International Financial Reporting Standard 1 First‑time Adoption of International Financial Reporting Standards (IFRS 1) is set out in paragraphs 1⁠–⁠40 and Appendices A⁠–⁠E. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. Terms defined in Appendix A are in italics the first time they appear in the IFRS. Definitions of other terms are given in the Glossary for International Financial Reporting Standards. IFRS 1 should be read in the context of its objective and the Basis for Conclusions, the Preface to IFRS Standards and the Conceptual Framework for Financial Reporting. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance. [Refer:IAS 8 paragraphs 10⁠–⁠12]

International Financial Reporting Standard 1First‑time Adoption of International Financial Reporting Standards

Objective

1

The objective of this IFRS is to ensure that an entity’s first IFRS financial statements, and its interim financial reports for part of the period covered by those financial statements, contain high quality information that:

(a)

is transparent for users and comparable over all periods presented;

[Refer:Basis for Conclusions paragraphs BC7⁠–⁠BC15]

(b)

provides a suitable starting point for accounting in accordance with International Financial Reporting Standards (IFRSs); and

[Refer:Basis for Conclusions paragraphs BC16⁠–⁠BC84]

(c)

can be generated at a cost that does not exceed the benefits.

[Refer:Basis for Conclusions paragraphs BC12(a), BC26⁠–⁠BC29, BC38, BC42, BC44, BC48, BC83, BC86 and BC90]

Scope

2

An entity shall apply this IFRS in:

(a)

its first IFRS financial statements; and

[Refer:

paragraphs 3 and 4

Basis for Conclusions paragraphs BC4⁠–⁠BC6]

(b)

each interim financial report, if any, that it presents in accordance with IAS 34 Interim Financial Reporting for part of the period covered by its first IFRS financial statements.

[Refer:

paragraphs 32 and 33

Basis for Conclusions paragraph BC96

Implementation Guidance paragraphs IG37 and IG38 (including IG example 10)

IAS 34]

3

An entity’s first IFRS financial statements are the first annual financial statements [Refer:IAS 1 paragraphs 36 and 37] in which the entity adopts IFRSs, by an explicit and unreserved statement in those financial statements of compliance with IFRSs. [Refer:Basis for Conclusions paragraphs BC4⁠–⁠BC6] Financial statements in accordance with IFRSs are an entity’s first IFRS financial statements if, for example, the entity:

(a)

presented its most recent previous financial statements:

(i)

in accordance with national requirements that are not consistent with IFRSs in all respects;

(ii)

in conformity with IFRSs in all respects, except that the financial statements did not contain an explicit and unreserved statement that they complied with IFRSs;

[Refer:IAS 1 paragraph 16]

(iii)

containing an explicit statement of compliance with some, but not all, IFRSs;

(iv)

in accordance with national requirements inconsistent with IFRSs, using some individual IFRSs to account for items for which national requirements did not exist; or

(v)

in accordance with national requirements, with a reconciliation of some amounts to the amounts determined in accordance with IFRSs;

(b)

prepared financial statements in accordance with IFRSs for internal use only, without making them available to the entity’s owners or any other external users;

(c)

prepared a reporting package in accordance with IFRSs for consolidation purposes without preparing a complete set of financial statements as defined in IAS 1 Presentation of Financial Statements (as revised in 2007); or

(d)

did not present financial statements for previous periods.

4

This IFRS applies when an entity first adopts IFRSs. It does not apply when, for example, an entity: 

(a)

stops presenting financial statements in accordance with national requirements, having previously presented them as well as another set of financial statements that contained an explicit and unreserved statement of compliance with IFRSs; [Refer:IAS 1 paragraph 16]

(b)

presented financial statements in the previous year in accordance with national requirements and those financial statements contained an explicit and unreserved statement of compliance with IFRSs; or

(c)

presented financial statements in the previous year that contained an explicit and unreserved statement of compliance with IFRSs, even if the auditors qualified their audit report on those financial statements.

4A

Notwithstanding the requirements in paragraphs 2 and 3, an entity that has applied IFRSs in a previous reporting period, but whose most recent previous annual financial statements did not contain an explicit and unreserved statement of compliance with IFRSs, must either apply this IFRS or else apply IFRSs retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors as if the entity had never stopped applying IFRSs.

[Refer:Basis for Conclusions paragraphs BC6A⁠–⁠BC6C]

4B

When an entity does not elect to apply this IFRS in accordance with paragraph 4A, the entity shall nevertheless apply the disclosure requirements in paragraphs 23A⁠–⁠23B of IFRS 1, in addition to the disclosure requirements in IAS 8.

5

This IFRS does not apply to changes in accounting policies made by an entity that already applies IFRSs. Such changes are the subject of: 

(a)

requirements on changes in accounting policies in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors; and

[Refer:IAS 8 paragraphs 14⁠–⁠31 and 50⁠–⁠53]

(b)

specific transitional requirements in other IFRSs.

Recognition and measurement

Opening IFRS statement of financial position

6

An entity shall prepare and present an opening IFRS statement of financial position at the date of transition to IFRSs. This is the starting point for its accounting in accordance with IFRSs.

[Refer:

Basis for Conclusions paragraphs BC16⁠–⁠BC84

Implementation Guidance]

Accounting policies

[Refer: 

Basis for Conclusions paragraphs BC11⁠–⁠BC29

Implementation Guidance]

7

An entity shall use the same accounting policies in its opening IFRS statement of financial position and throughout all periods presented in its first IFRS financial statements. Those accounting policies shall comply with each IFRS effective at the end of its first IFRS reporting period, except as specified in paragraphs 13⁠–⁠19 and Appendices B⁠–⁠E.E1

[Refer: 

Basis for Conclusions paragraphs BC11⁠–⁠BC15

IAS 8 paragraph 50

IAS 21 paragraph 17]

E1

[IFRIC® Update, May 2010, Agenda Decision, ‘Accounting for costs included in self‑constructed assets on transition’

The Committee received two requests concerning the application of IFRSs for an entity that capitalises certain costs, including actuarial gains and losses, as part of self‑constructed assets, in accordance with its previous GAAP accounting policies. On transition to IFRSs, the entity changes its accounting policy for actuarial gains and losses and determines that they should no longer be capitalised. The requests ask whether the entity should adjust the carrying amount of self‑constructed assets on transition to IFRSs and, if not, how the change in its actuarial gains and losses accounting policy should be reflected in the carrying amount of self‑constructed assets in subsequent reporting periods.

The Committee noted that paragraph 7 of IFRS 1 requires an entity to use ‘the same accounting policies in its opening IFRS statement of financial position and throughout all periods presented in its first IFRS financial statements.’

The Committee concluded that the issue was not currently widespread, although it might impact some entities in jurisdictions in transition to IFRSs, and that there were not significantly divergent interpretations (either emerging or already existing in practice). Therefore, the Committee decided not to add this issue to its agenda.]

8

An entity shall not apply different versions of IFRSs that were effective at earlier dates. An entity may apply a new IFRS that is not yet mandatory if that IFRS permits early application.

[Refer:Basis for Conclusions paragraphs BC11 and BC11A]
Example: Consistent application of latest version of IFRSs

Background

The end of entity A’s first IFRS reporting period is 31 December 20X5. Entity A decides to present comparative information in those financial statements for one year only (see paragraph 21). Therefore, its date of transition to IFRSs is the beginning of business on 1 January 20X4 (or, equivalently, close of business on 31 December 20X3). Entity A presented financial statements in accordance with its previous GAAP annually to 31 December each year up to, and including, 31 December 20X4.

Application of requirements

Entity A is required to apply the IFRSs effective for periods ending on 31 December 20X5 in:

(a)

preparing and presenting its opening IFRS statement of financial position at 1 January 20X4; and

(b)

preparing and presenting its statement of financial position [Refer:IAS 1 paragraphs 54⁠–⁠80A] for 31 December 20X5 (including comparative amounts for 20X4), statement of comprehensive income, [Refer:IAS 1 paragraphs 81⁠–⁠105] statement of changes in equity [Refer:IAS 1 paragraphs 106⁠–⁠110] and statement of cash flows [Refer:IAS 1 paragraph 111 and IAS 7] for the year to 31 December 20X5 (including comparative amounts for 20X4) and disclosures (including comparative information for 20X4). [Refer:paragraphs 21⁠–⁠31]

If a new IFRS is not yet mandatory but permits early application, entity A is permitted, but not required, to apply that IFRS in its first IFRS financial statements.

9

The transitional provisions in other IFRSs apply to changes in accounting policies made by an entity that already uses IFRSs; they do not apply to a first‑time adopter’s transition to IFRSs, except as specified in Appendices B⁠–⁠E.

[Refer:Basis for Conclusions paragraphs BC12⁠–⁠BC15 Implementation Guidance paragraphs IG42 and IG61]

10

Except as described in paragraphs 13⁠–⁠19 and Appendices B⁠–⁠E, an entity shall, in its opening IFRS statement of financial position: 

(a)

recognise all assets and liabilities whose recognition is required by IFRSs;

(b)

not recognise items as assets or liabilities if IFRSs do not permit such recognition;

(c)

reclassify items that it recognised in accordance with previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with IFRSs; and

(d)

apply IFRSs in measuring all recognised assets and liabilities.

[Refer:Basis for Conclusions paragraphs BC17⁠–⁠BC25]

11

The accounting policies that an entity uses in its opening IFRS statement of financial position may differ from those that it used for the same date using its previous GAAP. The resulting adjustments arise from events and transactions before the date of transition to IFRSs. Therefore, an entity shall recognise those adjustments directly in retained earnings (or, if appropriate, another category of equity) at the date of transition to IFRSs.

12

This IFRS establishes two categories of exceptions to the principle that an entity’s opening IFRS statement of financial position shall comply with each IFRS: 

(a)

paragraphs 14⁠–⁠17 and Appendix B prohibit retrospective application of some aspects of other IFRSs.

(b)

Appendices C⁠–⁠E grant exemptions from some requirements of other IFRSs.

Exceptions to the retrospective application of other IFRSs

13

This IFRS prohibits retrospective application of some aspects of other IFRSs. These exceptions are set out in paragraphs 14⁠–⁠17 and Appendix B.

Estimates

14

An entity’s estimates in accordance with IFRSs at the date of transition to IFRSs shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

[Refer: 

Basis for Conclusions paragraph BC84

Implementation Guidance paragraphs IG3, IG7, IG19, IG20, IG40, IG51 and IG58]

15

An entity may receive information after the date of transition to IFRSs about estimates that it had made under previous GAAP. In accordance with paragraph 14, an entity shall treat the receipt of that information in the same way as non‑adjusting events after the reporting period in accordance with IAS 10 Events after the Reporting Period. [Refer:IAS 10 paragraphs 10 and 11] For example, assume that an entity’s date of transition to IFRSs is 1 January 20X4 and new information on 15 July 20X4 requires the revision of an estimate made in accordance with previous GAAP at 31 December 20X3. The entity shall not reflect that new information in its opening IFRS statement of financial position (unless the estimates need adjustment for any differences in accounting policies or there is objective evidence that the estimates were in error). [Refer:IAS 8 paragraph 5 (definition of prior period errors)] Instead, the entity shall reflect that new information in profit or loss [Refer:IAS 1 paragraphs 81⁠–⁠105] (or, if appropriate, other comprehensive income) for the year ended 31 December 20X4.

