IASB proposes first-time adoption amendments

  • IASB Exposure Draft (original) Image

25 Jan 2007

The IASB has published an Exposure Draft proposing exemptions from the requirements of IFRSs when they are adopted for the first time.

The Exposure Draft would amend IFRS 1 First-time Adoption of International Financial Reporting Standards.

The proposals respond to concerns about difficulties encountered by parent companies in measuring the cost of an investment in a subsidiary on adopting IFRSs.

At present, IFRSs require a parent to measure an investment in a subsidiary either at its cost or at fair value. In some circumstances a parent is unable to determine cost in accordance with IFRSs but is deterred from using fair value to account for the investment by the subsequent need to measure the investment at each reporting date.

The Exposure Draft proposes to allow a parent to use a 'deemed cost' to measure its investment in subsidiaries when it first adopts IFRSs. This deemed cost can be determined by reference to the parent's investment in the net assets of the subsidiary or the fair value of the parent's investment.

In addition, the proposals would alleviate the need to restate the pre-acquisition accumulated profits of the subsidiary in accordance with IFRSs for the purposes of classifying dividends.

Comment deadline is 27 April 2007. Click for Press Release (PDF 52k).


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