International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards
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of financial position as at February 1, 2010 does not reflect any hedge relationships which did not satisfy the hedge
accounting criteria in IAS 39, Financial Instruments: Recognition and Measurement, as of the transition date.
Under IFRS 1, the Corporation elected to apply the following optional exemptions in preparing its opening
statement of financial position as at the transition date.
1. Business combinations – The Corporation elected to apply IFRS prospectively for business combinations from
the date of transition to IFRS. Accordingly, the Corporation has not restated the accounting for acquisitions of
subsidiaries, interests in joint ventures or associates that occurred before February 1, 2010.
2. CCTD – At the transition date, the Corporation transferred all cumulative foreign exchange losses, amounting to
$117 million, from CCTD to retained earnings. There was no impact on equity as at February 1, 2010 as a result of this election.
3. Borrowing costs – The Corporation elected to begin capitalization of borrowing costs to qualifying assets under
IFRS effective February 19, 2007, the launch date of the CRJ1000 NextGen aircraft program. Borrowing costs of
$32 million, capitalized under Canadian GAAP prior to that date, were derecognized and applied against retained
earnings at the transition date.
4. Share-based compensation – The Corporation did not apply IFRS 2, Share-based payment, to equity instruments
granted prior to November 7, 2002 and those that have vested before February 1, 2010. At transition date, there was
no adjustment related to these instruments as a result of this election.
5. Retirement benefits – The Corporation elected to disclose the defined benefit obligations, plan assets, deficit and
experience adjustments on retirement benefit liabilities and assets prospectively from the date of transition,
progressively building the data to present the four years of comparative information required under IFRS.
6. Retirement benefits – The Corporation elected to recognize all cumulative actuarial gains and losses as at
February 1, 2010 in retained earnings.
First-time
adoption
317
If a first-time adopter did not present financial statements for previous periods this fact
should be disclosed. [IFRS 1.28]. In practice this may apply to entities that did not prepare
consolidated accounts under their previous GAAP or a new entity formed for the
purpose of performing an IPO. In such cases and others, an explanation of how the
transition to IFRSs affected the entity’s reported financial position, financial
performance and cash flows cannot be presented, because relevant comparative
information under the entity’s previous GAAP does not exist.
6.3.1
Disclosure of reconciliations
A first-time adopter is required to present:
• reconciliations of its equity reported under previous GAAP to its equity under
IFRSs at:
• the date of transition to IFRSs; and
• the end of the latest period presented in the entity’s most recent annual
financial statements under previous GAAP;
• a reconciliation to its total comprehensive income under IFRSs for the latest period
in the entity’s most recent annual financial statements. The starting point for that
reconciliation should be total comprehensive income under previous GAAP for
the same period or, if an entity did not report such a total, profit or loss under
previous GAAP; [IFRS 1.24] and
• an explanation of the material adjustments to the statement of cash flows, if it
presented one under its previous GAAP. [IFRS 1.25].
These reconciliations should be sufficiently detailed to enable users to understand
the material adjustments to the statement of financial position, statement of profit or
loss (if presented) and statement of profit or loss and other comprehensive income.
[IFRS 1.25]. While the standard does not prescribe a layout for these reconciliations, the
implementation guidance contains an example of a line-by-line reconciliation of the
statement of financial position, statement of profit or loss and other comprehensive
income. [IFRS 1.IG Example 11]. This presentation may be particularly appropriate when a
first-time adopter needs to make transitional adjustments that affect a significant
number of line items in the primary financial statements. If the adjustments are less
pervasive a straightforward reconciliation of equity, total comprehensive income
and/or profit or loss may provide an equally effective explanation of how the
adoption of IFRSs affects the reported financial position, financial performance and
cash flows.
If a first-time adopter becomes aware of errors made under previous GAAP, it should
distinguish the correction of errors from changes in accounting policies in the above
reconciliations. [IFRS 1.26]. This means that the adoption of IFRSs should not be used to
mask the error.
