Our comments on proposed amendments to IFRS 1

  • Deloitte Comment Letter Image

01 May 2007

We have submitted a letter in response to the IASB's January 2007 Exposure Draft of a proposed amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards: Cost of an Investment in a Subsidiary.

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. Click to Download Our Letter  (PDF 128k). An excerpt:

We welcome the fact that the Board has taken this issue on to its agenda. The proposals in the Exposure Draft address a real concern that it may be impracticable to apply IAS 27 with full retrospective effect on transition. This is creating a significant barrier, in some jurisdictions, to the adoption of IFRSs for the separate financial statements of parent companies. Addressing the issue should therefore lead to wider use of IFRSs and reduced costs for companies because they will no longer have to prepare financial statements under local GAAP.

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