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Chapter 2 First-Time Adoption of IFRS (IFRS 1)
2.3
KEY CONCEPTS 2.3.1 The reporting date is the Statement of Financial Position date of the first financial statements that explicitly state that they comply with IFRS (for example, December 31, 2005).
2.3.2 The transition date is the beginning of the earliest period for which an entity presents full comparative information under IFRS in its first IFRS financial statements. For an entity to meet the requirements of IAS 1, three statements of financial position should be presented (for example, January 1, 2003, if the reporting date is December 31, 2005).
2.4
ACCOUNTING TREATMENT Opening Statement of Financial Position (Balance Sheet) 2.4.1 Entities are required to prepare and present an opening IFRS statement of financial position at the date of transition to IFRS. This is the starting point for accounting under IFRS. The opening IFRS Statement of Financial Position should recognize all assets and liabilities whose recognition is required by IFRS, but not recognize items as assets or liabilities whose recognition is not permitted by IFRS. An entity should use the same accounting policies in the opening statement of financial position and throughout all periods presented in its first IFRS financial statements. Those accounting policies should comply with each IFRS that is effective at the end of its first IFRS reporting period subject to certain exemptions and prohibitions provided for. An entity may early adopt an IFRS that is not yet mandatory on transition to IFRS provided that IFRS allows for early adoption.
2.4.2 When preparing the opening Statement of Financial Position an entity should: ■
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Recognize all assets and liabilities whose recognition is required by IFRS. Examples of changes from national GAAP are derivatives, leases, pension liabilities and assets, and deferred tax on revalued assets. Remove assets and liabilities whose recognition is not permitted by IFRS. Examples of changes from national GAAP are deferred hedging gains and losses, other deferred costs, some internally generated intangible assets, and provisions. Reclassify items that should be classified differently under IFRS. Examples of changes from national GAAP are financial assets, financial liabilities, leasehold property, compound financial instruments, and acquired intangible assets (reclassified to goodwill). Adjustments required are reclassifications between Statement of Financial Position items. Apply IFRS in measuring assets and liabilities recognized. Any adjustments resulting from events or transactions that occurred before the date of transition are recorded directly in retained earnings unless another category of equity (for example, sharebased payment reserve, or a component of other comprehensive income such as an available for sale reserve) is more appropriate.
Exemptions from Other IFRS 2.4.3 IFRS 1 provides certain exemptions from retrospective application of other IFRS. An entity may elect to apply one or more of these exemptions.
2.4.4 It is not necessary to restate business combinations that took place before the transition date. If any are restated, all later combinations must be restated. If information related to prior business combinations is not restated, the same classification (acquisition, reverse acquisition, and uniting of interests) must be retained. Carrying amounts per previous accounting principles (previous GAAP) are treated as deemed costs for IFRS purposes.