Hello, welcome to IFRS IS EASY!
Note: All the materials in this blog post have been made available to the public for free download by the respective sources. They are compiled here for ease of access to you.
IFRS 1 First-time adoption of International Financial Reporting Standards is an accounting standard that sets out the procedures that a company must follow when it switches from its previous accounting rules (e.g. local GAAP such as US GAAP in the United States of America, or ASPE in Canada) to IFRS for the first time.
If a company has been using a different accounting standard and wants to switch to IFRS, IFRS 1 guides them through the transition, essentially providing the company with a suitable starting point under IFRS.
Key things to note when transitioning from another accounting standard to IFRS:
- The company will have to adjust its existing accounting policies, disclosures, including its recognition and measurement principles to align with that of IFRS.
- The company recognizes all assets and liabilities that meet the criteria of IFRS and removes from its accounts any assets or liabilities that no longer qualify under IFRS.
- Any changes to the company's opening balance sheet are reflected in retained earnings (or a similar equity account). This applies to all changes except for adjustments made between goodwill and other intangible assets.
- The company is required to show a reconciliation of the equity (including its total comprehensive income) reported under the previous GAAP to that of IFRS.
- The company has 4 mandatory exceptions and 16 optional exemptions from retrospectively applying all IFRS requirements in its first IFRS-compliant financial statements.
- In addition to presenting the current year and comparative year in its financial statements, the company is required to present a third balance sheet (opening balance sheet) which is the balance as at the first day of transition to IFRS (that is, the first day of the comparative period).
Here is a simple example to explain the above
- Company A's financial year end is 31 December.
- Company A previously uses ASPE as a private company in Canada and has decided to switch to using IFRS. This decision was made at its annual general meeting with its private shareholders in August 2025.
- Based on the requirements of IFRS, Company A will prepare 3 balance sheets as follows:
- December 31, 2025 (Current Year)
- December 31, 2024 (Comparative Year)
- January 1, 2024 (Date of Transition to IFRS)
The below resources (PDF and eLearns) provide comprehensive coverage of IFRS 1, including its key requirements and practical guidance. Whether you are new to IFRS 1 or need a refresher, these resources will be helpful.
IFRS 1 First time adoption of IFRS
Source: Deloitte
Deloitte First-time adoption of IFRS - IFRS 1 Pdf
eLearn
Examples/Illustrative financial statements for first time IFRS adopters
Source: EY
Download Illustrative financial statements for a first-time adopter IFRS 1 pdf
Source: Grant Thornton
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