●
●
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.
‡ these additional reconciliations are required under paragraph 24 and 25 of IFRS 1.
The IAS 34 requirements regarding the disclosure of primary financial statements in interim reports are
discussed in Chapter 37.
As can be seen from the tables in Example 5.38, the additional reconciliations and
explanations required under (b) above would be presented out of context, i.e. without
the statement of financial position, statement of profit or loss (if presented), statement
of profit or loss and other comprehensive income and statement of cash flows to which
they relate. For this reason, we believe a first-time adopter should either (1) include the
primary financial statements to which these reconciliations relate or (2) refer to another
published document that includes these primary financial statements. The following
example showing the various reconciliations to be included in the financial statements
of a first-time adopter is based on the Illustrative Examples of IFRS 1: [IFRS 1.IG Example 10]
Example 5.39: Reconciliations to be presented in IFRS quarterly reports
Entity B’s date of transition to IFRSs is 1 January 2018, the end of its first IFRS reporting period is
31 December 2019 and it publishes quarterly reports under IAS 34. Which reconciliations should Entity B
present in its 2019 interim IFRS reports and in its first IFRS financial statements?
Reconciliation of total
Explanation of material
Reconciliation
comprehensive income
adjustments to statement
of equity
or profit or loss †
of cash flows
First quarter
1 January 2018
○
31 December 2018
○
○
○
31 March 2018
– 3 months ending
●
●
First-time
adoption
331
Reconciliation of total
Explanation of material
Reconciliation
comprehensive income
adjustments to statement
of equity
or profit or loss †
of cash flows
Second quarter
30 June 2018
– 3 months ending
●
– 6 months ending
●
●
Third quarter
30 September 2018
– 3 months ending
●
– 9 months ending
●
●
First IFRS financial statements
1 January 2018
●
31 December 2018
●
●
●
○
These reconciliations are only required to be presented in an entity’s first interim financial report
under IAS 34 and may be included by way of a cross-reference to another published document in
which these reconciliations are presented.
†
If an entity did not previously report total comprehensive income, a reconciliation from profit or
loss under previous GAAP to total comprehensive income under IFRSs should be presented.
If a first-time adopter issues interim financial report in accordance with IAS 34 for part
of the period covered by its first IFRS financial statements and changes accounting
policies or its use of exemptions contained in IFRS 1, the first-time adopter is required
to explain the changes in each such interim financial report in accordance with
paragraph 23 and update the reconciliation required by paragraph 32 (a) and (b) of
IFRS 1. [IFRS 1.32(c)].
6.6.2
Disclosures in the interim financial report
Interim financial reports under IAS 34 contain considerably less detail than annual
financial statements because they assume that users of the interim financial report
also have access to the most recent annual financial statements. [IFRS 1.33]. However,
they would be expected to provide disclosure relating to material events or
transactions to allow users to understand the current interim period. Therefore, a
first-time adopter needs to consider what IFRS disclosures are material to an
understanding of the current interim period. A full set of IFRS accounting policy
disclosures and related significant judgements and estimates should be included as
well as information on the IFRS 1 exemptions employed. In addition, consideration
should be given to both new disclosures not previously required under previous
GAAP, and disclosures made under previous GAAP but for which the amounts
contained therein have changed significantly due to changes in accounting policies
resulting from the adoption of IFRSs.
It is also important to note that such disclosures apply to balances in both the opening
and comparative year-end statement of financial position, each of which could be
included in the first interim financial report. First-time adopters should expect to
332 Chapter
5
include significantly more information in their first IFRS interim report than would
normally be included in an interim report (alternatively, it could cross refer to another
published document that includes such information). [IFRS 1.33].
Examples of additional annual disclosures under IFRSs to be included in the entity’s first
IAS 34 compliant interim financial report could include disclosures relating to
retirement benefits, income taxes, goodwill and provisions, amongst other items that
significantly differ from previous GAAP and those required IFRS disclosures that are
more substantial than previous GAAP.
6.7
Disclosure of IFRS information before adoption of IFRSs
As the adoption of IFRSs may have a significant impact on their financial statements,
many entities will want to provide information on its expected impact. There are
certain difficulties that arise as a result of the application of IFRS 1 when an entity
decides to quantify the impact of the adoption of IFRSs. In particular, IFRS 1
requires an entity to draw up an opening IFRS statement of financial position at its
date of transition based on the standards that are effective at the end of its first IFRS
reporting period. Therefore, it is not possible to prepare IFRS financial information
– and assess the
full impact of IFRSs – until an entity knows its date of transition to
IFRSs and exactly which standards will be effective at the end of its first IFRS
reporting period.
If an entity wanted to quantify the impact of the adoption of IFRSs before its date
of transition, it would not be able to do this in accordance with IFRS 1. While an
entity would be able to select a date and apply by analogy the requirements of
IFRS 1 to its previous GAAP financial information as of that date, it would not be
able to claim that such additional information complied with IFRSs. An entity
should avoid presenting such additional information if it is believed that the
information, despite being clearly marked as not IFRS compliant, would be
misleading or misunderstood.
If an entity wants to quantify the impact of the adoption of IFRSs in advance of the
release of its first IFRS financial statements but after its date of transition, there may still
be some uncertainty regarding the standards that apply. If so, an entity should disclose
the nature of the uncertainty, as is illustrated by the extract below from the IFRS
announcement of Canadian Imperial Bank of Commerce, and consider describing the
information as ‘preliminary’ IFRS information.
