IFRS 1-FIRST TIME ADOPTION

OF IFRS

First time adoption of international Financial reporting standard is an

International Financial reporting standard issued by IASB in 2003 June 19
and effect from 2004 April 1 .It sets out the requirement on the
preparation and Presentation of financial statements and interim financial
reports by entities that are adopting the IFRS for the first time, to ensure
that they contain high quality information. (Source: en.wikipedia.org).
This Standard defines transition and who occurs, provides guidance how
to make transition, set out exemption from the requirements of IFRS on
first time adoption, and prescribes discharge requirements. Since it was
first issued in 2003 it has been amended several times to accommodate
first time adoption requirements of new /amended IFRSs. IFRS 1 is the
guidance that is applies during the preparation of a companys first time
IFRS based statements.IFRS1 was created to help companies easily
converted
to
international
Standards
and
provides
practical
accommodation intended to market first time adoption cost effective.

OBJECTIVE OF IFRS1:
The objective of this IFRS is to ensure that entities first financial
statements, and its interim financial reports for a part of Period covered
by those financial statements, contain high quality information. (Source:
ec.europa.eu)

SCOPE:
An 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 financial statements.
C) IFRS1 does not apply to entities already reporting under IFRS.

KEY REQUIREMENTS AND MEASUREMENTS:

Following points are requirements for IFRS1

1) Statement of compliance with IFRS: IFRS1 applies to the

first set of financial statements that contain explicit and unrequired
statements of compliance with IFRS.

2) Opening IFRS financial position Statements:

a. An Opening IFRS financial position statements is prepared at the

date of transition to IFRS.
b. Recognised all assets and liabilities those recognition is required
by IFRSs.
c. Do not recognised items as assets or liabilities if IFRS do not
permit such recognition.
d. Classify the all assets and liabilities as per IFRS.
e. Measuring all assets and liabilities as per IFRS. (Source: Avinash
saluja ppt and www.bdointernational.com)

3) Optional Exemptions:
IFRS1 does not permit these to be applied by analogy to other
items. An entity may elect to use one/more of the following exemptions.
a.
b.
c.
d.

Business Combinations.
Share based payment Transactions.
Insurance contracts.
Fair value or revaluation as deemed cost for property, plant and
equipment (PPE), Intangible assets and investment property.
e. Leases
f. Employee Benefits
g. Cumulative translation differences.
h. Borrowing cost.
i. Assets and Liabilities of subsidiaries, associates and joint
ventures.
j. Compound Financial Instruments.
k. Designation of previously, recognized financial instruments.
l. Fair Value measurements of financial assets or financial liabilities
at initial recognition.
m. Decommissioning liabilities included in cost of PPE .
(Source:ec.europa.eu/market/accounts/does/consolidated/IFRS1_
en.pdf Retrieved on 31-10-2014)

3) Mandatory exceptions:

IFRS1 prohibits retrospective application in relation to the following.

Estimates
De recognition of financial assets and financial liabilities.
Hedge accounting.
Non-Controlling interests.

Presentation and Disclosure:

An entitys first set of financial statements are required to present at
least three statements of financial statements of financial position
and two statements each of comprehensive Income Statement and
Cash
Flowstatement.
(Source:www.bdointernational.com/service/audit/IFRS/IFRS
at
glance/documents/IFRS1 pdf retrieved on 2-11-2014)

IFRS 2 -SHARE BASED PAYMENT

IFRS 2 share based payment requires an entity to recognise share
based payment transactions(such as granted shares, share options,
share application rights) in it is financial statements including
transactions with employees or other parties to be settled in cash,
other assets, or equity instruments of other entity. Specific
requirements are included equity settled and cash settled, share
based payment transactions, as well as those where the entity
/suppliers has a choice of cash equity instruments.
IFRS2 was originally issued in 19-02-2004, and first applied to
annual periods beginning on or after 01 Jan 2005.
(Source:www.iasplus.com/en/standards/ifrs/ifrs2 retrieved on 03-112014)

Objective of IFRS 2:
The objective of this IFRS is to specify the financial reporting by an
entity when it undertakes a share based payment transactions.in
generally it requires an entity to reflect in its profit/loss and financial
position the effects of share based payment transactions, including
expenses associated with transactions in which share options are
granted
to
employees.
(Source:ec.europa.eu/internal
market/accounting/docs/consolidated/ifrs2_en.pdf Retrieved on 311-2014)

