Ist Time Adotpion of IFRS

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IFRS 1 : First Time Adoption of IFRS

Delhi 15th March,2010

01 04 2011

Compiled & Presented By CA Yagnesh Desai



IFRS 1 : Snap ShotTotal Clauses :………………………… 40

Appendices forming integral part of the StandardA = Defined terms.

B = Exceptions to the retrospectiveapplication of other IFRSs.

C = Exemptions for business combinations.

D = Exemptions from other IFRSs.

E = Short-term exemptions from IFRSs.Compiled & Presented By CA Yagnesh Desai



Breaking News..Roadmapby MCAConvergence to IFRS is spread over three

Phase.

TWO SEPARATE SETS OF ACCOUNTING STANDARDS

U/S SECTION 211(3C) OF THE COMPANIES ACT FORCONVERGENCE OF INDIAN ACCOUNTINGSTANDARDS WITH IFRS

Separate roadmap for banking and insurance companieswill be submitted by the Sub-Group I in consultation withthe concerned regulators by 28th February, 2010.




Two Sets of Accounts




Phase IThe following categories of companies will converttheir opening balance sheets as at 1st April, 2011, if

the financial year commences on or after 1st

April,2011 in compliance with the notified accountingstandards which are convergent with IFRS. Thesecompanies are:-a. Companies which are part of NSE – Nifty 50b. Companies which are part of BSE - Sensex 30c. Companies whose shares or other securities are

listed on stock exchanges outside Indiad. Companies, whether listed or not, which have a

net worth in excess of Rs.1,000 crores.Compiled & Presented By CA Yagnesh Desai



Phase II

The companies, whether listed or not, having a

net worth exceeding Rs. 500 crores but notexceeding Rs. 1,000 crores will convert theiropening balance sheet as at 1st April, 2013, if the

financial year commences on or after 1st April,2013 in compliance with the notified accountingstandards which are convergent with IFRS.




Separate roadmap for banking and insurance companieswill be submitted by the Sub-Group I in consultationwith the concerned regulators by 28th February, 2010.

Revised Schedule VI in line with IFRS will beannounced shortly.

Convergence of all the accounting standards will be

completed by ICAI by 31st March, 2010and NACAS willsubmit its recommendations to the Ministryby 30th April 2010.





This presentation is based on IFRS 1

introduced in 2008 and :-

is effective for entities applying IFRSs for thefirst time.

for annual periods beginning on Or after 1 July

2009.




IFRS 1 : Objective

Interim Financial Statements only if IAS 34 is applicable or followed by entity.

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;

(b) provides a suitable starting point for accounting in accordance

with International Financial Reporting Standards (IFRSs); and

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




IFRS 1 : DefinitionsFirst Time Adopter : An entity is referred to as a first-time adopter in theperiod in which it presents its first IFRS financial statements.

Date of Transition : The beginning of the earliest period for which

an entity presents full comparative information under IFRS in its “FirstIFRS Financial Statements”.

First Time IFRS Financial Statement : The first annual financial statements inwhich an entity adopts IFRS by making anexplicit and unreserved statement of compliance with IFRS.

Reporting Date : The end of the latest period covered by financialstatements or by an interim financial report





General

Requirements

Specific

To comply with each IFRS

effective at the

end of its first IFRS

reporting period.

To recognise, De-recognise,

measure & re-classify in the

opening IFRS statement of financial position that it

prepares------------------->




IFRS 1 : Specific Requirement

Subject to limited Exemptions & Mandatory Exceptions >

As a starting point IFRS 1.10 requires an entity to do the

followings :

(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 under previous GAAP as one type of

asset, liability or component of equity, but are a different type of asset,

liability or component of equity under IFRSs; and

(d) apply IFRSs in measuring all recognised assets and liabilities.




IFRS 1 : Exemptions & Exceptions

Exemptions & Exceptions discussed in details later

Limited exemptions from these requirements in specified

areas where the cost of complying with them would be likelyto exceed the benefits to users of financial statements.

