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IFRS 10 – Transitional requirements (new)

Date recorded:

The Committee received a request to clarify the meaning of the 'date of initial application' in the transitional requirements of IFRS 10 Consolidated Financial Statements. The issue considered whether the date of initial application in IFRS 10 refers to the beginning of the first reporting period in which the entity adopts IFRS 10 (i.e., the current period) or the beginning of the earliest period presented in the first financial statements in which the entity adopts IFRS 10 (i.e., retrospectively restate all prior periods presented at the date of initial application of the standard).

The staff noted that the date of initial application is the date on which an investor assesses whether it controls an entity under the provisions of IFRS 10. The staff noted that the intention of the staff writing the transitional requirements of IFRS 10 was that the date of initial application is the beginning of the first reporting period in which the entity adopts the standard (i.e., 1 January 2013 for a 31 December year-end reporter that applies IFRS 10 for the first time in 2013).

However, the staff noted divergent interpretations of the meaning of the date of initial application in IFRS 10, with some entities / firms referring to the date of initial application as the beginning of the earliest period presented in the first financial statements in which the entity adopts IFRS 10. Many Committee members supported this divergent view, as they cited paragraphs C2 and C4(a) of IFRS 10 which require that the standard is retrospectively applied (with some exceptions).

Other Committee members noted that the decision on this submission has relevance in other standards as well which use the term 'date of initial application' is used. They requested that the term be defined in IFRSs — noting that IAS 19 Employee Benefits uses the term in a different context.

In considering possible situations in which retrospective application should not be required, a few Committee members sought a scope exception to retrospective application when an interest is sold prior to application of IFRS 10 (e.g., if an interest is sold in an entity prior to application of IFRS 10, an entity could apply the guidance of IAS 27 Separate Financial Statements to the prior period without restatement at application of IFRS 10). Many Committee members agreed with this view as a practical way to avoid confusing the concepts of 'date of initial application' and retrospective application.

Additionally, certain Committee members expressed a desire to clarify with the staff drafting IFRS 10 that the intention of the term 'date of initial application' was the beginning of the first reporting period in which the entity adopts the standard.

Thus, the Committee tentatively decided to: (i) clarify the intention of the term 'date of initial application' by the staff drafting IFRS 10, (ii) seek the addition of a IFRS 10 scope exception for retrospective application when an interest is sold prior to applying IFRS 10 (which the Committee intends to bring to the IASB in October 2011), and (iii) consider the addition of 'date of initial application' as a defined term in IFRSs.

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