• Issue discussed at March 2010 IFRIC meeting (jump to notes below)
• Issue discussed at May 2010 IFRS Interpretations Committee meeting (jump to notes below)
• Issue discussed at July 2010 IFRS Interpretations Committee meeting - Referred to IASB (jump to notes below)
• Discussed at July 2010 IASB Meeting - Added to agenda (jump to notes below)
• Exposure Draft issued on 26 August 2010
• Discussed at November 2010 IASB Meeting (jump to notes below)
• 20 December 2010: Final amendment to IFRS 1 issued. Click for More Information.

Timetable

• Click for IASB Project Timetable

Discussion at the July 2010 IASB Meeting

The Board discussed the recommendation made by the IFRS Interpretations Committee on replacing the fixed date of 1 January 2004, relating to the derecognition exception (IFRS 1.B2) and the fair value measurement of financial assets or liabilities at initial recognition (IFRS 1.D20), with a more relevant date. The Board acknowledged that the cost for an entity of reconstructing transactions back in time to 2004 would likely outweigh the benefit to be achieved by doing so. The Board unanimously agreed to replace the fixed date with "the date of transition to IFRSs". The Board also agreed to amend IFRS 1 as a separate project, rather than through the Annual Improvements process, so that the relief offered by the amendment may be available in time for those jurisdictions planning to adopt IFRSs in the near future. The amendments will have a comment period of 60 days.

Discussion at the July 2010 IFRS Interpretations Committee Meeting

IFRS 1 – Fixed Date in Derecognition Exception

At its May meeting, the Committee decided to delay the finalisation of the request to replace the fixed date of 1 January 2004 in IFRS 1.B2 with a more relevant date, pending the transition requirements specified in the exposure draft on Derecognition to be issued by the Board.  Following the revised work plan issued by the Board and the decision not to issue an exposure draft on derecognition in the near future, the Board referred to matter back to the Committee for reconsideration.

Without much discussion on the matter, the Committee agreed with the staff recommendation to replace the fixed date with the phrase "date of transition to IFRSs".  The Committee also agreed with the proposal to recommend to the Board that the amendment to IFRS 1 not being done as part of the Annual Improvement Process, but rather as a separate amendment to IFRS 1 as this will result in a more expedient solution to those jurisdictions planning to adopt IFRSs in the near future.

Discussion at the May 2010 IFRS Interpretations Committee Meeting

IFRS 1/IFRS 9 (Derecognition Chapter): Fixed Date in the Derecognition Exemption

The IFRIC continued its discussion of an exception that IFRS 1 provides from full retrospective application of the requirements for derecognition of financial assets and financial liabilities in IAS 39 for transactions before 1 January 2004. The issue was discussed initially in March 2010.

The Committee had great sympathy to move to a 'relative date' approach in IFRS 1, rather than the fixed date of 1 January 2004, such that IFRS 1 would refer to 'date of transition to IFRS'. However, it was acknowledged that it was unlikely that the change could be implemented in time for those entities adopting IFRS in 2010.

On a related matter, the Committee discussed whether a similar accommodation should be made to IFRS 1.D20 (Fair value measurement of financial assets or financial liabilities at initial recognition /'day 1 differences'), which permits entities to apply prospectively the provisions of AG76 and AG76A of IAS 39 Financial Instruments: Recognition and Measurement for transactions entered into after 25 October 2002, or 1 January 2004.

There was considerable disquiet about moving to a 'relative date' for such transactions-the Committee would be inviting structuring of transactions in anticipation of the move to IFRS in situations in which predecessor GAAP provided a 'more advantageous' financial reporting result. In addition, the Committee did not think it appropriate to write financial reporting standards in anticipation of an uncertain future event.

The Committee stressed that it and the IASB's derecognition team had to come to the same answer, and noted that the derecognition team was not in a position to inform the Committee on their position yet. The Committee did not conclude on this issue and will await developments in the derecognition phase of the IASB's financial instruments project.