[Refer: 

Basis for Conclusions paragraph BC84

Implementation Guidance paragraphs IG3(a) and (b), IG20, IG40, IG51 and IG58

IG example 2]

16

An entity may need to make estimates in accordance with IFRSs at the date of transition to IFRSs that were not required at that date under previous GAAP. To achieve consistency with IAS 10, those estimates in accordance with IFRSs shall reflect conditions that existed at the date of transition to IFRSs. In particular, estimates at the date of transition to IFRSs of market prices, interest rates or foreign exchange rates shall reflect market conditions at that date.

[Refer:Implementation Guidance paragraphs IG3(c), IG7, IG41 and IG51]

17

Paragraphs 14⁠–⁠16 apply to the opening IFRS statement of financial position. They also apply to a comparative period [Refer:paragraphs 21 and 22] presented in an entity’s first IFRS financial statements, in which case the references to the date of transition to IFRSs are replaced by references to the end of that comparative period.

Exemptions from other IFRSs

18

An entity may elect to use one or more of the exemptions contained in Appendices C⁠–⁠E. An entity shall not apply these exemptions by analogy to other items.

19

[Deleted]

Presentation and disclosure

Disclosure of first-time adoption [text block] Disclosure Text block 800500, 819100
[Refer:Basis for Conclusions paragraphs BC85⁠–⁠BC95]

20

This IFRS does not provide exemptions from the presentation and disclosure requirements in other IFRSs.

Comparative information

21

An entity’s first IFRS financial statements shall include at least three statements of financial position, two statements of profit or loss and other comprehensive income, two separate statements of profit or loss (if presented), two statements of cash flows and two statements of changes in equity and related notes, including comparative information for all statements presented.

[Refer:

Basis for Conclusions paragraphs BC85⁠–⁠BC89 and BC89B

IAS 1 paragraph 38]

Non‑IFRS comparative information and historical summaries

22

Some entities present historical summaries of selected data for periods before the first period for which they present full comparative information in accordance with IFRSs. This IFRS does not require such summaries to comply with the recognition and measurement requirements of IFRSs. Furthermore, some entities present comparative information in accordance with previous GAAP as well as the comparative information required by IAS 1. In any financial statements containing historical summaries or comparative information in accordance with previous GAAP, an entity shall: 

(a)

label the previous GAAP information prominently as not being prepared in accordance with IFRSs; and

(b)

disclose the nature of the main adjustments that would make it comply with IFRSs. An entity need not quantify those adjustments.

Description of nature of main adjustments that would make historical summaries or comparative information presented in accordance with previous GAAP comply with IFRSs Disclosure Text 819100
[Refer:Basis for Conclusions paragraphs BC85⁠–⁠BC88 and BC90]

Explanation of transition to IFRSs

23

An entity shall explain how the transition from previous GAAP to IFRSs affected its reported financial position, financial performance and cash flows.

Explanation of effect of transition on reported cash flows Disclosure Text IFRS 1.25 Disclosure 819100
Explanation of effect of transition on reported financial performance Disclosure Text 819100
Explanation of effect of transition on reported financial position Disclosure Text 819100

23A

An entity that has applied IFRSs in a previous period, as described in paragraph 4A, shall disclose:

(a)

the reason it stopped applying IFRSs; and

Description of reason why entity stopped applying IFRSs Disclosure Text 819100

(b)

the reason it is resuming the application of IFRSs.

Description of reason why entity is resuming application of IFRSs Disclosure Text 819100
[Refer:Basis for Conclusions paragraph BC6E]

23B

When an entity, in accordance with paragraph 4A, does not elect to apply IFRS 1, the entity shall explain the reasons for electing to apply IFRSs as if it had never stopped applying IFRSs.

[Refer:Basis for Conclusions paragraph BC6E]
Explanation of reasons why entity elected to apply IFRSs as if it had never stopped applying IFRSs Disclosure Text 819100

Reconciliations

24

To comply with paragraph 23, an entity’s first IFRS financial statements shall include: 

(a)

reconciliations of its equity reported in accordance with previous GAAP to its equity in accordance with IFRSs for both of the following dates:

(i)

the date of transition to IFRSs; and

(ii)

the end of the latest period presented in the entity’s most recent annual [Refer:IAS 1 paragraphs 36 and 37] financial statements in accordance with previous GAAP.

[Refer: 

Basis for Conclusions paragraph BC92

Implementation Guidance paragraph IG63 (including IG example 11)]

Equity Disclosure MonetaryInstant, Credit IAS 1.55 Disclosure
IAS 1.78 e Disclosure
IFRS 1.32 a (i) Disclosure
IFRS 13.93 a Disclosure
IFRS 13.93 b Disclosure
IFRS 13.93 e Disclosure 		210000, 220000, 610000, 819100, 823000

(b)

a reconciliation to its total comprehensive income in accordance with IFRSs for the latest period in the entity’s most recent annual financial statements. The starting point for that reconciliation shall be total comprehensive income in accordance with previous GAAP for the same period or, if an entity did not report such a total, profit or loss under previous GAAP.

[Refer: 

Basis for Conclusions paragraphs BC92⁠–⁠BC92C

Implementation Guidance paragraph IG63 (including IG example 11)]

Comprehensive income Disclosure MonetaryDuration, Credit IAS 1.106 a Disclosure
IAS 1.81A c Disclosure
IFRS 1.32 a (ii) Disclosure
IFRS 12.B10 b Example
IFRS 12.B12 b (ix) Disclosure 		410000, 420000, 610000, 800200, 819100, 825700, 842000
Profit (loss) Disclosure MonetaryDuration, Credit IAS 1.106 d (i) Disclosure
IAS 1.81A a Disclosure
IAS 7.18 b Disclosure
IFRS 1.32 a (ii) Disclosure
IFRS 12.B10 b Example
IFRS 17.113 b Example
IFRS 8.23 Disclosure
IFRS 8.28 b Disclosure 		310000, 320000, 410000, 420000, 520000, 610000, 819100, 825700, 836600, 842000, 871100

(c)

if the entity recognised or reversed any impairment losses for the first time in preparing its opening IFRS statement of financial position, the disclosures that IAS 36 Impairment of Assets would have required if the entity had recognised those impairment losses or reversals in the period beginning with the date of transition to IFRSs.

[Refer: 

Basis for Conclusions paragraph BC94

IAS 36 paragraphs 126⁠–⁠137]

Disclosure of comparative information prepared under previous GAAP [table] Disclosure 819100
Disclosure of comparative information prepared under previous GAAP [text block] Disclosure Text block 819100
Effect of transition to IFRSs [member] Disclosure 819100
Financial effect of transition from previous GAAP to IFRSs [axis] Disclosure 819100, 990000
IFRSs [member] Disclosure 819100, 990000
Previous GAAP [member] Disclosure IFRS 1.29 Disclosure
IFRS 1.30 Common practice 		819100

25

The reconciliations required by paragraph 24(a) and (b) shall give sufficient detail to enable users to understand the material adjustments to the statement of financial position [Refer:IAS 1 paragraphs 54⁠–⁠80A] and statement of comprehensive income [Refer:IAS 1 paragraphs 81⁠–⁠105]. If an entity presented a statement of cash flows [Refer:IAS 7] under its previous GAAP, it shall also explain the material adjustments to the statement of cash flows.

[Refer: 

Basis for Conclusions paragraph BC92

Implementation Guidance paragraph IG63 (including IG example 11)]

Explanation of effect of transition on reported cash flows Disclosure Text IFRS 1.23 Disclosure 819100

26

If an entity becomes aware of errors made under previous GAAP, the reconciliations required by paragraph 24(a) and (b) shall distinguish the correction of those errors [Refer:IAS 8 paragraphs 41⁠–⁠48] from changes in accounting policies.

[Refer:Basis for Conclusions paragraph BC93]

27

IAS 8 does not apply to the changes in accounting policies an entity makes when it adopts IFRSs or to changes in those policies until after it presents its first IFRS financial statements. Therefore, IAS 8’s requirements about changes in accounting policies do not apply in an entity’s first IFRS financial statements.

[Refer:Basis for Conclusions paragraph BC97]

27A

If during the period covered by its first IFRS financial statements an entity changes its accounting policies or its use of the exemptions contained in this IFRS, it shall explain the changes between its first IFRS interim financial report and its first IFRS financial statements, in accordance with paragraph 23, and it shall update the reconciliations required by paragraph 24(a) and (b).

[Refer:Basis for Conclusions paragraph BC97]

28

If an entity did not present financial statements for previous periods, its first IFRS financial statements shall disclose that fact.

Explanation of fact that financial statements for previous periods not presented Disclosure Text 819100
Financial statements for previous periods not presented Disclosure True/False 819100

Designation of financial assets or financial liabilities

29

An entity is permitted to designate a previously recognised financial asset as a financial asset measured at fair value through profit or loss in accordance with paragraph D19A. The entity shall disclose the fair value of financial assets so designated at the date of designation and their classification and carrying amount in the previous financial statements.

Description of redesignated financial assets Disclosure Text 819100
Disclosure of redesignated financial assets and liabilities [table] Disclosure 819100
Disclosure of redesignated financial assets and liabilities [text block] Disclosure Text block 819100
Previous GAAP [member] Disclosure IFRS 1.24 Disclosure
IFRS 1.30 Common practice 		819100
Redesignated [member] Disclosure 819100, 990000
Redesignated financial asset as at fair value through profit or loss Disclosure MonetaryInstant, Debit 819100
Redesignation [axis] Disclosure 819100, 990000
Redesignated amount [member] Common practice 819100

29A

An entity is permitted to designate a previously recognised financial liability as a financial liability at fair value through profit or loss in accordance with paragraph D19. The entity shall disclose the fair value of financial liabilities so designated at the date of designation and their classification and carrying amount in the previous financial statements.

Description of redesignated financial liabilities Disclosure Text 819100
Redesignated financial liability as at fair value through profit or loss Disclosure MonetaryInstant, Credit 819100

Use of fair value as deemed cost

30

If an entity uses fair value in its opening IFRS statement of financial position as deemed cost for an item of property, plant and equipment, an investment property, an intangible asset or a right‑of‑use asset (see paragraphs D5 and D7), the entity’s first IFRS financial statements shall disclose, for each line item in the opening IFRS statement of financial position: 

(a)

the aggregate of those fair values; and

Aggregate of fair values [member] Disclosure 819100, 990000

(b)

the aggregate adjustment to the carrying amounts reported under previous GAAP.

Aggregate adjustment to carrying amounts reported under previous GAAP [member] Disclosure 819100
[Refer:Basis for Conclusions paragraph BC95]
Previous GAAP [member] Common practice IFRS 1.24 Disclosure
IFRS 1.29 Disclosure 		819100
Disclosure of fair values of items used as deemed cost [table] Disclosure 819100
Disclosure of fair values of items used as deemed cost [text block] Disclosure Text block 819100
Fair value as deemed cost [axis] Disclosure 819100, 990000
Intangible asset fair value used as deemed cost Disclosure MonetaryInstant, Debit 819100
Investment property fair value used as deemed cost Disclosure MonetaryInstant, Debit 819100
Property, plant and equipment fair value used as deemed cost Disclosure MonetaryInstant, Debit 819100
Right-of-use asset fair value used as deemed cost Disclosure MonetaryInstant, Debit 819100

Use of deemed cost for investments in subsidiaries, joint ventures and associates

31

Similarly, if an entity uses a deemed cost in its opening IFRS statement of financial position for an investment in a subsidiary, joint venture or associate in its separate financial statements (see paragraph D15), the entity’s first IFRS separate financial statements shall disclose:

(a)

the aggregate deemed cost of those investments for which deemed cost is their previous GAAP carrying amount;

Aggregate deemed cost of investments for which deemed cost is previous GAAP carrying amount Disclosure MonetaryInstant, Debit 819100

(b)

the aggregate deemed cost of those investments for which deemed cost is fair value; and

Aggregate deemed cost of investments for which deemed cost is fair value Disclosure MonetaryInstant, Debit 819100

(c)

the aggregate adjustment to the carrying amounts reported under previous GAAP.