Also prohibits retrospective application of IFRSs in some

areas, particularly where retrospective application would

require judgements by management about past conditions

after the outcome of a particular transaction is alreadyknown.




IFRS 1 : ApplicabilityAn entity shall apply this IFRS in:

(a) its first IFRS financial statements; and

(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 financialstatements.




IFRS 1 : Opening IFRS Statement of Financial Position

An entity’s statement of financial position at the date

of transition to IFRSs.-prepared in accordance with

the requirements of IFRS 1 as of the “date of transitionto IFRS.”

Under Revised IFRS 1 Opening IFRS Statement ofFinancial Position is ALSO to be presented with theFirst Time IFRS Statements.

This is the starting point for its accounting in accordancewith IFRSs.




Scope & ApplicabilityAn entity’s first IFRS financial statements refer tothe first annual financial statements in which the

entity adopts IFRS by making an explicit andunreserved statement (in the financial statements) ofcompliance with IFRS.

IFRS-compliant financial statements presented in thecurrent year would qualify as first IFRS financialstatements if the reporting entity presented its mostrecent previous financial statements :




Other examples of situations where an entity’s current year’s financial

statements would qualify as its first IFRS financial statements are :

• Financial Statements prepared under IFRS but only “forinternal use only”

• Where IFRS-compliant financial reporting had been producedin earlier years, with explicit and unreserved statement of this fact,but national GAAP, not IFRS, was used in the period immediatelypreceding the preparation of the current year’s first IFRS financial

statements;

• The entity prepared a reporting package in the previousperiod under IFRS for consolidation purposes without preparing a

complete set of financial statements as mandated by IAS 1; and

• Where the entity did not present financial statements for theprevious periods at all.





Exceptions to IFRS 1 – Means IFRS 1 will NotApply – hence no exemptions will apply.

1. When an entity presented its financialstatements in the previous year that contained

an explicit and unreserved statement ofcompliance with IFRS, and its auditors qualifiedtheir report on those financial statements;



2.When an entity in the previous year presented itsfinancial statements under national requirements(i.e., its national GAAP) along with another set of

financial statements that contained an explicit orunreserved statement of compliance with IFRS,and in the current year it discontinues this

practice of presenting under its national GAAPand presents only under IFRS; and

3.When an entity in the previous year presented its

financial statements under national requirements(its national GAAP) and those financialstatements contained (improperly) an explicitand unreserved statement of IFRS compliance.




IFRS 1 : Accounting PoliciesUse the same accounting policies in its opening IFRSstatement of financial position and

Throughout all periods presented in its first IFRS

financial statements.

Those accounting policies shall comply with each IFRSeffective at the end of its first IFRS reporting period,with some exceptions. Para 13-19 & Appendices B-

E.Compiled & Presented By CA Yagnesh Desai



IFRS 1 : Parallel ReportingIFRS transition requires

parallel reporting in localGAAP and IFRS for at least 1

year. Multi-GAAP accountingfunctionality is required and

needs to be implemented in

the ERP system.




IFRS 1 : First Time Adoption of IFRS31st March

2010

1st April 2010 31st March

2011

31st March

2012

IGAAP IFRS IGAAP – Published

IFRS

Published Presented with

FinancialStatements of

31st March

2012

IFRS –

Presented withFinancial

Statements of

31

st

March2012

Published along

with Statement of

Financial Position

as at 31st

March,2011 & as

at 1st April,2010




Transition Adjustments

Retained

Earnings

Goodwill

Another

category of Equity

E

x c e p t i o n

Adjustment to Intangible Assets

Tax Impact




Are there some relief for 1st time adopter ?

Yes

For Recognition & Measurement

Limited Voluntary

Exemptions ,and

Few Mandatory Exceptions

NO

Exemptions or Exceptions for

Presentation & Disclosures

Requirements in other

IFRSs




General Rule Retrospective Application

Exceptions to the retrospective

application of other IFRSs.

