IFRS 1 — Subsidiary as a first-time adopter

Date recorded:


In March 2017, the IC discussed whether a subsidiary that becomes a first-time adopter of IFRS later than its parent may apply IFRS 1.D16 to recognise cumulative translation differences (CTD) at the amount that would be included in the parent’s consolidated financial statements, based on the parent’s date of transition to IFRS.

IFRS 1.D16 permits such a subsidiary to measure its assets and liabilities, but not components of equity, based on the parent’s date of transition to IFRS. Furthermore, IFRS 1.D18 prohibits an entity from applying any of the exemptions in IFRS 1 by analogy. Accordingly, the IC concluded that IFRS 1 provides an adequate basis for a first-time adopter to determine how to account for CTD and decided not to add the issue onto its agenda.

Staff analysis on comment letters received

Three of the four respondents agreed with the IC’s technical conclusion. However, all the respondents asked the Board to consider amending IFRS 1 to extend the exemption in paragraph D16 to CTD.

The Staff conducted some analysis and agreed that it would be relatively easy to propose a narrow-scope amendment to extend the exemption of paragraph D16 to CTD. Such an amendment would have little risk of unintended consequences, would be in line with the intention of the paragraph D16 exemption of not having to keep two sets of books, and would potentially benefit many first-time adopters. However, the Staff believed that any potential standard-setting activities should consider more than just CTD (i.e. they would need to consider other components of equity as well), which would be more complex than suggested by the respondents. On balance, the Staff believed that the benefits of an amendment to IFRS 1 would not justify the costs of developing it and thus did not recommend such an amendment.

Staff recommendation

The Staff recommended that the IC finalise the agenda decision.


The IC agreed to finalise the agenda decision to confirm that the IFRS 1.D16 exemption cannot be applied to components of equity. However, they also agreed to perform additional research to help define the scope of a potential amendment to IFRS 1 in relation to this matter, i.e. whether it should be a narrow-scope amendment dealing with CTA only, or whether the scope should be broadened to cover all OCI, including a possibility of dealing only with OCI that will be subsequently recycled to profit or loss.

The IC members had mixed views about whether or not to amend IFRS 1 for the same reasons given by the Staff. The IC spent most of the session debating this issue.

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