IFRS 1 — Hard-wire dates

Date recorded:

The IFRIC discussed an exception that IFRS 1 First-time Adoption of International Financial Reporting Standards provides from full retrospective application of the requirements for derecognition of financial assets and financial liabilities in IAS 39 Financial Instruments: Recognition and Measurement 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.

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