This IFRS prohibits retrospective applicationof some aspects of other IFRSs. These

exceptions are set out in paragraphs 14–17 and

Appendix B. ( IFRS 1.13)




IFRS 1 : Mandatory Exceptions…..

…… from Retrospective Applications , contained

in Appendix C to IFRS 1

De-recognition of financial assets and

liabilities

Hedge accounting

Non Controlling Interest

Para 14 -17 of IFRS – Estimates.Compiled & Presented By CA Yagnesh Desai



Mandatory Exceptions : Dercognition of Financial

Assets & Financial LiabilitiesIf a first-time adopter derecognized financial assets or financial

liabilities under its previous GAAP in a financial year prior to

January 1, 2001, it should NOT recognize those assets andliabilities under IFRS.

However, a first-time adopter should recognize all derivativesand other interests retained after derecognition and still existing,

and consolidate all special-purpose entities (SPE) that it controls

at the date of transition to IFRS (even if the SPE existed before

the date of transition to IFRS or hold financial assets or financial

liabilities that were derecognized under previous GAAP).




Mandatory Exceptions :Hedge Instruments

On the date of Transition an entity should

(a)measure all derivatives at fair value; and

(b) eliminate all deferred losses and gains arising

on derivatives that were reported in accordancewith previous GAAP as if they were assets or

liabilities.Compiled & Presented By CA Yagnesh Desai




BUT not permitted to reflect a hedging relationship in

its opening IFRS statement of financial position if it doesnot qualify for hedge accounting under IAS 39.

Net Position designated as a hedged item under itsprevious GAAP, an individual item within that net

position may be designated as a hedged item

under IFRS, provided it does so prior to thedate of transition to IFRS.





Transitional provisions of IAS 39 apply to

hedging relationships of a first-time adopter atthe date of transition to IFRS. This is an

Exception to Para 9:

Transactions entered into before the date of transition

to IFRSs shall not be retrospectively designated ashedges.




Mandatory Exception :Non-controlling interests

A first-time adopter shall apply the following requirements of IAS 27(as amended in 2008) prospectively from the date of transition toIFRSs:

(a) the requirement in paragraph 28 that total comprehensive incomeis attributed to the owners of the parent and to the non-controllinginterests even if this results in the non-controlling interests having adeficit balance;

(b) the requirements in paragraphs 30 and 31 for accounting forchanges in the parent’s ownership interest in a subsidiary that do notresult in a loss of control; and(c) the requirements in paragraphs 34–37 for accounting for a loss ofcontrol over a subsidiary, and the related requirements of paragraph

8A of IFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations.




Mandatory Exception :Non-controlling interests

If a first-time adopter elects to apply IFRS 3 (as revised

in 2008) retrospectively to past business combinations,

it shall also apply IAS 27 (as amended in 2008) inaccordance with paragraph C1 of this IFRS.

In other words, this restriction shall not apply.




Estimates - Hindsight prohibited

Estimates in accordance with IFRSs at the

date of transition to IFRSs shall beconsistent with estimates made for the samedate in accordance with previous GAAP(after adjustments to reflect any differencein accounting policies),unless there is

objective evidence that those estimates werein error.




Estimates

Information received after the date of transition to

IFRSs

About estimates that it had made under previousGAAP.

To be treated as non-adjusting events after thereporting period in accordance with IAS 10 Events

after the Reporting Period.




EstimatesFor example, assume that an entity’s date of transitionto IFRSs is 1 April,2010

The new information on 15 April,2010 requires therevision of an estimate made in accordance withprevious GAAP at 31 March,2010.

The entity shall not reflect that new information in itsopening IFRS statement of position (unless there isobjective evidence of Error ).

Instead, the entity shall reflect that new information inprofit or loss (or, if appropriate other comprehensiveincome) for the year ended 31 March,2011




Estimates II

Estimates made under previous GAAP needs to berevised to comply with IFRS.