Discussion at the March 2010 IFRIC Meeting

Hard-wire dates (IFRS 1)

The IFRIC discussed an exception that IFRS 1 provides from full retrospective application of the requirements for derecognition of financial assets and financial liabilities in IAS 39 for transactions before 1 January 2004.

One of the IFRIC members agreed with the staff that exception was introduced to the Standard due to effective date of IAS 39 and was originally not intended as a stand-alone exception in IFRS 1. Therefore, she noted that any such exception would endanger the consistency of the transition balance sheet.

Other IFRIC members disagreed. In their view, extending the exemption, for instance, to the date of one year before the date of transition would be a practical accommodation similar to the one was applicable for Europe in 2005 and would, at the same time, avoid potential abuse. Some IFRIC members agreed that the exemption is conceptually wrong but noted that, practically, not providing it would make it very burdensome for first-time adopters, and IFRS 1 was developed to facilitate the transition.

One IFRIC member asked if the exemption was needed at all and what would be the consequences of the repeal of this exemption. Another IFRIC member suggested another approach that would recognise only assets at the date of transition (no 'stickiness').

Several IFRIC members were concerned what the answer would be under the new derecognition guidance. As such any amendment would be applicable only for entities not applying the new guidance (that is, for an interim period of two to three years).

Finally, the IFRIC agreed that more research of the issue was warranted and asked the staff to consult the derecognition project team. In addition the IFRIC agreed to consult the national standard setters on the differences with local GAAPs as well as practical experiences with application of the exemption.

August 2010: IASB proposes amendments to IFRS 1

On 26 August 2010, the IASB published for public comment proposed amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards. The proposal would amend IFRS 1 by replacing references to a fixed transition date of ‘1 January 2004’ with ‘the date of transition to IFRSs’. As a result, entities adopting IFRSs for the first time would not have to restate derecognition transactions that occurred before the date of transition to IFRSs. In addition, first-time adopters would also not have to recalculate ‘day 1’ differences on initial recognition of financial instruments, where the transaction occurred before the date of transition to IFRSs.

The Basis for Conclusions states:

The exposure draft Removal of Fixed Dates for First-time Adopters is open for comment until 27 October 2010. It can be accessed via the IASB's website. The IASB's press release is available here (PDF 98k).

Deloitte's IFRS Global Office has published an IFRS in Focus Newsletter – IASB issues Exposure Draft on Removal of Fixed Dates for First-time Adopters (PDF 63k) explaining the proposals in the ED.

Discussion at the November 2010 IASB Meeting

The Board discussed the staff's analysis of the comment letters received on the exposure draft, Removal of Fixed Dates for First-time Adopters, published in August 2010. This exposure draft replaces the fixed date of January 1, 2004 with "the date of transition to IFRSs" in paragraphs B2 and D20 of IFRS 1 First-time Adoption of International Reporting Standards. The exposure draft was issued in response to the fixed transition date becoming more remote with the passage of time.

The staff noted that 37 comment letters were received on the exposure draft from a variety of respondents including financial statement preparers, standard setters, and accounting firms. All of the comment letters supported the proposed amendment to IFRS 1, with some respondents also including ancillary comments. The most relevant ancillary comments, as identified by the staff, included:

• the removal of other fixed dates in IFRS 1, specifically paragraphs D2 and D3,
• the increased relevance of paragraph B3 of IFRS 1
• requests to clarify the definition of "in other words" as currently stated in paragraph B2 of IFRS 1.

The staff presented their analysis of each of the three themes of ancillary comments on the exposure draft, recommending to the Board that no action should be taken with respect to the ancillary comments provided by respondents. The Board unanimously agreed with the staff's recommendations.

The staff has also recommended that the final amendment be effective for annual periods beginning on or after July 1, 2011, with early adoption permitted. The Board unanimously agreed with the staff's recommendation.

December 2010: IASB amends IFRS 1 for fixed transition dates and severe hyperinflation

On 20 December 2010 the IASB amended IFRS 1 First-time Adoption of International Financial Reporting Standards to provide relief for first-time adopters of IFRSs from having to reconstruct transactions that occurred before their date of transition to IFRSs. Click for More Information.