The example below illustrates how these requirements apply to an entity whose first
IFRS financial statements are for the period ending on 31 December 2019 and whose
date of transition to IFRSs is 1 January 2018.
318 Chapter
5
Example 5.37: Reconciliations to be presented in first IFRS financial statements
Entity A’s date of transition to IFRSs is 1 January 2018 and the end of its first IFRS reporting period is
31 December 2019. Entity A should present the following primary financial statements and reconciliations in
its first IFRS financial statements.
1 January
31 December
31 December
2018
2018
2019
Statement of financial position
●
●
●
Reconciliation of equity
●
●
‡
For the period ending
Statement of profit or loss and other
comprehensive income *
●
●
Statement of cash flows
●
●
Statement of changes in equity
●
●
Reconciliation of total comprehensive income †
●
‡
Explanation of material adjustments to the
statement of cash flows
●
‡
* alternatively the entity should present two statements: a statement of profit or loss and a
statement of comprehensive income.
† if an entity did not previously report total comprehensive income then a reconciliation from profit or
loss under previous GAAP to total comprehensive income under IFRSs should be presented.
‡ a
first-time adopter that ceases to publish financial statements under previous GAAP is not
required to present reconciliations of equity and total comprehensive income at the end of the
first IFRS reporting period. However, a first-time adopter that continues to publish previous
GAAP financial statements may have to reconcile the equity and total comprehensive income
and explain material cash flow adjustments as of and for the end of the first IFRS financial
reporting period. See 6.3.1.A below for further discussion.
First-time adopters should not apply the requirements of IAS 8 relating to the changes
policies an entity makes when it adopts IFRSs or changes in those policies until after it
presents its first IFRS financial statements. [IFRS 1.27].
A first-time adopter should explain changes in accounting policies or in its use of
exemptions during the period between its first IFRS interim financial report and its first
IFRS annual financial statements (see 6.6 below) and update the reconciliations of
equity and total comprehensive income discussed herein. [IFRS 1.27A]. This requirement
is necessary since the first-time adopter is exempt from the requirements of IAS 8
concerning reporting of such changes. [IFRS 1.BC97].
6.3.1.A
Reconciliation by a first-time adopter that continues to publish previous
GAAP financial statements
A first-time adopter that continues to publish financial statements under previous GAAP
after adopting IFRSs must consider carefully the starting point of the reconciliations
required by IFRS 1 in the first IFRS financial statements because the requirements to
produce reconciliations do not consider this situation. Paragraph 24 of IFRS 1 results in
different applications depending on the timing of issuance of the previous GAAP
financial statements in relation to the first-time adopter’s first IFRS reporting period.
We believe a first-time adopter, that continues to publish previous GAAP financial
statements and has already issued those financial statements for the first IFRS reporting
First-time
adoption
319
period prior to the issuance of the IFRS financial statements, has a choice of presenting
reconciliations of equity and total comprehensive income:
(a) respectively as at the end of, and for, the first IFRS reporting period
(b) respectively as at the end of, and for, the first IFRS reporting period, and the
comparative period; or
(c) respectively as at the end of, and for, the comparative period
However, if the IFRS financial statements were issued prior to the previous GAAP
financial statements for the period, then IFRS 1 can only mean the previous GAAP
financial statements for the immediate preceding year.
6.3.2
Line-by-line reconciliations and detailed explanations
The extract below from the 2011 financial statements of Bombardier Inc. complies with
the versions of IFRS 1 and IAS 1 that were effective in 2011. However, it still provides a
good example of an entity that not only provides summary reconciliations of equity and
profit or loss, but also line-by-line reconciliations, as suggested by the Implementation
Guidance of IFRS 1, and detailed explanations of the reconciling items.
The exceptions and exemptions used by Bombardier on transition are shown in
Extract 5.12 above. The following extract does not include all of Bombardier’s detailed
explanations of the reconciling items.
