Objective
Ensures an entity's first IFRS financial statements are a suitable starting point, transparent and comparable, at a cost that does not exceed the benefits.
Scope
- An entity's first IFRS financial statements, and interim reports for part of that first period.
- Applies when the entity makes an explicit and unreserved statement of compliance with IFRS for the first time.
Key definitions
- Date of transition
- The beginning of the earliest period for which full comparative IFRS information is presented.
- Opening IFRS statement of financial position
- The statement of financial position at the date of transition.
- Deemed cost
- An amount used as a substitute for cost at a given date (e.g. fair value at transition).
Recognition & measurement
General approach
- Prepare an opening IFRS statement of financial position at the date of transition.
- Use the same accounting policies throughout, based on standards effective at the end of the first IFRS reporting period, applied retrospectively.
- Recognise all assets and liabilities IFRS requires, derecognise those it does not permit, reclassify items and measure everything under IFRS.
- Adjustments are recognised directly in retained earnings (or another equity category) at the date of transition.
Exceptions and exemptions
- Mandatory exceptions prohibit retrospective application in certain areas, including estimates (no hindsight), derecognition of financial instruments, hedge accounting and some aspects of non-controlling interests.
- Optional exemptions give relief in areas such as past business combinations, using fair value or a previous revaluation as deemed cost, and resetting cumulative translation differences to zero.
Key disclosures
- Explanation of how the transition affected financial position, performance and cash flows.
- Reconciliations of equity (at the transition date and the end of the latest previous-GAAP period) and of total comprehensive income.
- Any impairment losses recognised or reversed in preparing the opening statement of financial position.
Common exam traps
- Estimates at transition must be consistent with those under previous GAAP unless they were in error — hindsight is not allowed.
- The standards used are those in force at the end of the first IFRS reporting period, not at the transition date.
- The first IFRS statements include three statements of financial position (opening, comparative and current).
Practise MCQs on this standard
Test your understanding of IFRS 1 with free chapter-wise MCQs and explanations in these question banks.
CAF-6 Corporate ReportingICAP CAFACCA FR Financial ReportingACCACA Inter P1 Advanced AccountingICAI CA Intermediate
ICAI CA Intermediate examines Indian Accounting Standards, which are based on but can differ from IFRS. Check your syllabus.