Q1: What is IFRS 1?
IFRS 1 is an International Financial Reporting Standard that provides guidance on the first-time adoption of International Financial Reporting Standards (IFRS). It sets out the procedures that an entity must follow when transitioning from its previous accounting standards to IFRS.
Q2: What is the purpose of IFRS 1?
The purpose of IFRS 1 is to ensure that the financial statements prepared under IFRS provide reliable and relevant information about the entity's financial position, performance and cash flows. It also helps to ensure that the transition to IFRS does not result in a significant distortion of the entity's financial statements.
Q3: Who is affected by IFRS 1?
IFRS 1 applies to any entity that is adopting IFRS for the first time. This includes entities that are switching from another set of accounting standards to IFRS, as well as entities that are preparing their first set of financial statements.
Q4: What are the requirements of IFRS 1?
IFRS 1 requires an entity to:
- Prepare its opening IFRS statement of financial position at the date of transition to IFRS.
- Apply IFRS accounting policies retrospectively to all periods presented in its first IFRS financial statements.
- Make certain mandatory exemptions and optional exemptions, where applicable.
- Disclose the impact of the transition to IFRS on its financial statements.
Q5: What are some of the mandatory exemptions under IFRS 1?
The mandatory exemptions under IFRS 1 include:
- Business combinations: An entity may choose not to apply IFRS 3 Business Combinations retrospectively to business combinations that occurred before the date of transition to IFRS.
- Fair value or revaluation as deemed cost: An entity may choose to use a previous GAAP carrying amount as the deemed cost of an asset or liability when it is first measured in accordance with IFRS.
- Cumulative translation differences: An entity may reset the cumulative translation differences to zero at the date of transition to IFRS.
Q6: What are some of the optional exemptions under IFRS 1?
The optional exemptions under IFRS 1 include:
- Share-based payment transactions: An entity may choose not to apply IFRS 2 Share-based Payment retrospectively to equity instruments that were granted before the date of transition to IFRS.
- Derecognition of financial assets and liabilities: An entity may choose not to apply IAS 39 Financial Instruments: Recognition and Measurement retrospectively to transactions that occurred before the date of transition to IFRS.
- Estimates: An entity may use estimates based on the best information available at the date of transition to IFRS.
Q7: What disclosures are required under IFRS 1?
IFRS 1 requires an entity to disclose:
- The fact that it has adopted IFRS for the first time.
- A description of the accounting policies applied in its first set of IFRS financial statements.
- The reconciliations of its equity, total comprehensive income, and profit or loss reported in accordance with its previous GAAP to the amounts reported in accordance with IFRS.
- The impact of the transition to IFRS on its financial position, financial performance, and cash flows.
