Objective
IFRS 1 provides requirements for entities adopting IFRS for the first time, ensuring:
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Transparency and comparability
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Cost-effective transition
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High-quality starting point for IFRS reporting
🧾 1. When Does IFRS 1 Apply?
IFRS 1 applies when an entity first presents IFRS financial statements, with an explicit and unreserved statement of compliance with IFRS.
Example:
A company using local GAAP for years 2000–2024 decides to adopt IFRS from 1 January 2025. IFRS 1 applies.
📅 2. Key Dates
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Date of transition to IFRS
→ Beginning of the earliest comparative period presented -
Opening IFRS Statement of Financial Position
→ Prepared at the date of transition, using IFRS rules
Example:
If first IFRS statements are for 2025, with one comparative year (2024):
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First IFRS FS year: 2025
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Comparative year: 2024
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Date of transition: 1 January 2024
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Prepare opening IFRS balance sheet at 1 Jan 2024
🧩 3. Main Principle
The entity must:
✔ Apply IFRS standards retrospectively to all items in the opening balance sheet
✔ Except for mandatory exceptions and optional exemptions
🚫 4. Mandatory Exceptions (no retrospective application allowed)
1. Estimates
Cannot change previous estimates unless there is error.
Example:
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If bad debt estimate in 2023 was $10,000 and correctly based on data at that time → cannot change it.
2. Hedge accounting
Apply prospectively only.
3. Derecognition of financial assets/liabilities
Cannot reinstate items derecognized under old GAAP.
4. Non-controlling interests
Apply IFRS 10 prospectively.
🟦 5. Optional Exemptions (company can choose)
These are given to reduce the burden of full retrospective application.
(1) Property, Plant & Equipment – Fair Value as Deemed Cost
Entity may use fair value at transition date instead of reconstructing historical cost.
Example – PPE:
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Old GAAP carrying amount (1 Jan 2024): $400,000
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Fair value: $550,000
→ Use $550,000 as “deemed cost”
(2) Business Combinations
Companies may choose not to restate pre-transition business combinations.
Example:
Company acquired subsidiary in 2019.
→ No need to restate acquisition → use carrying amounts at transition date.
(3) Cumulative Translation Differences (IAS 21)
May reset cumulative FCTR to zero at transition.
Example:
Foreign currency translation reserve = (80,000)
→ Set to zero
(4) Leases (IFRS 16)
Simplified approach allowed for bringing assets/liabilities on balance sheet.
Other Optional Exemptions
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Share-based payments (IFRS 2)
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Borrowing costs (IAS 23)
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Investments in subsidiaries (IAS 27)
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Insurance contracts (IFRS 17)
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Decommissioning liabilities
📘 6. Opening IFRS Statement of Financial Position
Must include:
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All assets and liabilities required by IFRS
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No items prohibited by IFRS
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Reclassifications as required
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Adjustments to retained earnings
🧮 7. Adjustments to Retained Earnings
Any difference between old GAAP and IFRS carrying amounts is adjusted through opening retained earnings on transition date.
Example:
Local GAAP allowed:
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R&D development cost expensed immediately
IFRS allows capitalization if criteria met.
Company spent $120,000 on development cost in 2023.
Criteria for capitalization met → Under IFRS, should be asset.
📊 8. Presentation Requirements
First IFRS report must include:
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Three Statements of Financial Position
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End of current period
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End of comparative period
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Opening transition date
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Two Statements of Profit or Loss
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Two Statements of Cash Flows
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Two Statements of Changes in Equity
📝 9. Required Disclosures
Must explain:
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How transition affected financial position
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How transition affected profit or loss
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Reconciliations:
(1) Equity reconciliation
Old GAAP equity → IFRS equity
(2) Profit reconciliation
Old GAAP net profit → IFRS profit
(3) Cash flow classification changes
Simple Example – Reconciliation:
| 2024 Equity | |
|---|---|
| Under Old GAAP | $1,000,000 |
| + Capitalization of development cost | 120,000 |
| – Derecognition of asset not allowed under IFRS | (40,000) |
| IFRS Equity | $1,080,000 |
🎯 10. Key Points of IFRS 1
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Requires retrospective application of IFRS
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Provides certain exemptions to reduce complexity
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Adjustments go to opening retained earnings
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Must present three balance sheets
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Requires reconciliation between old GAAP and IFRS
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Designed to ensure transparent, comparable first IFRS statements