Extract 5.13: Bombardier Inc. (2011)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [extract]
For the fiscal years ended December 31, 2011 and January 31, 2011
(Tabular figures are in millions of U.S. dollars, unless otherwise indicated)
36.
ADOPTION OF IFRS [extract]
RECONCILIATIONS OF EQUITY AND NET INCOME FROM CANADIAN GAAP TO IFRS
The following reconciliations illustrate the measurement and recognition differences in restating equity and net
income reported under Canadian GAAP to IFRS for the dates and period indicated.
RECONCILIATION OF EQUITY
Item
January
31,
2011
February 1, 2010
Equity under Canadian GAAP (as reported)
$ 4,352
$ 3,769
Measurement and recognition differences:
Retirement benefits
A
(2,110)
(2,198)
Revenues B
(552)
(554)
Aerospace program tooling
C
(195)
(246)
Sale and leaseback obligations
D
(1)
(6)
Other
(92)
(12)
(2,950)
(3,016)
Income tax impact of all restatements
E
119
207
Total restatements
(2,831)
(2,809)
Equity under IFRS
$ 1,521
$ 960
320 Chapter
5
RECONCILIATION OF EBIT, NET INCOME AND DILUTED EPS
Fiscal year ended January 31, 2011
Net
financing
Net
Item
BA
BT
EBIT
expense
income
As reported under Canadian GAAP
$448 $602
$1,050
$
(119) $769
(1)
Reclassifications
1
–
1
(1)
–
Restatements to income before
income taxes
Retirement benefits
A
31
66
97
(44)
53
Revenues B
24
(15)
9
(7)
2
Aerospace program tooling
C
55
–
55
(4)
51
Sale and leaseback obligations
D
10
–
10
(5)
5
Other
(15)
(2)
(17)
(28)
(45)
105 49
154
(88) 66
Income tax impact of all restatements
E
(60)
Total restatements
105
49
154
(88)
6
As restated under IFRS
$554
$651 $1,205
$
(208) $775
Diluted EPS under Canadian GAAP
(as reported)
$0.42
Impact of IFRS restatements to net income
–
Diluted EPS under IFRS
$0.42
(1)
Net of income taxes of $162 million.
The following items explain the most significant restatements to equity and net income resulting from the change in
accounting policies upon adoption of IFRS.
A. RETIREMENT
BENEFITS
The equity adjustment before income taxes was as follows as at February 1, 2010:
Net unrecognized actuarial loss recorded in deficit
$
(1,826)
Vested past service credits
(32)
Asset ceiling and additional liability test
(97)
Measurement date
(227)
Allocation of retirement benefit costs to inventories and aerospace program tooling
(16)
Equity adjustment, before income taxes
$ (2,198)
The transition date adjustments related to net unrecognized actuarial loss, cha
nge of measurement date and asset
ceiling and additional liability test, net of income taxes of $177 million, totalled $1,973 million and have been
presented as a separate item of the deficit as at February 1, 2010. Cumulative net actuarial gains and losses since
February 1, 2010 are also presented in this separate item of the deficit.
The impact on EBT for the fiscal year ended January 31, 2011 was as follows:
First-time
adoption
321
Increase in EBIT
$
97
Increase in net financing expense
(44)
Increase in EBT
$ 53
Actuarial gains and losses
Under Canadian GAAP, actuarial gains and losses were amortized through net income using a corridor approach over
the estimated average remaining service life (“EARSL”) of employees. Under IFRS, the Corporation has elected to
recognize all actuarial gains and losses in OCI as incurred. As a result of this election, foreign exchange gains and
losses on the translation of plan assets and liabilities are also recorded in OCI under IFRS.
Vested past service costs (credits)
Under Canadian GAAP, vested past service costs (credits) of defined benefit plans were amortized over the EARSL
of plan participants from their grant date. Under IFRS, vested past service costs (credits) of defined benefit plans