Aggregate adjustment to carrying amounts of investments reported under previous GAAP Disclosure MonetaryInstant, Debit 819100

Use of deemed cost for oil and gas assets

31A

If an entity uses the exemption in paragraph D8A(b) for oil and gas assets, it shall disclose that fact and the basis on which carrying amounts determined under previous GAAP were allocated.

Carrying amounts determined under previous GAAP were allocated if entity uses exemption in IFRS 1.D8A(b) Disclosure True/False 819100
Description of fact and basis on which carrying amounts determined under previous GAAP were allocated if entity uses exemption in IFRS 1.D8A(b) Disclosure Text 819100

Use of deemed cost for operations subject to rate regulation

31B

If an entity uses the exemption in paragraph D8B for operations subject to rate regulation, it shall disclose that fact and the basis on which carrying amounts were determined under previous GAAP.

Carrying amounts were determined under previous GAAP if entity uses exemption in IFRS 1.D8B Disclosure True/False 819100
Description of fact and basis on which carrying amounts were determined under previous GAAP if entity uses exemption in IFRS 1.D8B Disclosure Text 819100

Use of deemed cost after severe hyperinflation

31C

If an entity elects to measure assets and liabilities at fair value [Refer:IFRS 13] and to use that fair value [Refer:IFRS 13] as the deemed cost in its opening IFRS statement of financial position because of severe hyperinflation (see paragraphs D26⁠–⁠D30), the entity’s first IFRS financial statements shall disclose an explanation of how, and why, the entity had, and then ceased to have, a functional currency that is subject to severe hyperinflation.

[Refer:Basis for Conclusions paragraphs BC63F⁠–⁠BC63J and BC95A]
Explanation of how and why entity had, and ceased to have, functional currency for which reliable general price index is not available and no exchangeability with stable foreign currency exists Disclosure Text 819100

Interim financial reports

[Refer:paragraph 2(b)Basis for Conclusions paragraphs BC91 and BC96Implementation Guidance paragraphs IG37 and IG38 (including IG example 10)IAS 34]

32

To comply with paragraph 23, if an entity presents an interim financial report in accordance with IAS 34 for part of the period covered by its first IFRS financial statements, the entity shall satisfy the following requirements in addition to the requirements of IAS 34: 

(a)

Each such interim financial report shall, if the entity presented an interim financial report for the comparable interim period of the immediately preceding financial year, include:

(i)

a reconciliation of its equity in accordance with previous GAAP at the end of that comparable interim period to its equity under IFRSs at that date; and

Equity Disclosure MonetaryInstant, Credit IAS 1.55 Disclosure
IAS 1.78 e Disclosure
IFRS 1.24 a Disclosure
IFRS 13.93 a Disclosure
IFRS 13.93 b Disclosure
IFRS 13.93 e Disclosure 		210000, 220000, 610000, 819100, 823000

(ii)

a reconciliation to its total comprehensive income in accordance with IFRSs for that comparable interim period (current and year to date). The starting point for that reconciliation shall be total comprehensive income in accordance with previous GAAP for that period or, if an entity did not report such a total, profit or loss in accordance with previous GAAP.

Comprehensive income Disclosure MonetaryDuration, Credit IAS 1.106 a Disclosure
IAS 1.81A c Disclosure
IFRS 1.24 b Disclosure
IFRS 12.B10 b Example
IFRS 12.B12 b (ix) Disclosure 		410000, 420000, 610000, 800200, 819100, 825700, 842000
Profit (loss) Disclosure MonetaryDuration, Credit IAS 1.106 d (i) Disclosure
IAS 1.81A a Disclosure
IAS 7.18 b Disclosure
IFRS 1.24 b Disclosure
IFRS 12.B10 b Example
IFRS 17.113 b Example
IFRS 8.23 Disclosure
IFRS 8.28 b Disclosure 		310000, 320000, 410000, 420000, 520000, 610000, 819100, 825700, 836600, 842000, 871100

(b)

In addition to the reconciliations required by (a), an entity’s first interim financial report in accordance with IAS 34 for part of the period covered by its first IFRS financial statements shall include the reconciliations described in paragraph 24(a) and (b) (supplemented by the details required by paragraphs 25 and 26) or a cross‑reference to another published document that includes these reconciliations.

(c)

If an entity changes its accounting policies or its use of the exemptions contained in this IFRS, it shall explain the changes in each such interim financial report in accordance with paragraph 23 and update the reconciliations required by (a) and (b).

[Refer:Basis for Conclusions paragraph BC97]

33

IAS 34 requires minimum disclosures, which are based on the assumption that users of the interim financial report also have access to the most recent annual [Refer:IAS 1 paragraphs 36 and 37] financial statements. However, IAS 34 also requires an entity to disclose ‘any events or transactions that are material [Refer:IAS 34 paragraphs 23⁠–⁠25] to an understanding of the current interim period’. Therefore, if a first‑time adopter did not, in its most recent annual financial statements in accordance with previous GAAP, disclose information material to an understanding of the current interim period, its interim financial report shall disclose that information or include a cross‑reference to another published document that includes it.

Explanation of cross-reference to interim financial statement disclosures for first-time adopter Disclosure Text 819100

Effective date

34

An entity shall apply this IFRS if its first IFRS financial statements are for a period beginning on or after 1 July 2009. Earlier application is permitted.

35

An entity shall apply the amendments in paragraphs D1(n) and D23 for annual periods [Refer:IAS 1 paragraphs 36 and 37] beginning on or after 1 July 2009. If an entity applies IAS 23 Borrowing Costs (as revised in 2007) for an earlier period, those amendments shall be applied for that earlier period.

36

IFRS 3 Business Combinations (as revised in 2008) amended paragraphs 19, C1 and C4(f) and (g). If an entity applies IFRS 3 (revised 2008) for an earlier period, the amendments shall also be applied for that earlier period.

37

IAS 27 Consolidated and Separate Financial Statements (as amended in 2008) amended paragraphs B1 and B7. If an entity applies IAS 27 (amended 2008) for an earlier period, the amendments shall be applied for that earlier period.

38

Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (Amendments to IFRS 1 and IAS 27), issued in May 2008, added paragraphs 31, D1(g), D14 and D15. An entity shall apply those paragraphs for annual periods [Refer:IAS 1 paragraphs 36 and 37] beginning on or after 1 July 2009. Earlier application is permitted. If an entity applies the paragraphs for an earlier period, it shall disclose that fact.

39

Paragraph B7 was amended by Improvements to IFRSs issued in May 2008. An entity shall apply those amendments for annual periods [Refer:IAS 1 paragraphs 36 and 37] beginning on or after 1 July 2009. If an entity applies IAS 27 (amended 2008) for an earlier period, the amendments shall be applied for that earlier period.

39A

Additional Exemptions for First‑time Adopters (Amendments to IFRS 1), issued in July 2009, added paragraphs 31A, D8A, D9A and D21A and amended paragraph D1(c), (d) and (l). An entity shall apply those amendments for annual periods beginning on or after 1 January 2010. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact.

39B

[Deleted]

39C

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments added paragraph D25. An entity shall apply that amendment when it applies IFRIC 19.

39D

[Deleted]

39E

Improvements to IFRSs issued in May 2010 added paragraphs 27A, 31B and D8B and amended paragraphs 27, 32, D1(c) and D8. An entity shall apply those amendments for annual periods beginning on or after 1 January 2011. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact. Entities that adopted IFRSs in periods before the effective date of IFRS 1 or applied IFRS 1 in a previous period are permitted to apply the amendment to paragraph D8 retrospectively in the first annual period after the amendment is effective. An entity applying paragraph D8 retrospectively shall disclose that fact.

39F

[Deleted]

39G

[Deleted]

39H

Severe Hyperinflation and Removal of Fixed Dates for First‑time Adopters (Amendments to IFRS 1), issued in December 2010, amended paragraphs B2, D1 and D20 and added paragraphs 31C and D26⁠–⁠D30. An entity shall apply those amendments for annual periods beginning on or after 1 July 2011. Earlier application is permitted.

39I

IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements, issued in May 2011, amended paragraphs 31, B7, C1, D1, D14 and D15 and added paragraph D31. An entity shall apply those amendments when it applies IFRS 10 and IFRS 11.

39J

IFRS 13 Fair Value Measurement, issued in May 2011, deleted paragraph 19, amended the definition of fair value in Appendix A and amended paragraphs D15 and D20. An entity shall apply those amendments when it applies IFRS 13.

[Refer:IFRS 13 Appendix C]

39K

Presentation of Items of Other Comprehensive Income (Amendments to IAS 1), issued in June 2011, amended paragraph 21. An entity shall apply that amendment when it applies IAS 1 as amended in June 2011.

[Refer:IAS 1 Basis for Conclusions paragraphs BC105A and BC105B]

39L

IAS 19 Employee Benefits (as amended in June 2011) amended paragraph D1 and deleted paragraphs D10 and D11. An entity shall apply those amendments when it applies IAS 19 (as amended in June 2011).

39M

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine added paragraph D32 and amended paragraph D1. An entity shall apply that amendment when it applies IFRIC 20.

39N

Government Loans (Amendments to IFRS 1), issued in March 2012, added paragraphs B1(f) and B10⁠–⁠B12. An entity shall apply those paragraphs for annual periods beginning on or after 1 January 2013. Earlier application is permitted.

39O

Paragraphs B10 and B11 refer to IFRS 9. If an entity applies this IFRS but does not yet apply IFRS 9, the references in paragraphs B10 and B11 to IFRS 9 shall be read as references to IAS 39 Financial Instruments: Recognition and Measurement.

39P

Annual Improvements 2009⁠–⁠2011 Cycle, issued in May 2012, added paragraphs 4A⁠–⁠4B and 23A⁠–⁠23B. An entity shall apply that amendment retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors for annual periods beginning on or after 1 January 2013. Earlier application is permitted. If an entity applies that amendment for an earlier period it shall disclose that fact.

39Q

Annual Improvements 2009⁠–⁠2011 Cycle, issued in May 2012, amended paragraph D23. An entity shall apply that amendment retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors for annual periods beginning on or after 1 January 2013. Earlier application is permitted. If an entity applies that amendment for an earlier period it shall disclose that fact.

39R

Annual Improvements 2009⁠–⁠2011 Cycle, issued in May 2012, amended paragraph 21. An entity shall apply that amendment retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors for annual periods beginning on or after 1 January 2013. Earlier application is permitted. If an entity applies that amendment for an earlier period it shall disclose that fact.

39S

Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12), issued in June 2012, amended paragraph D31. An entity shall apply that amendment when it applies IFRS 11 (as amended in June 2012).

39T

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), issued in October 2012, amended paragraphs D16, D17 and Appendix C. An entity shall apply those amendments for annual periods beginning on or after 1 January 2014. Earlier application of Investment Entities is permitted. If an entity applies those amendments earlier it shall also apply all amendments included in Investment Entities at the same time.

39U

[Deleted]

39V

IFRS 14 Regulatory Deferral Accounts, issued in January 2014, amended paragraph D8B. An entity shall apply that amendment for annual periods beginning on or after 1 January 2016. Earlier application is permitted. If an entity applies IFRS 14 for an earlier period, the amendment shall be applied for that earlier period.

