance with
previous GAAP at the date of transition subject to
following adjustments :
(i)increased by reclassification of Intangible asset or
(ii) Decreased upon recognition of Intangible Asset

subsumed in goodwill and if applicable adjust
deferred tax and non controlling interest.
Goodwill be tested for impairment regardless
of indicators.
Goodwill - Following adjustments not made
(i) to exclude in process research and development acquired in
that business combination * unless related to IA 38.
(ii) to adjust previous amortisation of goodwill;
(iii) to reverse adjustments to goodwill that IFRS 3 would not

permit, but were made in accordance with previous GAAP
because of adjustments to assets and liabilities between the
date of the business combination and the date of transition to
IFRSs.

Goodwill – If deducted from Equity
¾It shall not recognise that goodwill in its opening IFRS
statement of financial position.
¾ Also shall not reclassify to profit or loss account when

it disposes the subsidiary or investment in subsidiary
becomes impaired.
¾Adjustments resulting from the subsequent resolution

of a contingency affecting the purchase consideration
shall be recognised in retained earnings.
Goodwill Under
Previous GAAP
Intangible Assets (IA)

DOES Not Qualify
Under IFRS
IA Recognised Under
IFRS
Impairment Loss
Goodwill Under IFRS

y Goodwill to be tested for impairment at the date
of transitions.
1. This IFRS requires the entity to determine
whether the goodwill is impaired or not on the
date of transition accordingly to IAS 36.
2. This test is to be conducted whether or not the
indications exist.
3. When an impairment loss or gain or loss on
disposal of subsidiary is recognised then the
entity should not take into account any goodwill
that had already been written off against equity
under the previous GAAP.

IAS 12 Income Taxes
IG5 An entity applies IAS 12 to temporary differences

between the carrying amount of the assets and liabilities
in its opening IFRS statement of financial position and
their tax bases.

IFRS 1 : Disclosures
The IFRS requires disclosures that explain
how the transition from previous GAAP to
IFRSs affected the entity’s reported
financial position, financial
performance and cash flow.
Discussed in details later.

Reconciliations of Comprehensive Income & Equity.
To Comply followings are required.
Reconciliations of Equity at two dates at;
( i) the date of the transition, and; ( 1st April,2010)
(ii) the end of the latest period presented in the entity’s most
recent annual financial statements in accordance with previous
GAAP.
(31st March,2012)
Reconciliation of Total Comprehensive Income in accordance with

IFRSs for the latest period in the entity’s most recent annual
financial statements.
Also for Interim Reports Covered Separately
Comparatives : 1st IFRS Statements shall Include:
3 Statement of Financial Position
2 Statement of Comprehensive Income

These are
2 Statement of Income , if presented. minimum
2 Statement of Cash Flows requirements
2 Statement of Changes in Equity

Related notes and Comparative information.
Facts IFRS 1 Consideration
First Timer recognises an Impairment Review required at

impairment loss of RS 5 lakhs 2 date of transition.
year ago. On a cash generate amt Includes to the write downs and
due to decline in market demand reversals of prior impairments.
the market decline now has Reversals of this impairment
reversed. booked at the date of transition.
DATE OF TRANSITION ENTRY.
DR Capital Assets 5,00,000

CR Retained Earnings 5,00,000
DR Retained Earnings
CR Assets (Depreciation adj)

M\s First Timer has accumulated IFRS 1 exemptions to recognise

unrecognised actuarial losses of Rs cumulative actuarial losses at the
10,00,000/- relating to pension plan.
date of transition otherwise need to
revisit from the date of plan
inception & determine recognise
and unrecognised cost.
DATE OF TRANSITION ENTRY
DR Retained Earnings 10,00,000

CR Pension liability 10,00,000

Mr. First Time Adapter conducted IFRS 1 Exemption from restating

3 acquisitions in last 15 years. prior business considerations.
Mr. First Timer Adapter does not Avoid restatement of each

want to revisit these transactions. transactions under IFRS 3
Goodwill impairment test still

required.

Case Study
On IFRS 1: XYZ 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 XYZ 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 costs 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 XYZ Limited on the treatment of all the above items under IFRS1
Solution :
y In order to prepare the opening IFRS balance sheet at April 1, 2010, XYZ
Limited would need to make these adjustments to its balance sheet at
March 31, 2009, presented under its previous GAAP:
1. AS 10 does not allow proposed dividend to be recognized as a liability;
instead, under the latest revision to IAS 10, they should be disclosed in
footnotes. Previous 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 Previous
Indian 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 (i.e., used in measurement of) property,
plant and equipment under IFRS.
Disclosures : Do Not Confuse
Non-IFRS comparative information and historical
summaries should be properly identified and an entity
shall :
(a) label the previous GAAP information prominently as not

being prepared in accordance with IFRSs; and
(b) disclose the nature of the main adjustments that would make
it comply with IFRSs.
No onus to quantify those adjustments.

Disclosures : Separate effects of Errors From
Changes
If an entity becomes aware of errors made

under previous GAAP, the reconciliations
required by paragraph 24(a) and (b) shall
distinguish the correction of those errors
from changes in accounting policies.