Scope:
IFRS 2 applies to all entities. There is no exemption for private or
smaller entities. The IFRS2 encompasses the issuance of shares, or
right to share in returns for goods or services. There are two
exceptions to the general scope of IFRS 2.
Exemption 1: The issuance of shares in business combination.
However, care should be taken to distinguish share based

payments related to the acquisition from those related to counting

employees services.
Exemption 2:
IFRS2 does not address share based payments
within the scope of paragraphs 8-10 of IAS 32 Financial Instruments:
presentation, or paragraphs 5-7 of IAS 39 Financial Instruments:
Recognition & Measurements. Therefore IAS 32, and IAS39, should
be applied for commodity- based derivate contracts that may
settled
in
shares/
rights
to
shares.(
Source:
www.iasplus.com/en/standards/ifrs/ifrs2 Retrieved on 3-11-2014)
KEY REQUIREMENTS AND MEASUREMENTS:
A) Recognize the goods or services received acquired in a shared
based payment transactions when the goods are received or as
the services are received.
B) When the goods or services received or acquired do not quality
for recognition as assets, an expenses.
The following methods are used for measurement of share
based payments transactions.
a) Equity-Settled share based payment:
i) Transactions with Employees: Measure at the fair value of
the equity instruments granted at grant date. Granted dates
fair value is recognised over the vesting period.
ii) Transactions with Non-Employees: Measures at the fair
value of the goods or the services received at the date the entity of
obtains the goods or service receives. If the fair value of the goods or
service received cannot be estimated reliably, measure by reference to
the fair value of the equity instruments granted.
b) Cash settled share based payments: The measures of
liability at the fair value grant date. Re-measured the fair value of the
liability at each reporting date and at the date of settlement with any
changes in fair value recognised in profit or loss for the period.
c) Choice of settled share based payments: Shared based
payment transactions where there is a choice of settlement. If the entity
has the choice of whether to settle in cash/by issuing equity instruments,
the equity shall determine whether the it has a present obligation to settle
in cash and account for the transactions as cash settled or if no such
obligation exists, account for the transaction as equity settled.(Source:
http://www.bdointernational.com/Services/Audit/IFRS/IFRS%20at%20a
%20Glance/Documents/IFRS%202.pdf retrieved on 03-11-2014)

PRESENTATION AND DISCLOSURE:

An entity shall disclose information that enables users of the financial

statements to understand the nature and extent arrangements that
existed during the period. The entity shall disclose information that
enables users of the financial statements to understand the effect of share
based payment transactions on equity profit / loss for the period on its
financial position.

IFRS 3-BUSINESS COMBINATIONS

In April 2001 the IASB adopted IAS 22 Business Combination, which had
originally been issued by the IASC in October 1998. IAS 22 was itself a
revised version of IAS 22 business combinations that was issued
November 1983.
In March 2004 the IASB replaced IAS 22 and three related Interpretations
(SIC-9 Business combinations-Classification either as Acquisition or uniting
of interests,SIC-22 business combinations-subsequent adjustments of fair
values
and
goodwill
initially
reported
and
SIC-28
business
combinations-date of exchange and fair value of equity instalments)
when it issued IFRS-3 Business combinations.
The objectives of this IFRS are to improve the relevance, reliability and
comparability of the information that a reporting entity provide in its
financial statements about a business combinations and its effects.
Merges and acquisitions are common examples of IFRS 3.
Objective:
The IFRS 3 establishes principles and requirements for an acquirer in
respect of the following:
a) Recognised and measures in its financial statements the identifiable
assets acquired, the liabilities assumed and any Non-controlling
interest in the acquire.
b) Recognises and measures the Goodwill acquired in the business
combination or a gain from a bargain purchase.
Scope: This IFRS Applies to transaction or other events that meets the
definition of a business combination. But does not apply to
1) The accounting for the formation of a joint ventures in the financial
2) A Combination of business under common control.
3) The Acquisition of an asset or a group of assets that does not
constitutes
a
business
(Source:
eifrs.org/eifrs/bnstandards/en/2014/ifrs3.pdf)

Key Requirements/Provisions:
1) Acquisition Method: A Business combination must be accounted
for by applying the purchase method. But pooling of interest method
no to be used.
2) Steps for applying acquisition Method: The following 4 steps
are used in business combinations (Acquisition Method).
Step 1: Identification of Acquirer: An IFRS 10 Consolidated
financial statement is used to identify the acquirer the entity that
obtains control of the acquiree.
Step 2: Determining the acquisition date: The date which the
acquirer obtains control of the acquiree.
Step 3: Recognition and Measurement of Assets and
Liabilities and Non- Controlling Interests (NCI):
Step 4: Recognition and Measurement of Good Will (or) A
Bargaining Purchase:

REFERENCES
1) S.P.Srivastava & Sanjay Kumar Patel (2009). Convergence of
Indian Accounting Standards with IFRS: Prospects and
Challenges, Vol.V, No.2; December 2009.
2) http://en.wikipedia.org/wiki/ifrs retrieved on 10-10-2014.
3) Shobhan Sen., (2013) IFRS Convergence and Applicability in
India, Some issues, A journal of
Humanities & Social
Science Vol-I, issue III, PP-45-54.
4) Vandana Saxena Poria (2009) IFRS Implementation and
challenges in India MEDC Monthly Economic Digest August 2009.
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Retrieved on 12-10-2014.
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Retrieved on 14-10-2014.
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Retrieved on 25-09-2014.
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Retrieved on 14-10-2014.
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