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IAS 39 — Transition and day 1 profit recognition

Background

At its April 2004 meeting, the IASB was made aware of difficulties in the transition requirements in IAS 39 Financial Instruments: Recognition and Measurement for first-time adopters using IFRS 1 First-time Adoption of International Financial Reporting Standards to apply fully the retrospective approach without the impracticability exception for day one profit previously recognised.

The Board also noted this was contradictory to US GAAP which limits the retrospective approach to 25 October 2002. The Board therefore decided to converge with US GAAP to only require retrospective application back to 25 October 2002. Companies would have the choice to retrospectively apply earlier.

 

Current status of the project

This project has been completed. The IASB issued Transition and Initial Recognition of Financial Assets and Financial Liabilities on 17 December 2004.

 

Project milestones

DateDevelopmentComments
8 July 2004 Exposure Draft Transition and Initial Recognition of Financial Assets and Financial Liabilities published Comment deadline 8 October 2004
17 December 2004 Transition and Initial Recognition of Financial Assets and Financial Liabilities issued Effective on initial application of IAS 39 (required for annual periods beginning on or after 1 January 2005)

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