39W

Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11), issued in May 2014, amended paragraph C5. An entity shall apply that amendment in annual periods beginning on or after 1 January 2016. If an entity applies related amendments to IFRS 11 from Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) [Refer:IFRS 11 paragraphs 21A, B33A⁠–⁠B33D, C1AA and C14A] in an earlier period, the amendment to paragraph C5 shall be applied in that earlier period.

39X

IFRS 15 Revenue from Contracts with Customers, issued in May 2014, amended paragraph D1, deleted paragraph D24 and its related heading and added paragraphs D34⁠–⁠D35 and their related heading. An entity shall apply those amendments when it applies IFRS 15.

39Y

IFRS 9 Financial Instruments, as issued in July 2014, amended paragraphs 29, B1⁠–⁠B6, D1, D14, D15, D19 and D20, deleted paragraphs 39B, 39G and 39U and added paragraphs 29A, B8⁠–⁠B8G, B9, D19A⁠–⁠D19C, D33, E1 and E2. An entity shall apply those amendments when it applies IFRS 9.

39Z

Equity Method in Separate Financial Statements (Amendments to IAS 27), issued in August 2014, amended paragraph D14 and added paragraph D15A. An entity shall apply those amendments for annual periods beginning on or after 1 January 2016. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact.

39AA

[Deleted]

39AB

IFRS 16 Leases, issued in January 2016, amended paragraphs 30, C4, D1, D7, D8B and D9, deleted paragraph D9A and added paragraphs D9B⁠–⁠D9E. An entity shall apply those amendments when it applies IFRS 16.

39AC

IFRIC 22 Foreign Currency Transactions and Advance Consideration added paragraph D36 and amended paragraph D1. An entity shall apply that amendment when it applies IFRIC 22.

39AD

Annual Improvements to IFRS Standards 2014⁠–⁠2016 Cycle, issued in December 2016, amended paragraphs 39L and 39T and deleted paragraphs 39D, 39F, 39AA and E3⁠–⁠E7. An entity shall apply those amendments for annual periods beginning on or after 1 January 2018.

[Refer:Basis for Conclusions paragraph BC99]

39AE

IFRS 17 Insurance Contracts, issued in May 2017, amended paragraphs B1 and D1, deleted the heading before paragraph D4 and paragraph D4, and after paragraph B12 added a heading and paragraph B13. An entity shall apply those amendments when it applies IFRS 17.

39AF

IFRIC 23 Uncertainty over Income Tax Treatments added paragraph E8. An entity shall apply that amendment when it applies IFRIC 23.

39AG

Annual Improvements to IFRS Standards 2018⁠–⁠2020, issued in May 2020, amended paragraph D1(f) and added paragraph D13A. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2022. Earlier application is permitted. If an entity applies the amendment for an earlier period, it shall disclose that fact.

39AH

Deferred Tax related to Assets and Liabilities arising from a Single Transaction, issued in May 2021, amended paragraph B1 and added paragraph B14. An entity shall apply these amendments for annual reporting periods beginning on or after 1 January 2023. Earlier application is permitted. If an entity applies the amendments for an earlier period, it shall disclose that fact.

39AI

Lack of Exchangeability (Amendments to IAS 21), issued in August 2023, amended paragraphs 31C and D27. An entity shall apply those amendments when it applies IAS 21 (as amended in August 2023).

Withdrawal of IFRS 1 (issued 2003)

40

This IFRS supersedes IFRS 1 (issued in 2003 and amended at May 2008).

Appendices

Appendix ADefined terms

This appendix is an integral part of the IFRS.

date of transition to IFRSs

The beginning of the earliest period for which an entity presents full comparative information under IFRSs [Refer:paragraphs 21 and 22] in its first IFRS financial statements.

deemed cost 

An amount used as a surrogate for cost or depreciated cost at a given date. Subsequent depreciation or amortisation assumes that the entity had initially recognised the asset or liability at the given date and that its cost was equal to the deemed cost.

[Refer:paragraphs D1 and D5⁠–⁠D8]
fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See IFRS 13.)

first IFRS financial statements

The first annual [Refer:IAS 1 paragraphs 36 and 37] financial statements in which an entity adopts International Financial Reporting Standards (IFRSs), by an explicit and unreserved statement of compliance with IFRSs. [Refer:IAS 1 paragraph 16]

[Refer: 

paragraphs 2⁠–⁠4

Basis for Conclusions paragraphs BC4 and BC5]

first IFRS reporting period

The latest reporting period covered by an entity’s first IFRS financial statements.

first‑time adopter

An entity that presents its first IFRS financial statements.

International Financial Reporting Standards (IFRSs)

Standards and Interpretations issued by the International Accounting Standards Board (IASB). They comprise: 

(a)

International Financial Reporting Standards;

(b)

International Accounting Standards;

(c)

IFRIC Interpretations; and

(d)

SIC Interpretations.1

opening IFRS statement of financial position

An entity’s statement of financial position at the date of transition to IFRSs.

[Refer:IAS 1 paragraphs 54⁠–⁠80A]
previous GAAP

The basis of accounting that a first‑time adopter used immediately before adopting IFRSs.

Appendix BExceptions to the retrospective application of other IFRSs

This appendix is an integral part of the IFRS.

B1

An entity shall apply the following exceptions:

(a)

derecognition of financial assets and financial liabilities (paragraphs B2 and B3);

(b)

hedge accounting (paragraphs B4⁠–⁠B6);

(c)

non‑controlling interests (paragraph B7);

(d)

classification and measurement of financial assets (paragraphs B8⁠–⁠B8C);

(e)

impairment of financial assets (paragraphs B8D⁠–⁠B8G);

(f)

embedded derivatives (paragraph B9);

(g)

government loans (paragraphs B10⁠–⁠B12);

(h)

insurance contracts (paragraph B13); and

(i)

deferred tax related to leases and decommissioning, restoration and similar liabilities (paragraph B14).

Derecognition of financial assets and financial liabilities

[Refer: 

Basis for Conclusions paragraphs BC20⁠–⁠BC23

Implementation Guidance paragraphs IG52⁠–⁠IG54]

B2

Except as permitted by paragraph B3, a first-time adopter shall apply the derecognition requirements in IFRS 9 prospectively for transactions occurring on or after the date of transition to IFRSs. [Refer:Basis for Conclusions paragraph BC22A] For example, if a first-time adopter derecognised non-derivative financial assets or non-derivative financial liabilities in accordance with its previous GAAP as a result of a transaction that occurred before the date of transition to IFRSs, it shall not recognise those assets and liabilities in accordance with IFRSs (unless they qualify for recognition as a result of a later transaction or event).

B3

Despite paragraph B2, an entity may apply the derecognition requirements in IFRS 9 retrospectively from a date of the entity’s choosing, provided that the information needed to apply IFRS 9 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.

Hedge accounting

[Refer:

Basis for Conclusions paragraphs BC75⁠–⁠BC80

Implementation Guidance paragraphs IG60⁠–⁠IG60B]

B4

As required by IFRS 9, at the date of transition to IFRSs an entity shall:

[Refer:paragraphs 7⁠–⁠12]

(a)

measure all derivatives at fair value; and

(b)

eliminate all deferred losses and gains arising on derivatives that were reported in accordance with previous GAAP as if they were assets or liabilities.

[Refer:Implementation Guidance paragraphs IG60A and IG60B]

B5

An entity shall not reflect in its opening IFRS statement of financial position a hedging relationship of a type that does not qualify for hedge accounting in accordance with IFRS 9 (for example, many hedging relationships where the hedging instrument is a stand-alone written option or a net written option; or where the hedged item is a net position in a cash flow hedge for another risk than foreign currency risk). However, if an entity designated a net position as a hedged item in accordance with previous GAAP, it may designate as a hedged item in accordance with IFRSs an individual item within that net position, or a net position if that meets the requirements in paragraph 6.6.1 of IFRS 9, provided that it does so no later than the date of transition to IFRSs. [Refer:IFRS 9 paragraphs B6.6.1−B6.6.4 and IFRS 9 Basis for Conclusions paragraphs BC6.435−BC6.437]

B6

If, before the date of transition to IFRSs, an entity had designated a transaction as a hedge but the hedge does not meet the conditions for hedge accounting in IFRS 9, the entity shall apply paragraphs 6.5.6 and 6.5.7 of IFRS 9 to discontinue hedge accounting. Transactions entered into before the date of transition to IFRSs shall not be retrospectively designated as hedges.

[Refer:IFRS 9 paragraphs B6.5.22−B6.5.28 and IFRS 9 Basis for Conclusions paragraphs BC6.314−BC6.352]

Non‑controlling interests

B7

A first‑time adopter shall apply the following requirements of IFRS 10 prospectively from the date of transition to IFRSs:

(a)

the requirement in paragraph B94 that total comprehensive income is attributed to the owners of the parent and to the non‑controlling interests even if this results in the non‑controlling interests having a deficit balance;

(b)

the requirements in paragraphs 23 and B96 for accounting for changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control; and

(c)

the requirements in paragraphs B97⁠–⁠B99 for accounting for a loss of control over a subsidiary, and the related requirements of paragraph 8A of IFRS 5 Non‑current Assets Held for Sale and Discontinued Operations.

However, if a first‑time adopter elects to apply IFRS 3 retrospectively to past business combinations, it shall also apply IFRS 10 in accordance with paragraph C1 of this IFRS.

Classification and measurement of financial instruments

B8

An entity shall assess whether a financial asset meets the conditions in paragraph 4.1.2 of IFRS 9 or the conditions in paragraph 4.1.2A of IFRS 9 on the basis of the facts and circumstances that exist at the date of transition to IFRSs.

B8A

If it is impracticable to assess a modified time value of money element in accordance with paragraphs B4.1.9B⁠–⁠B4.1.9D of IFRS 9 on the basis of the facts and circumstances that exist at the date of transition to IFRSs, an entity shall assess the contractual cash flow characteristics of that financial asset on the basis of the facts and circumstances that existed at the date of transition to IFRSs without taking into account the requirements related to the modification of the time value of money element in paragraphs B4.1.9B⁠–⁠B4.1.9D of IFRS 9. (In this case, the entity shall also apply paragraph 42R of IFRS 7 but references to ‘paragraph 7.2.4 of IFRS 9’ shall be read to mean this paragraph and references to ‘initial recognition of the financial asset’ shall be read to mean ‘at the date of transition to IFRSs’.)

B8B

If it is impracticable to assess whether the fair value of a prepayment feature is insignificant in accordance with paragraph B4.1.12(c) of IFRS 9 on the basis of the facts and circumstances that exist at the date of transition to IFRSs, an entity shall assess the contractual cash flow characteristics of that financial asset on the basis of the facts and circumstances that existed at the date of transition to IFRSs without taking into account the exception for prepayment features in paragraph B4.1.12 of IFRS 9. (In this case, the entity shall also apply paragraph 42S of IFRS 7 but references to ‘paragraph 7.2.5 of IFRS 9’ shall be read to mean this paragraph and references to ‘initial recognition of the financial asset’ shall be read to mean ‘at the date of transition to IFRSs’.)

B8C

If it is impracticable (as defined in IAS 8) for an entity to apply retrospectively the effective interest method in IFRS 9, the fair value of the financial asset or the financial liability at the date of transition to IFRSs shall be the new gross carrying amount of that financial asset or the new amortised cost of that financial liability at the date of transition to IFRSs.