Disclosure : Reversal of impairment losses
If the entity recognised or reversed any impairment losses
for the first time in preparing its opening IFRS statement of

financial position,
the disclosures that IAS 36 Impairment of Assets would have

required if the entity
had recognised those impairment losses or reversals in the

period beginning with the date of transition to IFRSs.
(IFRS1.24(c))
Disclosures : Designation of financial assets or
financial liabilities
Classification Under I GAAP Classification under IFRS ( D.19)
Financial Assets or Financial Either

Financial Assets or Financial
Liability Liabilities through profit or loss
accounts
OR
Available for sale
In that case disclose the fair value of financial assets or
financial liabilities designated into each category at the
date of designation and their classification and carrying
amount in the previous financial statements.
Disclosures: Use of fair value as deemed cost
Fair Value
Plant ,
Property &
Intangible Investment
Equipment Assets Property
Disclose, for each line item in the opening IFRS
statement of financial position:
(a) the aggregate of those fair values; and
(b) the aggregate adjustment to the carrying amounts
reported under previous GAAP.
Disclosure : Use of deemed cost for investments in subsidiaries,
jointly controlled entities and associates
Disclose:
(a)the aggregate deemed cost of those investments for
which deemed cost is their previous GAAP carrying
amount;
(b) the aggregate deemed cost of those investments for

which deemed cost is fair value; and
(c) the aggregate adjustment to the carrying amounts

reported under previous GAAP.
Disclosure : Interim financial reports
(i) Equity
A reconciliation of its equity in accordance with

previous GAAP at the end of that comparable
interim period to its equity under IFRSs at that date

Disclosure :Interim financial reports – (ii)
Comprehensive Income
A reconciliation to its total comprehensive income
in accordance with IFRSs for that comparable
interim period (current and year to date).
The starting point for that reconciliation shall be

total comprehensive income in accordance with
previous GAAP for that period or, if an entity did
not report such a total, profit or loss in accordance
with previous GAAP.
Key Timelines and Reporting
Requirements
y Step 1-Identify the key dates and the first IFRS financial
statements.
y Step 2-Identify the differences between the accounting
policies applied under GAAP and those that IFRS requires,
and select the accounting policies to be applied under IFRS
y Step 3-Consider whether to apply any of the 12 exemptions
from the mandatory retrospective application.
y Step 4-Apply the four mandatory exceptions to
retrospective application and determine whether the
information exists to apply these to an earlier date.
y Step 5- Preparing an Opening balance sheet at the date of
transition to IFRS
y Step 6- Identifying disclosures that IFRS 1 requires.

Lets
Prepare Well in advance
Not Procrastinate
Lets Not Make First Time a
FUSS Time Adoption –

Questions
&
Answers
Thank You
CA Y. M. Desai
Office 93 & 94, Bldg 4,
Nityanand Nagar Society,
Swami Nityanand Marg,
Andheri (E),
Mumbai – 400069
Tel no. 022-26839090 / 26832850
Email: yagnesh@caymd.com

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IFRS 1 : First Time Adoption of IFRS

Delhi 15th March,2010

Separate roadmap for banking and insurance companies

Compiled & Presented By CA Yagnesh Desai

Compiled & Presented By CA Yagnesh Desai

The companies, whether listed or not, having a

Compiled & Presented By CA Yagnesh Desai

Compiled & Presented By CA Yagnesh Desai

Revised Schedule VI in line with IFRS will be

Convergence of all the accounting standards will be

Compiled & Presented By CA Yagnesh Desai

This presentation is based on IFRS 1

¾is effective for entities applying IFRSs for the

¾for annual periods beginning on Or after 1 July

(a) is transparent for users and comparable over all periods

(b) provides a suitable starting point for accounting in accordance

This means compliance with ALL IFRSs

Partial Compliance is not enough to make an

Date of Transition : The beginning of the earliest period for which

Reporting Date : The end of the latest period covered by financial

Compiled & Presented By CA Yagnesh Desai

To comply with each IFRS To recognise, De-recognise,

(d) apply IFRSs in measuring all recognised assets and liabilities.

Compiled & Presented By CA Yagnesh Desai

¾Also prohibits retrospective application of IFRSs in some

(a) its first IFRS financial statements; and

An entity’s statement of financial position at the date

Under Revised IFRS 1 Opening IFRS Statement of

IFRS-compliant financial statements presented in the

Compiled & Presented By CA Yagnesh Desai

• In conformity with IFRS in all respects, but without an explicit and

• With a categorical statement that the financial statements

• Under national GAAP or standards that differ from IFRS but

• Under national GAAP or standards, but with a reconciliation of

Compiled & Presented By CA Yagnesh Desai

• Financial Statements prepared under IFRS but only “for

• Where IFRS-compliant financial reporting had been produced

• The entity prepared a reporting package in the previous

Compiled & Presented By CA Yagnesh Desai

1. When an entity presented its financial

Compiled & Presented By CA Yagnesh Desai

Throughout all periods presented in its first IFRS

Those accounting policies shall comply with each IFRS

Compiled & Presented By CA Yagnesh Desai

Compiled & Presented By CA Yagnesh Desai

Compiled & Presented By CA Yagnesh Desai

Few Mandatory Exceptions Requirements in other

Compiled & Presented By CA Yagnesh Desai

Exceptions to the retrospective

This IFRS prohibits retrospective application

Compiled & Presented By CA Yagnesh Desai

…… from Retrospective Applications , contained

De-recognition of financial assets and

Non Controlling Interest

Para 14 -17 of IFRS – Estimates.

However, a first-time adopter should recognize all derivatives

(a)measure all derivatives at fair value; and

(b) eliminate all deferred losses and gains arising

BUT not permitted to reflect a hedging relationship in

Net Position designated as a hedged item under its

Transitional provisions of IAS 39 apply to

Transactions entered into before the date of transition

Few Mandatory Exceptions Requirements in other

De-recognition of financial assets and

Non Controlling Interest

Para 14 -17 of IFRS – Estimates.