For Example a provision made for Warranties butat nominal value under previous GAAP , now needto be discounted





ESTIMATE

REQUIRED BY

PREVIOUS GAAP

ESTIMATES – SUMMARY

EVIDENCE OF

ERROR

USE PREVIOUS

ESTIMATE &

PREVIOUS

CALCULATIONS

USE PREVIOUS

ESTIMATE &

ADJUST

CALCULATIONS

TO REFLECT

IFRS

MAKE ESTIMATE

REFLECTING

CONDITIONS AT

RELEVANT DATE

CALCULATION

CONSISTENT

WITH IFRS ?

Yes No

No NoYes Yes



Voluntary Exemptions : Implications

Entity is exempt from makingretrospective calculations to make thetransition simpler. In all 14 VoluntaryExemptions.




Voluntary Exemptions - General

D1 An entity may elect to use one or more of the

following exemptions:

(a) Share-based payment transactions (D2 –D3)

(b) Insurance contracts (D4)

(c) Fair value or revaluation as deemed cost(D5-D8)

(d) Leases (D9)





(e) employee benefits (D10-D11);

(f) cumulative translation differences (D12 -D13);

(g) investments in subsidiaries, jointly

controlled entities and associates (D14-D15);(h) assets and liabilities of subsidiaries,associates and joint ventures (D16-D17);

(i)compound financial instruments (D18);





An entity shall not apply these exemptions by analogy to other

items.

(j) designation of previously recognised financialinstruments (D19);

(k) fair value measurement of financial assets or financialliabilities at initial recognition (D20);

(l) decommissioning liabilities included in the cost of

property, plant and equipment (D21);

(m) financial assets or intangible assets accounted for inaccordance with IFRIC 12 Service Concession

Arrangements

(n) borrowing costs (D23).




VE – IFRS 2 – Equity Instruments

For Equity Instruments Granted

Before 7

th

November 2002 After 7

th

November 2002 andvested before the later

of (a) the date of transition to

IFRSs and (b) 1 January

2005…

Not required but encouraged to apply IFRS for suchinstruments – BUT shall disclose the information

required by para 42 and 45 of IFRS 2.Compiled & Presented By CA Yagnesh Desai



VE IFRS 2 Liability

Liabilities Settled

before January 1, 2005

Liabilities Settled

before the date of

transition.

Not required but encouraged to applyFor Liabilities to which IFRS 2 is applied an entity not

required to restate comparative information to the

extent that the information relates to a period or date

that is earlier than 7 November 2002.Compiled & Presented By CA Yagnesh Desai



VE – Insurance Contracts IFRS 4

A first-time adopter may apply the

transitional provisions in IFRS 4 Insurance

Contracts.




VE Fair Value or Revaluation as Deemed Cost

Disclosure as per Para 30 of IFRS 1

Plant Property & Equipment

Fair Value as the deemedcost of that asset Revaluation at or before thedate of transition as the

deemed cost of that asset

Revaluation broadlycomparable to fair value or

cost of depreciated cost in

accordance with IFRS.


VE I t ibl A t & I t ibl A t



VE : Intangible Asset & Intangible Assets

Investment Property Intangible Assets

If Entity follows Cost Model If IA meets he recognition

criteria under IAS 38, i.e.

cost measured reliably

AND criteria for

revaluation.

Same as the Plant, Property and equipment

An entity shall not use these elections for

other assets or for liabilities.Compiled & Presented By CA Yagnesh Desai



VE L IAS 17



VE :Lease IAS 17

A first-time adopter may apply the transitional

provisions in IFRIC 4 Determining whether an

Arrangement contains a Lease. Para D9 provides

transitional exemption.

The entity may determine whether the arrangement

contains a lease by applying the criteria in paragraphs 6–

9 of IFRIC 4 on the basis of facts and circumstancesexisting on the date of Transition. IG


VE E l B fit



VE : Employee Benefits

A first-time adopter may elect to recognise all

cumulative actuarial gains and losses at the date of transition to IFRSs, even if it uses the corridor approach

for later actuarial gains and losses.

If a first-time adopter uses this election, it shall apply

it to all plans.