Impairment of financial assets

B8D

An entity shall apply the impairment requirements in Section 5.5 of IFRS 9 retrospectively subject to paragraphs B8E⁠–⁠B8G and E1⁠–⁠E2.

B8E

At the date of transition to IFRSs, an entity shall use reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognised (or for loan commitments and financial guarantee contracts the date that the entity became a party to the irrevocable commitment in accordance with paragraph 5.5.6 of IFRS 9) and compare that to the credit risk at the date of transition to IFRSs (also see paragraphs B7.2.2⁠–⁠B7.2.3 of IFRS 9).

B8F

When determining whether there has been a significant increase in credit risk since initial recognition, an entity may apply:

(a)

the requirements in paragraph 5.5.10 and B5.5.22⁠–⁠B5.5.24 of IFRS 9; and

(b)

the rebuttable presumption in paragraph 5.5.11 of IFRS 9 for contractual payments that are more than 30 days past due if an entity will apply the impairment requirements by identifying significant increases in credit risk since initial recognition for those financial instruments on the basis of past due information.

B8G

If, at the date of transition to IFRSs, determining whether there has been a significant increase in credit risk since the initial recognition of a financial instrument would require undue cost or effort, an entity shall recognise a loss allowance at an amount equal to lifetime expected credit losses at each reporting date until that financial instrument is derecognised (unless that financial instrument is low credit risk at a reporting date, in which case paragraph B8F(a) applies).

Embedded derivatives

B9

A first-time adopter shall assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative on the basis of the conditions that existed at the later of the date it first became a party to the contract and the date a reassessment is required by paragraph B4.3.11 of IFRS 9.

Government loans

[Refer:Basis for Conclusions paragraphs BC80A and BC80B]

B10

A first-time adopter shall classify all government loans received as a financial liability or an equity instrument in accordance with IAS 32 Financial Instruments: Presentation. Except as permitted by paragraph B11, a first-time adopter shall apply the requirements in IFRS 9 Financial Instruments and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance prospectively to government loans existing at the date of transition to IFRSs and shall not recognise the corresponding benefit of the government loan at a below-market rate of interest as a government grant. Consequently, if a first-time adopter did not, under its previous GAAP, recognise and measure a government loan at a below-market rate of interest on a basis consistent with IFRS requirements, it shall use its previous GAAP carrying amount of the loan at the date of transition to IFRSs as the carrying amount of the loan in the opening IFRS statement of financial position. An entity shall apply IFRS 9 to the measurement of such loans after the date of transition to IFRSs.

[Refer:

Basis for Conclusions paragraph BC80C

Implementation Guidance paragraph IG66 and IG Example 12]

B11

Despite paragraph B10, an entity may apply the requirements in IFRS 9 and IAS 20 retrospectively to any government loan originated before the date of transition to IFRSs, provided that the information needed to do so had been obtained at the time of initially accounting for that loan.

[Refer:Basis for Conclusions paragraphs BC80D and BC80E Implementation Guidance paragraph IG66 and IG Example 12]

B12

The requirements and guidance in paragraphs B10 and B11 do not preclude an entity from being able to use the exemptions described in paragraphs D19⁠–⁠D19C relating to the designation of previously recognised financial instruments at fair value through profit or loss.

Insurance contracts

[Refer:IFRS 17 Basis for Conclusions paragraph BC407]

B13

An entity shall apply the transition provisions in paragraphs C1⁠–⁠C24 and C28 in Appendix C of IFRS 17 to contracts within the scope of IFRS 17. The references in those paragraphs in IFRS 17 to the transition date shall be read as the date of transition to IFRSs.

Deferred tax related to leases and decommissioning, restoration and similar liabilities

B14

Paragraphs 15 and 24 of IAS 12 Income Taxes exempt an entity from recognising a deferred tax asset or liability in particular circumstances. Despite this exemption, at the date of transition to IFRSs, a first-time adopter shall recognise a deferred tax asset—to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised—and a deferred tax liability for all deductible and taxable temporary differences associated with:

(a)

right-of-use assets and lease liabilities; and

(b)

decommissioning, restoration and similar liabilities and the corresponding amounts recognised as part of the cost of the related asset.

[Refer:IAS 12 Basis for Conclusions paragraph BC95]

Appendix CExemptions for business combinations

This appendix is an integral part of the IFRS. An entity shall apply the following requirements to business combinations that the entity recognised before the date of transition to IFRSs. This Appendix should only be applied to business combinations within the scope of IFRS 3 Business Combinations.

[Refer: 

Basis for Conclusions paragraphs BC31⁠–⁠BC40

Implementation Guidance paragraph IG22

IG examples 2⁠–⁠7]

C1

A first‑time adopter may elect not to apply IFRS 3 retrospectively to past business combinations (business combinations that occurred before the date of transition to IFRSs). However, if a first‑time adopter restates any business combination to comply with IFRS 3, it shall restate all later business combinations and shall also apply IFRS 10 from that same date. For example, if a first‑time adopter elects to restate a business combination that occurred on 30 June 20X6, it shall restate all business combinations that occurred between 30 June 20X6 and the date of transition to IFRSs, and it shall also apply IFRS 10 from 30 June 20X6.

[Refer:Basis for Conclusions paragraphs BC31⁠–⁠BC34]

C2

An entity need not apply IAS 21 The Effects of Changes in Foreign Exchange Rates retrospectively to fair value adjustments and goodwill arising in business combinations that occurred before the date of transition to IFRSs. If the entity does not apply IAS 21 retrospectively to those fair value adjustments and goodwill, it shall treat them as assets and liabilities of the entity rather than as assets and liabilities of the acquiree. Therefore, those goodwill and fair value adjustments either are already expressed in the entity’s functional currency or are non‑monetary foreign currency items, which are reported using the exchange rate applied in accordance with previous GAAP.

[Refer: 

Implementation Guidance paragraph IG21A

IAS 21 paragraph 47

IAS 21 Basis for Conclusions paragraphs BC26⁠–⁠BC32]

C3

An entity may apply IAS 21 retrospectively to fair value adjustments and goodwill arising in either:

[Refer:

Implementation Guidance paragraph IG21A

IAS 21 paragraph 47

IAS 21 Basis for Conclusions paragraphs BC26⁠–⁠BC32]

(a)

all business combinations that occurred before the date of transition to IFRSs; or

(b)

all business combinations that the entity elects to restate to comply with IFRS 3, as permitted by paragraph C1 above.

C4

If a first‑time adopter does not apply IFRS 3 retrospectively to a past business combination, this has the following consequences for that business combination: 

(a)

The first‑time adopter shall keep the same classification (as an acquisition by the legal acquirer, a reverse acquisition by the legal acquiree, or a uniting of interests) as in its previous GAAP financial statements.

[Refer:IG example 2]

(b)

The first‑time adopter shall recognise all its assets and liabilities at the date of transition to IFRSs that were acquired or assumed in a past business combination, other than:

(i)

some financial assets and financial liabilities derecognised in accordance with previous GAAP (see paragraph B2); and

(ii)

assets, including goodwill, and liabilities that were not recognised in the acquirer’s consolidated statement of financial position in accordance with previous GAAP and also would not qualify for recognition in accordance with IFRSs in the separate statement of financial position of the acquiree (see (f)⁠–⁠(i) below).

[Refer:Basis for Conclusions paragraph BC18(a)]

The first‑time adopter shall recognise any resulting change by adjusting retained earnings (or, if appropriate, another category of equity), unless the change results from the recognition of an intangible asset that was previously subsumed within goodwill (see (g)(i) below).

(c)

The first‑time adopter shall exclude from its opening IFRS statement of financial position any item recognised in accordance with previous GAAP that does not qualify for recognition as an asset or liability under IFRSs. The first‑time adopter shall account for the resulting change as follows:

(i)

the first‑time adopter may have classified a past business combination as an acquisition and recognised as an intangible asset an item that does not qualify for recognition as an asset in accordance with IAS 38 Intangible Assets. It shall reclassify that item (and, if any, the related deferred tax and non‑controlling interests) as part of goodwill (unless it deducted goodwill directly from equity in accordance with previous GAAP, see (g)(i) and (i) below).

(ii)

the first‑time adopter shall recognise all other resulting changes in retained earnings.2

[Refer:IG examples 3 and 5]

(d)

IFRSs require subsequent measurement of some assets and liabilities on a basis that is not based on original cost, such as fair value. The first‑time adopter shall measure these assets and liabilities on that basis in its opening IFRS statement of financial position, even if they were acquired or assumed in a past business combination. It shall recognise any resulting change in the carrying amount by adjusting retained earnings (or, if appropriate, another category of equity), rather than goodwill.

[Refer:IG example 2]

(e)

Immediately after the business combination, the carrying amount in accordance with previous GAAP of assets acquired and liabilities assumed in that business combination shall be their deemed cost in accordance with IFRSs at that date. If IFRSs require a cost‑based measurement of those assets and liabilities at a later date, that deemed cost shall be the basis for cost‑based depreciation or amortisation from the date of the business combination.

[Refer:IG example 2]

(f)

If an asset acquired, or liability assumed, in a past business combination was not recognised in accordance with previous GAAP, it does not have a deemed cost of zero in the opening IFRS statement of financial position. Instead, the acquirer shall recognise and measure it in its consolidated statement of financial position on the basis that IFRSs would require in the statement of financial position of the acquiree. To illustrate: if the acquirer had not, in accordance with its previous GAAP, capitalised leases acquired in a past business combination in which the acquiree was a lessee, it shall capitalise those leases in its consolidated financial statements, as IFRS 16 Leases would require the acquiree to do in its IFRS statement of financial position. [Refer:IG example 7] Similarly, if the acquirer had not, in accordance with its previous GAAP, recognised a contingent liability that still exists at the date of transition to IFRSs, the acquirer shall recognise that contingent liability at that date unless IAS 37 Provisions, Contingent Liabilities and Contingent Assets would prohibit its recognition in the financial statements of the acquiree. Conversely, if an asset or liability was subsumed in goodwill in accordance with previous GAAP but would have been recognised separately under IFRS 3, that asset or liability remains in goodwill unless IFRSs would require its recognition in the financial statements of the acquiree.

[Refer: 

Basis for Conclusions paragraph BC35

Implementation Guidance paragraph IG22

IG examples 5 and 7]

(g)

The carrying amount of goodwill in the opening IFRS statement of financial position shall be its carrying amount in accordance with previous GAAP at the date of transition to IFRSs, after the following two adjustments:

[Refer: 

Basis for Conclusions paragraphs BC36⁠–⁠BC40

IG examples 2, 3 and 5]

(i)

If required by (c)(i) above, the first‑time adopter shall increase the carrying amount of goodwill when it reclassifies an item that it recognised as an intangible asset in accordance with previous GAAP. Similarly, if (f) above requires the first‑time adopter to recognise an intangible asset that was subsumed in recognised goodwill in accordance with previous GAAP, the first‑time adopter shall decrease the carrying amount of goodwill accordingly (and, if applicable, adjust deferred tax and non‑controlling interests).

[Refer:IG example 4]

(ii)

Regardless of whether there is any indication that the goodwill may be impaired, the first‑time adopter shall apply IAS 36 in testing the goodwill for impairment at the date of transition to IFRSs and in recognising any resulting impairment loss in retained earnings (or, if so required by IAS 36, in revaluation surplus). The impairment test shall be based on conditions at the date of transition to IFRSs.

