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BASIS FOR CONCLUSIONS ON IFRS 1 PRESENTATION AND DISCLOSURE

BASIS FOR CONCLUSIONS ON IFRS 1 PRESENTATION AND DISCLOSURE

BASIS FOR CONCLUSIONS ON IFRS 1 PRESENTATION AND DISCLOSURE

Presentation and disclosure- Comparative information
IAS 1 requires an entity to disclose comparative information (in accordance with IFRSs) for the previous period. Some suggested that a first-time adopter should disclose comparative information for more than one previous period. For entities that already apply IFRSs, users normally have access to financial
statements prepared on a comparable basis for several years. However, this is
not the case for a first-time adopter.

Nevertheless, the Board did not require a first-time adopter to present more comparative information than IAS 1 requires, because such a requirement would impose costs out of proportion to the benefits to users, and increase the risk that preparers might need to make arbitrary assumptions in applying hindsight.

ED 1 proposed that if the first IFRS financial statements include more than one year of comparative information, the additional comparative information should comply with IFRSs. Some respondents to ED 1 noted that some regulators require entities to prepare more than two years of comparatives.
They argued the following:
(a) A requirement to restate two years of comparatives would impose excessive costs and lead to arbitrary restatements that might be biased by hindsight.
(b) Consider an entity adopting IFRSs in 2005 and required by its regulator to give two years of comparatives. Its date of transition to IFRSs would be 1 January 2003—several months before the publication of the IFRS and of the standards resulting from the improvements project. This could contradict the Board’s assertion in paragraph BC27 above that most preparers could gather most information they need for their opening IFRS balance sheet at, or soon after, the date of transition to IFRSs.

BASIS FOR CONCLUSIONS ON IFRS 1 PRESENTATION AND DISCLOSURE

In response to these comments, the Board deleted this proposal. Instead, if a first-time adopter elects to give more than one year of comparative information, the additional comparative information need not comply with IFRSs, but theIFRS requires the entity:
(a) to label previous GAAP information prominently as not being prepared in accordance with IFRSs.
(b) to disclose the nature of the main adjustments that would make it comply with IFRSs (paragraph 22 of the IFRS).

Some respondents to ED 1 suggested that it would be onerous to prepare comparative information in accordance with IAS 32 and IAS 3932 about financial instruments. They suggested that an entity should be able to apply IAS 39 prospectively from the beginning of the year of its first IFRS financial statements (eg 1 January 2005 for many first-time adopters). They noted that US companies were not required to restate comparatives on the introduction of SFAS 133 Accounting for Derivative Instruments and Hedging Activities. However, given the Board’s emphasis on comparability within the first IFRS financial statements and the assumption of timely planning (paragraph BC27), the Board introduced no general exemption in this area.

BASIS FOR CONCLUSIONS ON IFRS 1 PRESENTATION AND DISCLOSURE

Nevertheless, the Board noted that the revised IAS 32 and IAS 3933 were not issued until December 2003. Additionally, the Board’s decision to re-expose its proposals for portfolio hedges of interest rate risk had the effect that some of the requirements will not be finalised until early 2004. The Board was sympathetic to concerns that entities that will be required to comply with IFRSs for the first time in 2005 could not make a timely transition to IFRSs because IAS 39 will not be issued in final form until after the start of 2004. Therefore, the Board decided to exempt entities adopting IFRSs for the first time before 1 January 2006 from producing comparative information that complies with IAS 32 and IAS 39, as revised in 2003, in their first IFRS financial statements.

BASIS FOR CONCLUSIONS ON IFRS 1 PRESENTATION AND DISCLOSURE

In the light of respondents’ comments on the June 2011 exposure draft Improvements to IFRSs, the Board amended paragraph 21 as part of Annual Improvements 2009–2011 Cycle (issued in May 2012) because it considered that the requirements for comparative information for a first-time adopter should be different from the requirements for comparative information for an existing preparer. The Board noted that a first-time adopter should not be exempted from presenting three statements of financial position and related notes because it might not have presented this information previously on a basis consistent with IFRSs.

BASIS FOR CONCLUSIONS ON IFRS 1 PRESENTATION AND DISCLOSURE

In addition, the Board considered that a first-time adopter may provide additional comparative information that is presented in accordance with previous GAAP to help the user understand the effects of the transition to IFRSs in accordance with paragraph 22 of IFRS 1. For example, a law or a regulator requires an entity to present the first comparative financial statements in accordance with both IFRSs and previous GAAP and the second comparative in accordance with previous GAAP only. The presentation of this information is an exception from the requirement in paragraph 38C of IAS 1 (to allow an entity to present comparative information in addition to the minimum comparative
information required by IFRSs).

BASIS FOR CONCLUSIONS ON IFRS 1 PRESENTATION AND DISCLOSURE

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