The Interaction Between Employee benefits and The Business



Combinations exemptions

Apply Employee Benefits

exemption?

NoWas plan acquired in

business combination ?

Apply Business combinations

exemption ?

Yes

Yes

Yes

NoNo

The past acquisition

accounted for under

previous GAAP and the

pension liability recognisedat the date of acquisition is

grandfathered IAS 19. is

applied from the date of

acquisition

Recompute

corridor from

the date plan

was established.

Restate the past

acquisition in

accordance with IFRS 3

– IAS 19 applies at the

acquisition date (i.e.

benefit plan included in

the past acquisition are

restated according to

(IAS 19)

Recognise all

cumulative

actuarial gains

and losses at thedate of transition

and apply the ‘

corridor’

prospectively.Compiled & Presented By CA Yagnesh Desai

VE Cumulative Translation Differences



VE : Cumulative Translation Differences

IAS 21 The Effects of Changes in Foreign Exchange Rates)

requires an entity:

to recognise some translation differences in other

comprehensive income and accumulate these in a

component of equity

to transfer, on disposal, the cumulative translation

differences for foreign operations to profit or loss as

part of the gain or loss on disposalCompiled & Presented By CA Yagnesh Desai

VE : Cumulative Transitional Differences



VE : Cumulative Transitional Differences

A first-time adopter is exempted from a transfer of the

cumulative translation adjustment that existed on the date of

transition to IFRS.

Upon Exercise of this exemption the cumulative translation

adjustment for all foreign operations would be deemed to be

zero at the date of transition to IFRS.

The gain or loss on subsequent disposal of any foreign

operation should exclude translation differences thatarose before the date of transition to IFRS, but would

include all subsequent translation adjustments.Compiled & Presented By CA Yagnesh Desai

Investments in subsidiaries, jointly controlled entities



and associates – In Separate Financial Statements

Cost IAS 39

Cost or

Deemed Cost which can be :-

Fair Value as per IAS 39 or

Previous GAAP Carrying Amount


VE : Assets and Liabilities of Subsidiaries,



associates and joint ventures.

Key factor : Who adopts IFRS first –

Parent or

Subsidiary .


Parent - Subsidiary



Parent - Subsidiary

Consider Income tax & Non Controlling Interest

A first-time adopter consolidates all subsidiaries (as

defined in IAS 27), unless IAS 27 requires otherwise.

If a first-time adopter did not consolidate a subsidiary inaccordance with previous GAAP, then in its consolidated

statements :

Treatment depending on who has adopted IFRS First.

If Subsidiary was Acquired If Subsidiary was not acquired

Parent Recognises Goodwill Parent does not recognisedGoodwill


Parent adopts in 2009 Subsidiary in 2011




Parents Consolidated Financial

Statements

Subsidiary’s Separate Financial

Statements.

However, the fact that subsidiary

becomes a first-time

adopter in 2011 does not change the

carrying amounts of its assets and

liabilities in parent’s consolidatedfinancial statements.

The carrying amounts of its

assets and liabilities are the same in

both its opening IFRS statement of

financial position at 1 January 2010

and parent N’s consolidatedstatement of financial position

(except for adjustments for

consolidation procedures) and

are based on parent ’s date of transition to IFRSs. OR






Parents Consolidated

Financial Statements

Subsidiary’s Separate

Financial Statements.

The fact that subsidiary O becomes a first-time

adopter in 20X7 does not

change the carryingamounts of its assets and

liabilities in parent N’s

consolidated financial

statements

OR ..Measure all itsassets or liabilities

based on its own dateof transition to

IFRSs (1 January2010).


Parent adopts in 2011Subsidiary in 2009



Parent adopts in 2011Subsidiary in 2009

Parents Consolidated Financial

Statements

Subsidiary’s Separate Financial

Statements.

