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Financial statements presented by an entity in the current year would qualify as “first IFRS financial statements,” as explained in the Standard, if an entity presented
its most recent previous financial statements:
1. Under national generally accepted accounting principles or Standards that were inconsistent with IFRS in all respects
2. In conformity with IFRS in all respects, however, these financial statements did not contain an explicit and unreserved statement that they complied with IFRS
3. Categorically stating that the financial statements comply with certain IFRS but not all
4. Under national GAAP or Standards that differ from IFRS but using some individual IFRS to account for items that are not addressed by its national GAAP or
Standards
5. Under national GAAP or Standards with a reconciliation of some items to amounts determined under IFRS
Other examples of situations when an entity’s current year’s financial statements would qualify as “first IFRS financial statements” are when
6. The entity prepared financial statements in the previous period under IFRS but the financial statements were meant for “internal use only” and were not made
available to the entity’s owners or any other external users
7. The entity prepared a reporting package in the previous period under IFRS for consolidation purposes without preparing a complete set of financial statements
as mandated by IAS 1
8. The entity did not present financial statements for the previous periods
(in accordance with IFRS 1)
DEFINITIONS OF KEY TERMS
Date of transition to IFRS. A critical date for first-time adopters of IFRS. Refers to the beginning of the earliest period for which an entity presents full
comparative information under IFRS in its “first IFRS financial statements.”
Deemed cost. An amount substituted for “cost” or “depreciated cost” at a given date. In the subsequent period, depreciation or amortization is based on such
deemed cost on the premise that the entity had initially recognized the asset or liability at the given date and that its cost was equal to the deemed cost.
Fair value. The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction.
First IFRS financial statements. The first annual financial statements in which an entity adopts IFRS by an explicit and unreserved statement of
compliance with IFRS.
First-time adopter (of IFRS). Term used for an entity that presents its “first IFRS financial statements” in the period in which it does so.
International Financial Reporting Standards (IFRS). Collective name for the Standards issued by the International Accounting Standards Board (IASB)
and the interpretations issued by the International Financial Reporting Standards Interpretations Committee (IFRSIC). They also include all previous standards
(IAS) issued by the International Accounting Standards Committee (IASC), the IASB’s predecessor standard-setting body, and the interpretations issued by the
erstwhile Standards Interpretations Committee (SIC) and adopted by the IASB.
Opening IFRS statement of financial position. The statement of financial position prepared in accordance with the requirements of IFRS 1 as of the “date
of transition to IFRS.” (Since IFRS 1 only requires that a first-time adopter prepare an opening statement of financial position, as opposed to present an
opening statement of financial position, whether this statement of financial position is published along with the “first IFRS financial statements” or not, it would
still be considered an opening IFRS statement of financial position.)
Previous GAAP. Refers to the basis of accounting (say, national standards) that a first-time adopter used immediately prior to IFRS adoption.
Reporting date. The end of the latest period covered by financial statements or by an interim financial report. (For IFRS 1, this is another critical date since,
based on this date, a first-time adopter determines accounting policies to be applied in the preparation of the opening IFRS statement of financial position; these
policies have to be compliant with IFRS effective on that date.)
DEEMED EXCEPTIONS TO THE “FIRST-TIME ADOPTER” RULE
In a case where an entity’s financial statements in the previous year contained an explicit and unreserved statement of compliance with IFRS but in fact did not fully
comply with all aspects of IFRS, such an entity would not be considered a first-time adopter for the purposes of IFRS 1. In other words, disclosed or undisclosed
departures from IFRS in the previous year’s financial statements of an entity that has made an explicit and unreserved statement of IFRS compliance would be treated
by IFRS 1 as “errors” that warrant correction under IAS 8.
IFRS 1 identifies three instances, including the one described above, and categorically states that in such cases, this Standard does not apply. These deemed
exceptions are
• When an entity presented its financial statements in the previous year that contained an explicit and unreserved statement of compliance with IFRS and auditors
qualified their report on those financial statements
• When an entity in the previous year presented its financial statements under national requirements (i.e., its national GAAP) along with another set of financial
statements that contained an explicit or unreserved statement of compliance with IFRS and in the current year it discontinues this practice of presenting under
its national GAAP and presents only under IFRS
• When an entity in the previous year presented its financial statements under national requirements (its national GAAP) and those financial statements contained
an explicit and unreserved statement of IFRS compliance
OPENING IFRS STATEMENT OF FINANCIAL POSITION
An entity adopting IFRS for the first time is obliged, under this Standard, to prepare an opening statement of financial position on the date of transition to IFRS.
This opening IFRS statement of financial position serves as the starting point for the entity’s accounting under IFRS. Although the requirement under IFRS 1 is to
“prepare” an opening statement of financial position, this does not imply that the opening IFRS statement of financial position should also be presented in the entity’s