IFRS 1 First-time Adoption of International Financial Reporting Standards
About
IFRS 1 requires an entity that is adopting IFRS Standards for the first time, to prepare a complete set of financial statements, covering its first IFRS reporting period and the preceding year.
The entity uses the same accounting policies throughout all periods presented in its first IFRS financial statements. Those accounting policies must comply with each Standard effective at the end of its first IFRS reporting period.
IFRS 1 provides exceptions to restating previous periods in certain areas. These exceptions are allowed when the cost of following the rule would outweigh the benefits for financial statement users.
IFRS 1 also prohibits retrospective application of IFRS Standards in some areas, particularly when retrospective application would require judgements by management about past conditions after the outcome of a particular transaction is already known.
IFRS 1 requires disclosures that explain how the transition from previous GAAP to IFRS Standards affected the entity’s reported financial position, financial performance and cash flows.
Standard history
In April 2001 the International Accounting Standards Board (Board) adopted SIC‑8 First-time Application of IASs as the Primary Basis of Accounting, which had been issued by the Standing Interpretations Committee of the International Accounting Standards Committee in July 1998.
In June 2003 the Board issued IFRS 1 First-time Adoption of International Financial Reporting Standards to replace SIC‑8. IAS 1 Presentation of Financial Statements (as revised in 2007) amended the terminology used throughout IFRS Standards, including IFRS 1.
The Board restructured IFRS 1 in November 2008. In December 2010 the Board amended IFRS 1 to reflect that a first-time adopter would restate past transactions from the date of transition to IFRS Standards instead of at 1 January 2004.
Since it was issued in 2003, IFRS 1 was amended to accommodate first-time adoption requirements resulting from new or amended Standards. Most recently, IFRS 1 was amended by IFRS 17 Insurance Contracts (issued May 2017), which added an exception to the retrospective application of IFRS 17 to require that first-time adopters apply the transition provisions in IFRS 17 to contracts within the scope of IFRS 17.
Frequently asked questions
What is the IFRS 1?
IFRS 1 requires an entity that is adopting IFRS Standards for the first time to prepare a complete set of financial statements covering its first IFRS reporting period as well as the preceding year. The entity uses the same accounting policies throughout all periods presented in its first IFRS financial statements.
Why is it important to have IFRS 1?
IFRS 1 provides guidance for entities adopting IFRS for the first time. The rule states that a company in this position must adhere to IFRS rules. These rules pertain to the recognition and measurement of assets and debts. This applies specifically at the end of the company's first IFRS accounting period.
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