The carrying amounts of subsidiary

Q’s assets and liabilities at 1 January

2009 are the same in both parent ’s

(consolidated) opening IFRS

statement of financial positionand subsidiary ‘s financial

statements (except for adjustments

for consolidation procedures) and are

based on subsidiary’s date of transition to IFRSs

No Impact onSubsidiary ‘s

Statements of Financial Position.


VE : Compound financial instruments




In accordance with IFRS 1 a first-timeadopter need not separate these twoportions if the liability component is nolonger outstanding at the date of transition

to IFRSs.


VE : Decommissioning Liabilities



included in cost of PPE

Example next Slide

A first-time adopter need not comply with the IFRIC 1re any changes that occurred before date oftransition.

If exemption used:

Measure liability at date of transition in accordance with IAS 37.

Estimate amount that would have been included in Non CurrentAsset when liability first arose. Discount using rate applicable to theintervening period.

Calculate accumulated depreciation at date of transition based onthe above amount.





p

Financial assets or intangible assets accounted for in

accordance with IFRIC 12 – Service Concession arrangement

.

And

Borrowing costs

An entity MAY apply transition provisions.


VE :Designation of previously recognised



financial instruments

At the date of transition an entity may classifypreviously designated Financial Instruments :

(a)As an available-for-sale ; or

(b) As financial asset or financial liability as atfair value through profit or loss provided theasset or liability meets the criteria in paragraph

9(b)(i), 9(b)(ii) or 11A of IAS 39 at that date.


Exemptions for business combinations



p

A first-time adopter may elect not to apply IFRS 3

retrospectively to past business combinations that

occurred before the date of transition.But if any business combination is restated to comply

with IFRS 3 all later business combinations shall be

restated and entity shall also apply from that same

date.

The exemption for past business combinations alsoapplies to past acquisitions of investments in associates

and of interests in joint ventures.Compiled & Presented By CA Yagnesh Desai

If IFRS 3 is not applied retrospectively.



pp p y

1.The FTA should preserve the same Classification

= as an acquisition by legal acquirer

= a reverse acquisition by the legal acquiree,= or a uniting of interests.

as in its previous GAAP financial statements.





pp p y

Continued…………

2. Recognise all its assets and liabilities at the date of transition to

IFRSs that were acquired or assumed in a past business

combination, EXCEPT(i) Financial assets and Financial liabilities derecognised in

accordance with previous GAAP – covered by mandatory

exceptions ; 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.





pp p y

(iii)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.Compiled & Presented By CA Yagnesh Desai

IFRS 3 is not applied retrospectively Derecognise



As adjustment

from from

Goodwill

All other resulting

changes in

retained earnings.*

Account for the

Resulting Change

If past business combination

accounted as an acquisition and

recognised as an intangible asset .Itshall reclassify that item and, if any,

the related deferred tax and non-

controlling interests as part of

goodwill (unless it deductedgoodwill directly from equity in

accordance with previous GAAP.

If Intangible asset

not subsumed inGoodwill and if

goodwill not

deducted directlyfrom equity


Goodwill ----



Goodwill be tested for impairment regardless

of indicators.

----Shall be at carrying amount in accordance with

previous GAAP at the date of transition subject to

following adjustments :

(i)increased by reclassification of Intangible asset or

(ii) Decreased upon recognition of Intangible Asset

subsumed in goodwill and if applicable adjust

deferred tax and non controlling interest.


Goodwill - Following adjustments not made



(i) to exclude in process research and development acquired in

that business combination * unless related to IA 38.

(ii) to adjust previous amortisation of goodwill;

(iii) to reverse adjustments to goodwill that IFRS 3 would notpermit, 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.


Goodwill – If deducted from Equity



y

It shall not recognise that goodwill in its opening IFRS

statement of financial position.

Also shall not reclassify to profit or loss account when

it disposes the subsidiary or investment in subsidiary becomes impaired.

Adjustments resulting from the subsequent resolution

of a contingency affecting the purchase consideration

shall be recognised in retained earnings.Compiled & Presented By CA Yagnesh Desai

Goodwill Under



Goodwill Under IFRS

Previous GAAP

Intangible Assets (IA)

DOES Not Qualify

Under IFRS

IA Recognised Under

IFRS

Impairment Loss




Goodwill to be tested for impairment at the dateof transitions.

