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First-Time Adoption of IFRSs

Date recorded:

The Board discussed whether an entity should be allowed to use the exemptions on first-time adoption set out in the revised draft of the Standard for its individual entity-only financial statements (i.e. in the parent-only financial statements or subsidiary-only financial statements) when that entity has in fact already prepared IFRS-compliant information for the purposes of group reporting in the consolidated financial statements.

This issue arises because some exemptions in the latest draft Standard on first-time adoption result in measurements that depend on the date of transition to IFRSs. If an entity is a member of a group, the use of those exemptions could lead to some assets or liabilities being measured at two different amounts if the group adopts IFRSs for the first time in one period, but the entity adopts IFRSs in its separate financial statements for the first time in a different period.

The Board discussed whether, to avoid those differences in amounts, if a first-time adopter has an asset or liability that was already included in the opening IFRS balance sheet of its group (or another member of its group) at an earlier date, it should be able to elect to apply the exemptions in the Standard to that asset or liability in the same way as the group (or the other member of the group) and based on the same date of transition to IFRSs. This would mean that both entities could use the same measurements for that asset or liability.

The Board first discussed this issue for first-time adoption in the separate financial statements of the parent and the subsidiary, and then for those of associates, joint ventures, and venturers.

The Board decided as follows:

  • If the subsidiary has adopted IFRS in its entity-only financial statements before the group to which it belongs adopts IFRS for the consolidated financial statements, then the subsidiary's first-time adoption date is still the date at which it adopted IFRS for the first-time, not that of the group.
  • If the group adopts IFRS before the subsidiary adopts IFRS in its entity-only financial statements, then the subsidiary should have the option to elect that either the group date of IFRS adoption is its transition date or to first-time adopt in its entity-only financial statements.
  • If the parent has adopted IFRS in its entity-only financial statements before the group adopts IFRS for the consolidated financial statements, then the parent's first-time adoption date is still the date at which the group adopted IFRS for the first time.
  • If the group adopts IFRS before the parent adopts IFRS in its entity-only financial statements, then the parent's first-time adoption date is still the date at which the group adopted IFRS for the first time.
  • If the group adopts IFRS before its associate or joint venture adopts IFRS in its entity-only financial statements, then the associate or joint venture should have the option to elect that either the group date of IFRS adoption is its transition date or to first-time adopt in its entity-only financial statements.

The Board also discussed two issues arising from the fatal flaw review of the revised draft first-time adoption Standard by IFRIC and concluded as follows:

  • Previously recognised intangibles from past business combinations should be measured at the amount measured in the acquiree's separate financial statements on acquisition. The purchase price allocation on acquisition should not be revisited.
  • Additional explanatory information will be needed in the interim financial statements that precede the first set of IFRS annual financial statements, most notably information about expected changes in accounting policies, so that financial statement users will be aware of the changes ahead. The Board discussed whether to add these additional disclosure into the first-time adoption Standard. The Board decided to add a cross-reference in the first-time adoption Standard to IAS 1 (paragraph 12 in the exposure draft of revised IAS 1), which states that additional disclosure should be provided when the requirements in IFRS and Interpretations of IFRS are insufficient to enable users to understand the impact of particular transactions or other events on the entity's financial position and financial performance.