Disclosures In First IFRS Financial Statements – FAQ | IFRS

Disclosures in First IFRS Financial statements

A first-time adopter must apply all of the presentation and disclosure requirements in IFRSs. IFRS Reference: [IFRS 1, paras 20, 23 – 27A, 29 – 31B]

The first-time adopter must also explain how the transition from previous GAAP to IFRSs affected its reported financial position, financial performance and cash flows. As a result, an entity’s first IFRS financial statements must include the following reconciliations:

Note that the dates presented are examples for an entity with a calendar year end (adopting IFRS in 20X3) that presents only one comparative period.

Nature of disclosure

Comparative year ended December 31, 20×2

Opening as at January 1, 20×2

Reconciliation of equity as at:

  • the date of transition to IFRSs; and
  • the end of the latest period presented in the entity’s most recent annual financial statements in accordance with previous GAAP

A reconciliation of equity in accordance with previous GAAP to equity in accordance with IFRSs.

The reconciliation must give sufficient detail to enable users to understand the material adjustments to the statement of financial position.

If an entity becomes aware of errors made under previous GAAP, the reconciliation must distinguish the correction of those errors from changes in accounting policies.

Reconciliation of total comprehensive income for the latest period in the entity’s most recent annual financial statements

A reconciliation of total comprehensive income in accordance with previous GAAP to total comprehensive income in accordance with IFRSs. The starting point for this reconciliation will be total comprehensive income in accordance with the previous GAAP or, if this was not reported, the profi t or loss under previous GAAP.

The reconciliation must give sufficient detail to enable users to understand the material adjustments to the statement of comprehensive income.

If an entity becomes aware of errors made under previous GAAP, the reconciliation must distinguish the correction of those errors from changes in accounting policies.

Reconciliation of cash flows

An explanation of material adjustments to the statement of cash flows if such a statement was presented under previous GAAP.

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, the requirements in IAS 8 about changes in accounting policies do not apply to an entity’s first IFRS financial statements.

If, during the period covered by its first IFRS financial statements, an entity changes its accounting policies or its use of optional exemptions, it must:

  • explain the changes between its first IFRSs interim financial report and its first IFRS financial statements; and
  • update the above mentioned reconciliations. Disclosures in First IFRS Financial statements

Additional disclosure requirements are set out in IFRS 1:

[IFRS 1, paras 24(c), 29 – 31C]

Nature of disclosure

Disclosure Disclosures in First IFRS Financial statements

Impairments of assets

If an entity recognized or reversed any impairment losses for the first time in preparing its opening IFRS statement of financial position, an entity’s first IFRS financial statements must include the disclosures that IAS 36 would have required if the entity had recognized those impairment losses or reversals in the period beginning with the date of transition to IFRSs.

Designation of financial assets or financial liabilities

Disclosures in First IFRS Financial statements

If an entity has adopted IAS 39, it must disclose the fair value of financial assets or financial liabilities designated into FVTPL and AFS at the date of designation and their classification and carrying amount in the previous financial statements. If the entity adopted IFRS 9, disclosure is required of the fair value of financial assets and financial liabilities designated as FVTPL at the date of designation and their classification and carrying amount in the previous statements.

Use of fair value as deemed cost

Disclosures in First IFRS Financial statements

If an entity used fair value in its opening IFRS statement of financial position as deemed cost for an item of PPE, an investment property or an intangible asset, the entity’s first IFRS financial statements must disclose, for each line item in the opening IFRS statement of financial position:

  • the aggregate of those fair values; and
  • the aggregate adjustment to the carrying amounts reported under previous GAAP.

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

Disclosures in First IFRS Financial statements

If an entity used a deemed cost in its opening IFRSs statement of financial position for an investment in a subsidiary, joint venture or associate in its separate financial statements, the entity’s first IFRS separate financial statements must disclose:

  • the aggregate deemed cost of those investments for which deemed cost is their previous GAAP carrying amount;
  • the aggregate deemed cost of those investments for which deemed cost is fair value; and
  • the aggregate adjustment to the carrying amounts reported under previous GAAP.

Use of optional exemption for oil and gas assets in the development and production phases

If an entity used the optional exemption for oil and gas assets in the development and production phases, it must disclose that fact and the basis on which carrying amounts determined under previous GAAP were allocated.

Use of deemed cost for operations subject to rate regulation

If an entity used the optional exemption for operations subject to rate regulation, it must disclose that fact and the basis on which carrying amounts were determined under local GAAP. Disclosures in First IFRS Financial statements

Use of deemed cost after severe hyperinflation

If an entity used the optional exemption to measure assets and liabilities at fair value and to use that fair value as deemed cost in its opening IFRS statement, it must explain how, and why, it had, and then ceased to have, a functional currency that had both of the characteristics indicating it was subject to severe hyperinflation.

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