1. This IFRS requires the entity to determinewhether the goodwill is impaired or not on the

date of transition accordingly to IAS 36.

2. This test is to be conducted whether or not theindications exist.

3. When an impairment loss or gain or loss ondisposal of subsidiary is recognised then theentity should not take into account any goodwillthat had already been written off against equity

under the previous GAAP.





IAS 12 Income Taxes

IG5 An entity applies IAS 12 to temporary differences

between the carrying amount of the assets and liabilities

in its opening IFRS statement of financial position and

their tax bases.



IFRS 1 : Disclosures

Reconciliations of Comprehensive Income & Equity.

The IFRS requires disclosures that explain

how the transition from previous GAAP to

IFRSs affected the entity’s reported

financial position, financialperformance and cash flow.

Discussed in details later.Compiled & Presented By CA Yagnesh Desai

To Comply followings are required.



Reconciliations of Equity at two dates at;

( i) the date of the transition, and; ( 1st April,2010)

(ii) the end of the latest period presented in the entity’s mostrecent annual financial statements in accordance with previous

GAAP.

(31st

March,2012)

Reconciliation of Total Comprehensive Income in accordance with

IFRSs for the latest period in the entity’s most recent annual

financial statements.

Also for Interim Reports Covered SeparatelyCompiled & Presented By CA Yagnesh Desai

Comparatives : 1st IFRS Statements shall Include:



3 Statement of Financial Position

2 Statement of Comprehensive Income

2 Statement of Income , if presented.

2 Statement of Cash Flows

2 Statement of Changes in Equity

Related notes and Comparative information.

These are

minimumrequirements


Facts IFRS 1 Consideration



First Timer recognises an

impairment loss of RS 5 lakhs 2

year ago. On a cash generate amtdue to decline in market demand

the market decline now has

reversed.

Impairment Review required at

date of transition.

Includes to the write downs andreversals of prior impairments.

Reversals of this impairment

booked at the date of transition.

DATE OF TRANSITION ENTRY.

DR Capital Assets 5,00,000

CR Retained Earnings 5,00,000

DR Retained Earnings

CR Assets (Depreciation adj)





M\s First Timer has accumulated

unrecognised actuarial losses of Rs

10,00,000/- relating to pension plan.

IFRS 1 exemptions to recognise

cumulative actuarial losses at the

date of transition otherwise need torevisit from the date of plan

inception & determine recognise

and unrecognised cost.

DATE OF TRANSITION ENTRY

DR Retained Earnings 10,00,000

CR Pension liability 10,00,000





Mr. First Time Adapter conducted3 acquisitions in last 15 years.

Mr. First Timer Adapter does not

want to revisit these transactions.

IFRS 1 Exemption from restatingprior business considerations.

Avoid restatement of each

transactions under IFRS 3

Goodwill impairment test still

required.


Case Study

On IFRS 1: XYZ Limited presented its financial statements under the

i l GAAP il 2009 I d d IFRS f A il 1 2010 d i



national GAAP until 2009. It adopted IFRS from April 1, 2010 and isrequired to prepare an opening IFRS balance sheet as at April 1, 2010.

In preparing the IFRS opening balance sheet of XYZ Limited noted:

1.Under its previous GAAP, had classified proposed dividend ofRs.5,00,000 as a current liability.

2.It had not made a provision for warranty of Rs. 200,000 in the financial

statements presented under previous GAAP since the concept of“constructive obligation” was not recognized under its previous GAAP.

3.In arriving at the amount to be capitalized as part of costs necessary to

bring an asset to its working condition, XYZ Limited had not includedProfessional fees of Rs. 300,000 paid to architects at the time when the

building it currently occupies as its head office was being constructed.