[Refer: 

Basis for Conclusions paragraphs BC36⁠–⁠BC40

IG examples 4 and 6]

(h)

No other adjustments shall be made to the carrying amount of goodwill at the date of transition to IFRSs. For example, the first‑time adopter shall not restate the carrying amount of goodwill:

[Refer:IG example 5]

(i)

to exclude in‑process research and development acquired in that business combination (unless the related intangible asset would qualify for recognition in accordance with IAS 38 in the statement of financial position of the acquiree);

(ii)

to adjust previous amortisation of goodwill;

(iii)

to reverse adjustments to goodwill that IFRS 3 would not permit, but were made in accordance with previous GAAP because of adjustments to assets and liabilities between the date of the business combination and the date of transition to IFRSs.

(i)

If the first‑time adopter recognised goodwill in accordance with previous GAAP as a deduction from equity:

[Refer:IG example 5]

(i)

it shall not recognise that goodwill in its opening IFRS statement of financial position. Furthermore, it shall not reclassify that goodwill to profit or loss if it disposes of the subsidiary or if the investment in the subsidiary becomes impaired.

(ii)

adjustments resulting from the subsequent resolution of a contingency affecting the purchase consideration shall be recognised in retained earnings.

(j)

In accordance with its previous GAAP, the first‑time adopter may not have consolidated a subsidiary acquired in a past business combination (for example, because the parent did not regard it as a subsidiary in accordance with previous GAAP or did not prepare consolidated financial statements). The first‑time adopter shall adjust the carrying amounts of the subsidiary’s assets and liabilities to the amounts that IFRSs would require in the subsidiary’s statement of financial position. The deemed cost of goodwill equals the difference at the date of transition to IFRSs between:

(i)

the parent’s interest in those adjusted carrying amounts; and

(ii)

the cost in the parent’s separate financial statements of its investment in the subsidiary.

[Refer:IG example 6]

(k)

The measurement of non‑controlling interests and deferred tax follows from the measurement of other assets and liabilities. Therefore, the above adjustments to recognised assets and liabilities affect non‑controlling interests and deferred tax.

[Refer:IG example 2]

C5

The exemption for past business combinations also applies to past acquisitions of investments in associates, interests in joint ventures and interests in joint operations in which the activity of the joint operation constitutes a business, as defined in IFRS 3 [Refer:IFRS 3 paragraphs B7⁠–⁠B12 and IFRS 11 paragraph 21A]. Furthermore, the date selected for paragraph C1 applies equally for all such acquisitions.

Appendix DExemptions from other IFRSs

This appendix is an integral part of the IFRS.

D1

An entity may elect to use one or more of the following exemptions:

(a)

share‑based payment transactions (paragraphs D2 and D3);

(b)

[deleted]

(c)

deemed cost (paragraphs D5⁠–⁠D8B);

(d)

leases (paragraphs D9 and D9B⁠–⁠D9E);

(e)

[deleted]

(f)

cumulative translation differences (paragraphs D12⁠–⁠D13A);

(g)

investments in subsidiaries, joint ventures and associates (paragraphs D14⁠–⁠D15A);

(h)

assets and liabilities of subsidiaries, associates and joint ventures (paragraphs D16 and D17);

(i)

compound financial instruments (paragraph D18);

(j)

designation of previously recognised financial instruments (paragraphs D19⁠–⁠D19C);

(k)

fair value measurement of financial assets or financial liabilities at initial recognition (paragraph D20);

(l)

decommissioning liabilities included in the cost of property, plant and equipment (paragraphs D21 and D21A);

(m)

financial assets or intangible assets accounted for in accordance with IFRIC 12 Service Concession Arrangements (paragraph D22);

(n)

borrowing costs (paragraph D23);

(o)

[deleted]

(p)

extinguishing financial liabilities with equity instruments (paragraph D25);

(q)

severe hyperinflation (paragraphs D26⁠–⁠D30);

(r)

joint arrangements (paragraph D31);

(s)

stripping costs in the production phase of a surface mine (paragraph D32);

(t)

designation of contracts to buy or sell a non-financial item (paragraph D33);

(u)

revenue (paragraphs D34 and D35); and

(v)

foreign currency transactions and advance consideration (paragraph D36).

An entity shall not apply these exemptions by analogy to other items.

Share‑based payment transactions

D2

A first‑time adopter is encouraged, but not required, to apply IFRS 2 Share‑based Payment to equity instruments that were granted on or before 7 November 2002. A first‑time adopter is also encouraged, but not required, to apply IFRS 2 to equity instruments that were granted after 7 November 2002 and vested before the later of (a) the date of transition to IFRSs and (b) 1 January 2005. However, if a first‑time adopter elects to apply IFRS 2 to such equity instruments, it may do so only if the entity has disclosed publicly the fair value of those equity instruments, determined at the measurement date, as defined in IFRS 2. For all grants of equity instruments to which IFRS 2 has not been applied (eg equity instruments granted on or before 7 November 2002), a first‑time adopter shall nevertheless disclose the information required by paragraphs 44 and 45 of IFRS 2. If a first‑time adopter modifies the terms or conditions of a grant of equity instruments to which IFRS 2 has not been applied, the entity is not required to apply paragraphs 26⁠–⁠29 of IFRS 2 if the modification occurred before the date of transition to IFRSs.

D3

A first‑time adopter is encouraged, but not required, to apply IFRS 2 to liabilities arising from share‑based payment transactions that were settled before the date of transition to IFRSs. A first‑time adopter is also encouraged, but not required, to apply IFRS 2 to liabilities that were settled before 1 January 2005. For liabilities to which IFRS 2 is applied, a first‑time adopter is not required to restate comparative information [Refer:IAS 1 paragraphs 38⁠–⁠44] to the extent that the information relates to a period or date that is earlier than 7 November 2002.

D4

[Deleted]

Deemed cost

[Refer:Basis for Conclusions paragraphs BC41⁠–⁠BC47]

D5

An entity may elect to measure an item of property, plant and equipment at the date of transition to IFRSs at its fair value and use that fair value as its deemed cost at that date.

[Refer: 

paragraph 30

Basis for Conclusions paragraph BC44

Implementation Guidance paragraphs IG8⁠–⁠IG11]

D6

A first‑time adopter may elect to use a previous GAAP revaluation of an item of property, plant and equipment at, or before, the date of transition to IFRSs as deemed cost at the date of the revaluation, if the revaluation was, at the date of the revaluation, broadly comparable to:

(a)

fair value; or

(b)

cost or depreciated cost in accordance with IFRSs, adjusted to reflect, for example, changes in a general or specific price index.

[Refer: 

Basis for Conclusions paragraphs BC46 and BC47

Implementation Guidance paragraphs IG8⁠–⁠IG11]

D7

The elections in paragraphs D5 and D6 are also available for:

(a)

investment property, if an entity elects to use the cost model in IAS 40 Investment Property; [Refer:IAS 40 paragraphs 30 and 56]

[Refer:Implementation Guidance paragraphs IG7⁠–⁠IG13 and IG62]

(aa)

right-of-use assets (IFRS 16 Leases); [Refer:IFRS 16 Appendix A (definition of right-of-use asset)] and

(b)

intangible assets that meet:

(i)

the recognition criteria in IAS 38 (including reliable measurement of original cost); and

[Refer:IAS 38 paragraphs 18⁠–⁠67]

(ii)

the criteria in IAS 38 for revaluation (including the existence of an active market).

[Refer:IAS 38 paragraphs 75⁠–⁠87]
[Refer:

Basis for Conclusions paragraph BC71

Implementation Guidance paragraph IG50]

An entity shall not use these elections for other assets or for liabilities.

[Refer:

paragraph 30

Basis for Conclusions paragraph BC44]

D8

A first‑time adopter may have established a deemed cost in accordance with previous GAAP for some or all of its assets and liabilities by measuring them at their fair value at one particular date because of an event such as a privatisation or initial public offering. 

(a)

If the measurement date is at or before the date of transition to IFRSs, the entity may use such event‑driven fair value measurements as deemed cost for IFRSs at the date of that measurement.

(b)

If the measurement date is after the date of transition to IFRSs, but during the period covered by the first IFRS financial statements, the event‑driven fair value measurements may be used as deemed cost when the event occurs. An entity shall recognise the resulting adjustments directly in retained earnings (or if appropriate, another category of equity) at the measurement date. At the date of transition to IFRSs, the entity shall either establish the deemed cost by applying the criteria in paragraphs D5⁠–⁠D7 or measure assets and liabilities in accordance with the other requirements in this IFRS.

[Refer: 

Basis for Conclusions paragraphs BC46⁠–⁠BC46B

Implementation Guidance paragraphs IG8⁠–⁠IG10 and IG50]

D8A

Under some national accounting requirements exploration and development costs for oil and gas properties in the development or production phases are accounted for in cost centres that include all properties in a large geographical area. A first‑time adopter using such accounting under previous GAAP may elect to measure oil and gas assets at the date of transition to IFRSs on the following basis:

(a)

exploration and evaluation assets at the amount determined under the entity’s previous GAAP; and

(b)

assets in the development or production phases at the amount determined for the cost centre under the entity’s previous GAAP. The entity shall allocate this amount to the cost centre’s underlying assets pro rata using reserve volumes or reserve values as of that date.

The entity shall test exploration and evaluation assets and assets in the development and production phases for impairment at the date of transition to IFRSs in accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources or IAS 36 respectively and, if necessary, reduce the amount determined in accordance with (a) or (b) above. For the purposes of this paragraph, oil and gas assets comprise only those assets used in the exploration, evaluation, development or production of oil and gas.

[Refer:

Basis for Conclusions paragraphs BC30(b) and BC47A⁠–⁠BC47E

Implementation Guidance paragraphs IG8 and IG9]

D8B

Some entities hold items of property, plant and equipment, right‑of‑use assets or intangible assets that are used, or were previously used, in operations subject to rate regulation. The carrying amount of such items might include amounts that were determined under previous GAAP but do not qualify for capitalisation in accordance with IFRSs. If this is the case, a first‑time adopter may elect to use the previous GAAP carrying amount of such an item at the date of transition to IFRSs as deemed cost. If an entity applies this exemption to an item, it need not apply it to all items. At the date of transition to IFRSs, an entity shall test for impairment in accordance with IAS 36 each item for which this exemption is used. For the purposes of this paragraph, operations are subject to rate regulation if they are governed by a framework for establishing the prices that can be charged to customers for goods or services and that framework is subject to oversight and/or approval by a rate regulator (as defined in IFRS 14 Regulatory Deferral Accounts).

[Refer:

Basis for Conclusions paragraphs BC47F⁠–⁠BC47K

IFRS 14 Basis for Conclusions paragraphs BC38, BC40⁠–⁠BC43, BC46 and BC77]

Leases

[Refer:IFRS 16 Basis for Conclusions paragraphs BC299⁠–⁠BC302]

D9

A first-time adopter may assess whether a contract existing at the date of transition to IFRSs contains a lease by applying paragraphs 9⁠–⁠11 of IFRS 16 to those contracts on the basis of facts and circumstances existing at that date.

D9A

[Deleted]

D9B

When a first-time adopter that is a lessee recognises lease liabilities and right-of-use assets, it may apply the following approach to all of its leases (subject to the practical expedients described in paragraph D9D):

(a)

measure a lease liability at the date of transition to IFRSs. A lessee following this approach shall measure that lease liability at the present value of the remaining lease payments (see paragraph D9E), discounted using the lessee’s incremental borrowing rate (see paragraph D9E) at the date of transition to IFRSs.