Required:

Advise XYZ Limited on the treatment of all the above items under IFRS1


Solution :

In order to prepare the opening IFRS balance sheet at April 1, 2010, XYZ

Li i d ld d k h dj i b l h



Limited would need to make these adjustments to its balance sheet atMarch 31, 2009, presented under its previous GAAP:

1. AS 10 does not allow proposed dividend to be recognized as a liability;instead, under the latest revision to IAS 10, they should be disclosed in

footnotes. Previous Indian GAAP allowed proposed dividend to be treatedas current liability. Therefore proposed dividend of Rs.500,000 should bedisclosed in footnotes.

2. IAS 37 requires recognition of a provision for warranty but Previous

Indian GAAP did not allow a similar treatment. Thus, a provision forwarranty of Rs.200,000 should be recognized under IFRS-37.

3. IAS 16 requires all directly attributable costs of bringing an asset to itsworking condition for its intended use to be capitalized as part of carrying

cost of property, plant and equipment. Thus Rs.300,000 of architects’ feesshould be capitalized as part of (i.e., used in measurement of) property,plant and equipment under IFRS.


Disclosures : Do Not Confuse



Non-IFRS comparative information and historical

summaries should be properly identified and 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.

No onus to quantify those adjustments.Compiled & Presented By CA Yagnesh Desai

Disclosures : Separate effects of Errors From

Ch



Changes

If an entity becomes aware of errors madeunder previous GAAP, the reconciliations

required by paragraph 24(a) and (b) shall

distinguish the correction of those errors

from changes in accounting policies.




Disclosures : Designation of financial assets or

financial liabilities



Classification Under I GAAP Classification under IFRS ( D.19)

Financial Assets or Financial

Liability

Either

Financial Assets or FinancialLiabilities through profit or loss

accounts

OR

Available for saleIn that case disclose the fair value of financial assets or

financial liabilities designated into each category at the

date of designation and their classification and carryingamount in the previous financial statements.


Disclosures: Use of fair value as deemed cost



Plant ,Property &

Equipment

IntangibleAssets

InvestmentProperty

Fair Value

Disclose, for each line item in the opening IFRSstatement of financial position:

(a) the aggregate of those fair values; and

(b) the aggregate adjustment to the carrying amounts

reported under previous GAAP.Compiled & Presented By CA Yagnesh Desai

Disclosure : Use of deemed cost for investments in subsidiaries,

jointly controlled entities and associates



Disclose:

(a)the aggregate deemed cost of those investments for

which deemed cost is their previous GAAP carryingamount;

(b) the aggregate deemed cost of those investments forwhich deemed cost is fair value; and

(c) the aggregate adjustment to the carrying amounts

reported under previous GAAP.Compiled & Presented By CA Yagnesh Desai

Disclosure : Interim financial reports



(i) Equity

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


Disclosure :Interim financial reports – (ii)

Comprehensive Income



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 betotal comprehensive income in accordance with

previous GAAP for that period or, if an entity did

not report such a total, profit or loss in accordancewith previous GAAP.


Key Timelines and Reporting

Requirements



Requirements Step 1-Identify the key dates and the first IFRS financial

statements.

Step 2-Identify the differences between the accounting

policies applied under GAAP and those that IFRS requires,and select the accounting policies to be applied under IFRS

Step 3-Consider whether to apply any of the 12 exemptionsfrom the mandatory retrospective application.

Step 4-Apply the four mandatory exceptions toretrospective application and determine whether theinformation exists to apply these to an earlier date.

Step 5- Preparing an Opening balance sheet at the date of

transition to IFRS Step 6- Identifying disclosures that IFRS 1 requires.


Lets



Lets

Prepare Well in advance

Not Procrastinate

Lets Not Make First Time a

FUSS Time Adoption –


Questions



Questions &

Answers

Thank You CA Y. M. Desai Office 93 & 94, Bldg 4,

Nityanand Nagar Society,Swami Nityanand Marg,

Andheri (E),Mumbai – 400069

Tel no. 022-26839090 / 26832850 Email: [email protected]


Ist Time Adotpion of IFRS

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