(b)

measure a right-of-use asset at the date of transition to IFRSs. The lessee shall choose, on a lease-by-lease basis, to measure that right-of-use asset at either:

(i)

its carrying amount as if IFRS 16 had been applied since the commencement date of the lease (see paragraph D9E), but discounted using the lessee’s incremental borrowing rate at the date of transition to IFRSs; or

(ii)

an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position immediately before the date of transition to IFRSs.

[Refer:paragraph D7(aa)]

(c)

apply IAS 36 to right-of-use assets at the date of transition to IFRSs.

D9C

Notwithstanding the requirements in paragraph D9B, a first-time adopter that is a lessee shall measure the right-of-use asset at fair value at the date of transition to IFRSs for leases that meet the definition of investment property in IAS 40 [Refer:IAS 40 paragraph 5 (definition of investment property)] and are measured using the fair value model in IAS 40 [Refer:IAS 40 paragraphs 33⁠–⁠55] from the date of transition to IFRSs.

D9D

A first-time adopter that is a lessee may do one or more of the following at the date of transition to IFRSs, applied on a lease-by-lease basis:

(a)

apply a single discount rate to a portfolio of leases with reasonably similar characteristics (for example, a similar remaining lease term for a similar class of underlying asset in a similar economic environment). [Refer:IFRS 16 Basis for Conclusions paragraph BC287 Portfolio approach]

(b)

elect not to apply the requirements in paragraph D9B to leases for which the lease term (see paragraph D9E) ends within 12 months of the date of transition to IFRSs. Instead, the entity shall account for (including disclosure of information about) these leases as if they were short-term leases accounted for in accordance with paragraph 6 of IFRS 16. [Refer:IFRS 16 Basis for Conclusions paragraph BC287 Leases for which the lease term ends within 12 months]

(c)

elect not to apply the requirements in paragraph D9B to leases for which the underlying asset is of low value (as described in paragraphs B3⁠–⁠B8 of IFRS 16). Instead, the entity shall account for (including disclosure of information about) these leases in accordance with paragraph 6 of IFRS 16.

(d)

exclude initial direct costs (see paragraph D9E) from the measurement of the right-of-use asset at the date of transition to IFRSs. [Refer:IFRS 16 Basis for Conclusions paragraph BC287 Initial direct costs]

(e)

use hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease. [Refer:Basis for Conclusions paragraph BC287 Use of hindsight]

D9E

Lease payments, lessee, lessee’s incremental borrowing rate, commencement date of the lease, initial direct costs and lease term are defined terms in IFRS 16 [Refer:IFRS 16 Appendix A] and are used in this Standard with the same meaning.

D10⁠–D11

[Deleted]

Cumulative translation differences

[Refer:Basis for Conclusions paragraphs BC53⁠–⁠BC55C]

D12

IAS 21 requires an entity:

(a)

to recognise some translation differences in other comprehensive income and accumulate these in a separate component of equity; and

[Refer:IAS 21 paragraphs 21 and 27⁠–⁠45]

(b)

on disposal of a foreign operation, to reclassify the cumulative translation difference for that foreign operation (including, if applicable, gains and losses on related hedges) from equity to profit or loss [Refer:IAS 1 paragraphs 88⁠–⁠105] as part of the gain or loss on disposal.

[Refer:IAS 21 paragraphs 32 and 48]

D13

However, a first‑time adopter need not comply with these requirements for cumulative translation differences that existed at the date of transition to IFRSs. If a first‑time adopter uses this exemption:

(a)

the cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRSs; and

(b)

the gain or loss on a subsequent disposal of any foreign operation shall exclude translation differences that arose before the date of transition to IFRSs and shall include later translation differences.

D13A

Instead of applying paragraph D12 or paragraph D13, a subsidiary that uses the exemption in paragraph D16(a) may elect, in its financial statements, to measure cumulative translation differences for all foreign operations at the carrying amount that would be included in the parent’s consolidated financial statements, based on the parent’s date of transition to IFRSs, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. A similar election is available to an associate or joint venture that uses the exemption in paragraph D16(a).

Investments in subsidiaries, joint ventures and associates

[Refer:Basis for Conclusions paragraphs BC58A⁠–⁠BC58M]

D14

When an entity prepares separate financial statements, IAS 27 requires it to account for its investments in subsidiaries, joint ventures and associates either:

(a)

at cost;

(b)

in accordance with IFRS 9; or

(c)

using the equity method as described in IAS 28.

D15

If a first-time adopter measures such an investment at cost in accordance with IAS 27, it shall measure that investment at one of the following amounts in its separate opening IFRS statement of financial position:

(a)

cost determined in accordance with IAS 27; or

(b)

deemed cost. The deemed cost of such an investment shall be its:

(i)

fair value at the entity’s date of transition to IFRSs in its separate financial statements; or

(ii)

previous GAAP carrying amount at that date.

A first-time adopter may choose either (i) or (ii) above to measure its investment in each subsidiary, joint venture or associate that it elects to measure using a deemed cost.

D15A

If a first-time adopter accounts for such an investment using the equity method procedures as described in IAS 28:

(a)

the first-time adopter applies the exemption for past business combinations (Appendix C) to the acquisition of the investment.

(b)

if the entity becomes a first-time adopter for its separate financial statements earlier than for its consolidated financial statements, and

(i)

later than its parent, the entity shall apply paragraph D16 in its separate financial statements.

(ii)

later than its subsidiary, the entity shall apply paragraph D17 in its separate financial statements.

Assets and liabilities of subsidiaries, associates and joint ventures

[Refer:

Basis for Conclusions paragraphs BC59⁠–⁠BC63

Implementation Guidance paragraphs IG26⁠–⁠IG31]

D16

If a subsidiary becomes a first‑time adopter later than its parent, the subsidiary shall, in its financial statements, measure its assets and liabilities at either: 

(a)

the carrying amounts that would be included in the parent’s consolidated financial statements, based on the parent’s date of transition to IFRSs, if no adjustments were made for consolidation procedures [Refer:IFRS 10 paragraphs B86⁠–⁠B96] and for the effects of the business combination in which the parent acquired the subsidiary (this election is not available to a subsidiary of an investment entity, as defined in IFRS 10, that is required to be measured at fair value through profit or loss); [Refer:IFRS 3] or

(b)

the carrying amounts required by the rest of this IFRS, based on the subsidiary’s date of transition to IFRSs. These carrying amounts could differ from those described in (a):

(i)

when the exemptions in this IFRS result in measurements that depend on the date of transition to IFRSs.

(ii)

when the accounting policies used in the subsidiary’s financial statements differ from those in the consolidated financial statements. For example, the subsidiary may use as its accounting policy the cost model [Refer:IAS 16 paragraph 30] in IAS 16 Property, Plant and Equipment, whereas the group may use the revaluation model. [Refer:IAS 16 paragraphs 31⁠–⁠42]

A similar election is available to an associate or joint venture that becomes a first‑time adopter later than an entity that has significant influence or joint control over it.

[Refer:IG example 8]

D17

However, if an entity becomes a first‑time adopter later than its subsidiary (or associate or joint venture) the entity shall, in its consolidated financial statements, measure the assets and liabilities of the subsidiary (or associate or joint venture) at the same carrying amounts as in the financial statements of the subsidiary (or associate or joint venture), after adjusting for consolidation [Refer:IFRS 10 paragraphs B86⁠–⁠B96] and equity accounting adjustments [Refer:IAS 28 paragraphs 10⁠–⁠43] and for the effects of the business combination [Refer:IFRS 3] in which the entity acquired the subsidiary. Notwithstanding this requirement, a non-investment entity parent shall not apply the exception to consolidation that is used by any investment entity subsidiaries. [Refer:IFRS 10 Basis for Conclusions paragraphs BC275⁠–⁠BC283] Similarly, if a parent becomes a first‑time adopter for its separate financial statements earlier or later than for its consolidated financial statements, it shall measure its assets and liabilities at the same amounts in both financial statements, except for consolidation adjustments.

[Refer:IG example 9]

Compound financial instruments

D18

IAS 32 Financial Instruments: Presentation requires an entity to split a compound financial instrument at inception into separate liability and equity components. [Refer:IAS 32 paragraphs 28⁠–⁠32] If the liability component is no longer outstanding, retrospective application of IAS 32 involves separating two portions of equity. The first portion is in retained earnings and represents the cumulative interest accreted on the liability component. The other portion represents the original equity component. However, in accordance with this IFRS, a first‑time adopter need not separate these two portions if the liability component is no longer outstanding at the date of transition to IFRSs.

[Refer:

Basis for Conclusions paragraphs BC56⁠–⁠BC58

Implementation Guidance paragraph IG36]

Designation of previously recognised financial instruments

[Refer: paragraphs 29 and 29A Basis for Conclusions paragraph BC63A Implementation Guidance paragraph IG56]

D19

IFRS 9 permits a financial liability (provided it meets certain criteria) to be designated as a financial liability at fair value through profit or loss. Despite this requirement an entity is permitted to designate, at the date of transition to IFRSs, any financial liability as at fair value through profit or loss provided the liability meets the criteria in paragraph 4.2.2 of IFRS 9 at that date.

D19A

An entity may designate a financial asset as measured at fair value through profit or loss in accordance with paragraph 4.1.5 of IFRS 9 on the basis of the facts and circumstances that exist at the date of transition to IFRSs.

D19B

An entity may designate an investment in an equity instrument as at fair value through other comprehensive income in accordance with paragraph 5.7.5 of IFRS 9 on the basis of the facts and circumstances that exist at the date of transition to IFRSs.

D19C

For a financial liability that is designated as a financial liability at fair value through profit or loss, an entity shall determine whether the treatment in paragraph 5.7.7 of IFRS 9 would create an accounting mismatch in profit or loss on the basis of the facts and circumstances that exist at the date of transition to IFRSs.

Fair value measurement of financial assets or financial liabilities at initial recognition

D20

Despite the requirements of paragraphs 7 and 9, an entity may apply the requirements in paragraph B5.1.2A(b) of IFRS 9 prospectively to transactions entered into on or after the date of transition to IFRSs.

[Refer:Basis for Conclusions paragraphs BC74(d) and BC83A]

Decommissioning liabilities included in the cost of property, plant and equipment

D21

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities requires specified changes in a decommissioning, restoration or similar liability to be added to or deducted from the cost of the asset to which it relates; the adjusted depreciable amount of the asset is then depreciated prospectively over its remaining useful life. [Refer:IFRIC 1 paragraphs 4⁠–⁠7] A first‑time adopter need not comply with these requirements for changes in such liabilities that occurred before the date of transition to IFRSs. If a first‑time adopter uses this exemption, it shall:

(a)

measure the liability as at the date of transition to IFRSs in accordance with IAS 37; [Refer:IAS 37 paragraphs 36⁠–⁠52]

(b)

to the extent that the liability is within the scope of IFRIC 1, [Refer:IFRIC 1 paragraph 2] estimate the amount that would have been included in the cost of the related asset when the liability first arose, by discounting the liability to that date using its best estimate of the historical risk‑adjusted discount rate(s) that would have applied for that liability over the intervening period; and

(c)

calculate the accumulated depreciation on that amount, as at the date of transition to IFRSs, on the basis of the current estimate of the useful life of the asset, using the depreciation policy adopted by the entity in accordance with IFRSs.

[Refer:

Basis for Conclusions paragraph BC63C

Implementation Guidance paragraphs IG13 and IG201⁠–⁠IG203

IG example 201

IFRIC 1 Basis for Conclusions paragraph BC33]

D21A

An entity that uses the exemption in paragraph D8A(b) (for oil and gas assets in the development or production phases accounted for in cost centres that include all properties in a large geographical area under previous GAAP) shall, instead of applying paragraph D21 or IFRIC 1:

(a)

measure decommissioning, restoration and similar liabilities as at the date of transition to IFRSs in accordance with IAS 37; and

(b)

recognise directly in retained earnings any difference between that amount and the carrying amount of those liabilities at the date of transition to IFRSs determined under the entity’s previous GAAP.

[Refer:Basis for Conclusions paragraphs BC30(j) and BC63CA]

Financial assets or intangible assets accounted for in accordance with IFRIC 12

Borrowing costs

D23

A first-time adopter can elect to apply the requirements of IAS 23 from the date of transition or from an earlier date as permitted by paragraph 28 of IAS 23. From the date on which an entity that applies this exemption begins to apply IAS 23, the entity:

(a)

shall not restate the borrowing cost component that was capitalised under previous GAAP and that was included in the carrying amount of assets at that date; and

(b)

shall account for borrowing costs incurred on or after that date in accordance with IAS 23, including those borrowing costs incurred on or after that date on qualifying assets already under construction.

[Refer:

paragraph 35

Basis for Conclusions paragraphs BC63E⁠–⁠BC63EB

Implementation Guidance paragraphs IG23 and IG24]

D24

[Deleted]

Extinguishing financial liabilities with equity instruments

D25

A first‑time adopter may apply the transitional provisions in IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments.

Severe hyperinflation

D26

If an entity has a functional currency that was, or is, the currency of a hyperinflationary economy, it shall determine whether it was subject to severe hyperinflation [Refer:paragraph D27] before the date of transition to IFRSs. This applies to entities that are adopting IFRSs for the first time, as well as entities that have previously applied IFRSs.

D27

The currency of a hyperinflationary economy is subject to severe hyperinflation if it has both of the following characteristics:

(a)

a reliable general price index is not available to all entities with transactions and balances in the currency.

(b)

the currency is not exchangeable into a relatively stable foreign currency. Exchangeability is assessed in accordance with IAS 21.

[Refer:Basis for Conclusions paragraph BC95A]

D28

The functional currency of an entity ceases to be subject to severe hyperinflation on the functional currency normalisation date. That is the date when the functional currency no longer has either, or both, of the characteristics in paragraph D27, or when there is a change in the entity’s functional currency to a currency that is not subject to severe hyperinflation.

D29

When an entity’s date of transition to IFRSs is on, or after, the functional currency normalisation date, [Refer:paragraph D28] the entity may elect to measure all assets and liabilities held before the functional currency normalisation date at fair value [Refer:IFRS 13] on the date of transition to IFRSs. The entity may use that fair value as the deemed cost of those assets and liabilities in the opening IFRS statement of financial position.

[Refer:Basis for Conclusions paragraphs BC63F⁠–⁠BC63J]

D30

When the functional currency normalisation date [Refer:paragraph D28] falls within a 12‑month comparative period, the comparative period may be less than 12 months, provided that a complete set of financial statements (as required by paragraph 10 of IAS 1) is provided for that shorter period.

Joint arrangements

D31

A first‑time adopter may apply the transition provisions in IFRS 11 [Refer:IFRS 11 Appendix C] with the following exceptions:

(a)

When applying the transition provisions in IFRS 11, a first-time adopter shall apply these provisions at the date of transition to IFRS.

(b)

When changing from proportionate consolidation to the equity method, a first-time adopter shall test for impairment the investment in accordance with IAS 36 as at the date of transition to IFRS, regardless of whether there is any indication that the investment may be impaired. Any resulting impairment shall be recognised as an adjustment to retained earnings at the date of transition to IFRS.

[Refer:Basis for Conclusions paragraphs BC63K⁠–⁠BC63M]

Stripping costs in the production phase of a surface mine

D32

A first‑time adopter may apply the transitional provisions set out in paragraphs A1 to A4 of IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine. In that paragraph, reference to the effective date shall be interpreted as 1 January 2013 or the beginning of the first IFRS reporting period, whichever is later.

Designation of contracts to buy or sell a non-financial item

D33

IFRS 9 permits some contracts to buy or sell a non-financial item to be designated at inception as measured at fair value through profit or loss (see paragraph 2.5 of IFRS 9). Despite this requirement an entity is permitted to designate, at the date of transition to IFRSs, contracts that already exist on that date as measured at fair value through profit or loss but only if they meet the requirements of paragraph 2.5 of IFRS 9 at that date and the entity designates all similar contracts.

Revenue

D34

A first-time adopter may apply the transition provisions in paragraph C5 of IFRS 15. In those paragraphs references to the ‘date of initial application’ shall be interpreted as the beginning of the first IFRS reporting period. If a first-time adopter decides to apply those transition provisions, it shall also apply paragraph C6 of IFRS 15.

D35

A first-time adopter is not required to restate contracts that were completed before the earliest period presented. A completed contract is a contract for which the entity has transferred all of the goods or services identified in accordance with previous GAAP.

Foreign currency transactions and advance consideration

D36

A first-time adopter need not apply IFRIC 22 Foreign Currency Transactions and Advance Consideration to assets, expenses and income in the scope of that Interpretation initially recognised before the date of transition to IFRS Standards.

[Refer:IFRIC 22 Basis for Conclusions paragraph BC33]

Appendix EShort‑term exemptions from IFRSs

This appendix is an integral part of the IFRS.

Exemption from the requirement to restate comparative information for IFRS 9

E1

If an entity’s first IFRS reporting period begins before 1 January 2019 and the entity applies the completed version of IFRS 9 (issued in 2014), the comparative information in the entity’s first IFRS financial statements need not comply with IFRS 7 Financial Instruments: Disclosure or the completed version of IFRS 9 (issued in 2014), to the extent that the disclosures required by IFRS 7 relate to items within the scope of IFRS 9. For such entities, references to the ‘date of transition to IFRSs’ shall mean, in the case of IFRS 7 and IFRS 9 (2014) only, the beginning of the first IFRS reporting period.

[Refer:IFRS 9 Basis for Conclusions paragraph BC7.71(a)]

E2

An entity that chooses to present comparative information that does not comply with IFRS 7 and the completed version of IFRS 9 (issued in 2014) in its first year of transition shall:

(a)

apply the requirements of its previous GAAP in place of the requirements of IFRS 9 to comparative information about items within the scope of IFRS 9.

(b)

disclose this fact together with the basis used to prepare this information.

[Refer:IAS 1 paragraph 117]
Comparative information does not comply with IFRS 7 and IFRS 9 Disclosure True/False 819100
Description of basis used to prepare comparative information that does not comply with IFRS 7 and IFRS 9 Disclosure Text 819100
Statement that comparative information does not comply with IFRS 7 and IFRS 9 Disclosure Text 819100

(c)

treat any adjustment between the statement of financial position at the comparative period’s reporting date (ie the statement of financial position that includes comparative information under previous GAAP) and the statement of financial position at the start of the first IFRS reporting period (ie the first period that includes information that complies with IFRS 7 and the completed version of IFRS 9 (issued in 2014)) as arising from a change in accounting policy and give the disclosures required by paragraph 28(a)⁠–⁠(e) and (f)(i) of IAS 8. Paragraph 28(f)(i) applies only to amounts presented in the statement of financial position at the comparative period’s reporting date.

(d)

apply paragraph 17(c) of IAS 1 to provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.

[Refer:IFRS 9 Basis for Conclusions paragraph BC7.71(b)]

E3⁠–E7

[Deleted] [Refer:Basis for Conclusions paragraph BC99]

Uncertainty over income tax treatments

[Refer:IFRIC 23 Basis for Conclusions paragraph BC26]

E8

A first-time adopter whose date of transition to IFRSs is before 1 July 2017 may elect not to reflect the application of IFRIC 23 Uncertainty over Income Tax Treatments in comparative information in its first IFRS financial statements. An entity that makes that election shall recognise the cumulative effect of applying IFRIC 23 as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of its first IFRS reporting period.

Board Approvals

Approval by the Board of IFRS 1 issued in November 2008

International Financial Reporting Standard 1 First‑time Adoption of International Financial Reporting Standards (as revised in 2008) was approved for issue by the thirteen members of the International Accounting Standards Board.3

Sir David TweedieChairman
Thomas E JonesVice‑Chairman
Mary E Barth
Stephen Cooper
Philippe Danjou
Jan Engström
Robert P Garnett
Gilbert Gélard
James J Leisenring
Warren J McGregor
John T Smith
Tatsumi Yamada
Wei‑Guo Zhang

Approval by the Board of Additional Exemptions for First‑time Adopters (Amendments to IFRS 1) issued in July 2009

Additional Exemptions for First‑time Adopters (Amendments to IFRS 1) was approved for issue by the fourteen members of the International Accounting Standards Board.

Sir David TweedieChairman
Thomas E JonesVice‑Chairman
Mary E Barth
Stephen Cooper
Philippe Danjou
Jan Engström
Robert P Garnett
Gilbert Gélard
Prabhakar Kalavacherla
James J Leisenring
Warren J McGregor
John T Smith
Tatsumi Yamada
Wei‑Guo Zhang

Approval by the Board of Limited Exemption from Comparative IFRS 7 Disclosures for First‑time Adopters (Amendment to IFRS 1) issued in January 2010

Limited Exemption from Comparative IFRS 7 Disclosures for First‑time Adopters (Amendment to IFRS 1) was approved for issue by the fifteen members of the International Accounting Standards Board.

Sir David TweedieChairman
Stephen Cooper
Philippe Danjou
Jan Engström
Patrick Finnegan
Robert P Garnett
Gilbert Gélard
Amaro Luiz de Oliveira Gomes
Prabhakar Kalavacherla
James J Leisenring
Patricia McConnell
Warren J McGregor
John T Smith
Tatsumi Yamada
Wei‑Guo Zhang

Approval by the Board of Severe Hyperinflation and Removal of Fixed Dates for First‑time Adopters (Amendments to IFRS 1) issued in December 2010

Severe Hyperinflation and Removal of Fixed Dates for First‑time Adopters was approved for issue by the fifteen members of the International Accounting Standards Board.

Sir David Tweedie Chairman
Stephen Cooper
Philippe Danjou
Jan Engström
Patrick Finnegan
Amaro Luiz de Oliveira Gomes
Prabhakar Kalavacherla
Elke König
Patricia McConnell
Warren J McGregor
Paul Pacter
Darrel Scott
John T Smith
Tatsumi Yamada
Wei‑Guo Zhang

Approval by the Board of Government Loans (Amendments to IFRS 1) issued in March 2012

Government Loans (Amendments to IFRS 1) was approved for issue by the fourteen members of the International Accounting Standards Board.

Hans Hoogervorst Chairman
Ian MackintoshVice-Chairman
Stephen Cooper
Philippe Danjou
Jan Engström
Patrick Finnegan
Amaro Luiz de Oliveira Gomes
Prabhakar Kalavacherla
Patricia McConnell
Takatsugu Ochi
Paul Pacter
Darrel Scott
John T Smith
Wei‑Guo Zhang

Footnotes

1

Definition of IFRSs amended after the name changes introduced by the revised Constitution of the IFRS Foundation in 2010. (back)

2

Such changes include reclassifications from or to intangible assets if goodwill was not recognised in accordance with previous GAAP as an asset. This arises if, in accordance with previous GAAP, the entity (a) deducted goodwill directly from equity or (b) did not treat the business combination as an acquisition. (back)

3

Professor Barth and Mr Danjou dissented from Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (Amendments to IFRS 1 and IAS 27) issued in May 2008. Their dissenting opinions are set out after the Basis for Conclusions on IAS 27. (back)