First-time
adoption
333
Extract 5.15: Canadian Imperial Bank of Commerce (CIBC) (2011)
Notes to the consolidated financial statements [extract]
Note 32 Transition to International Financial Reporting Standards [extract]
Publicly accountable enterprises are required to adopt IFRS for annual periods beginning on or after January 1, 2011. As
a result, our audited consolidated financial statements for the year ending October 31, 2012 will be the first annual
financial statements that comply with IFRS, including the application of IFRS 1 “First-time Adoption of International
Financial Reporting Standards”. IFRS 1 requires an entity to adopt IFRS in its first annual financial statements prepared under IFRS by making an explicit and unreserved statement of compliance with IFRS in those financial statements. We
will make this statement of compliance when we issue our 2012 annual consolidated financial statements.
IFRS 1 also requires that comparative financial information be provided. As a result, the first day at which we applied
IFRS was as at November 1, 2010 (the Transition Date), and our consolidated opening IFRS balance sheet was prepared
as at this date. The opening IFRS balance sheet represents our starting point for financial reporting under IFRS.
In accordance with IFRS 1, we have retrospectively applied our IFRS accounting policies in the preparation of our
opening IFRS balance sheet as at November 1, 2010. These IFRS accounting policies are those that we expect to
apply in our first annual IFRS financial statements for the year ending October 31, 2012, although IFRS 1 provides
certain optional exemptions and mandatory exceptions from retrospective application of IFRS, as described in Section
A, Exemptions and exceptions from retrospective application of IFRS.
The following information is provided to allow users of the financial statements to obtain a better understanding of
the effect of the adoption of IFRS on our consolidated financial statements. The information below includes our
opening IFRS balance sheet as at November 1, 2010, based on the IFRS optional exemptions and accounting policies
that we expect to apply in our first annual IFRS financial statements. A description of the differences in accounting
policies under IFRS and Canadian GAAP that resulted in transition adjustments as at November 1, 2010 is provided
in Section B, Differences in accounting policies. [...]
Notes to the opening IFRS consolidated balance sheet
A. Exemptions and exceptions from retrospective application of IFRS
Set forth below are the applicable IFRS 1 optional exemptions and mandatory exceptions from retrospective
application of IFRS accounting policies that have been applied in the preparation of the opening IFRS balance sheet.
IFRS optional exemptions [extract]
1. Actuarial gains and losses for post-employment defined benefit plans – Retrospective application of the ‘corridor
approach’ under IAS 19 “Employee Benefits” would require us to restate the accounting for our post-employment
defined benefit plans, including unamortized actuarial gains and losses, from the inception or acquisition of the plans
until the Transition Date as if IAS 19 had always been applied. However, IFRS 1 permits entities to instead recognize all unamortized actuarial gains and losses as at the Transition Date in opening retained earnings, except those related to
subsidiaries that have applied IFRS in their own financial statements prior to their parent. We elected to apply this ‘fresh-start’ election, which resulted in the recognition of $1,150 million of after-tax unamortized net actuarial losses on our defined benefit plans that existed under Canadian GAAP as at November 1, 2010 through retained earnings. This amount
excludes the unamortized actuarial losses related to CIBC FirstCaribbean which adopted IFRS prior to CIBC. This
transition adjustment, together with the other employee benefits IFRS adjustments (see Section B.1), resulted in a
decrease in after-tax retained earnings of $1,080 million.
334 Chapter
5
7
ACCOUNTING POLICIES AND PRACTICAL APPLICATION
ISSUES
The exceptions and exemptions of IFRS 1 are explained at 4 and 5 above, respectively.
This section provides an overview of the detailed application guidance in IFRS 1 (to the
extent that it is not covered in 4 and 5 above) and some of the practical application
issues that are not directly related to any of the exceptions or exemptions. These issues
are discussed on a standard by standard basis as follows:
• IAS 7 – Statement of Cash Flows (see 7.1 below);
• IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors
(see 7.2 below);
• IAS 12 – Income Taxes (see 7.3 below);
• IAS 16 – Property, Plant and Equipment – and IAS 40 – Investment Property (cost
model) (see 7.4 below);
• IAS 17 – Leases (see 7.5 below);
• IFRS 15 – Revenue from Contracts with Customers (see 7.6 below);
• IAS 19 – Employee Benefits (see 7.7 below);
• IAS 21 – The Effects of Changes in Foreign Exchange Rates (see 7.8 below);
• IAS 28 – Investments in Associates and Joint Ventures (see 7.9 below);
• IAS 29 – Financial Reporting in Hyperinflationary Economies (see 7.10 below);
• IFRS 11 – Joint Arrangements (see 7.11 below);
• IAS 36 – Impairment of Assets (see 7.12 below);
• IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (see 7.13 below);
and
• IAS 38 – Intangible Assets (see 7.14 below).
7.1 IAS
7 – Statement of Cash Flows
A statement of cash flows prepared under IAS 7 may differ in the following ways from
the one prepared under an entity’s previous GAAP:
• The definition of cash and cash equivalents under IAS 7 may well differ from the
one used under previous GAAP. In particular, IAS 7 includes within cash and cash
equivalents those bank overdrafts that are repayable on demand and that form an
integral part of an entity’s cash management. [IAS 7.8].
• The layout and definition of the categories of cash flows (i
.e. operating, investing
and financing) is often different from previous GAAP. In addition, IAS 7 contains
specific requirements about the classification of interest, dividends and taxes.
• Differences in accounting policies between IFRSs and previous GAAP often have
a consequential impact on the statement of cash flows.
IFRS 1 requires disclosure of an explanation of the material adjustments to the statement
of cash flows, if a first-time adopter presented one under its previous GAAP (see 6.3.1
above). The extract below illustrates how an IFRS statement of cash flows may differ
from the one under previous GAAP.
First-time
adoption
335
Extract 5.16: 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]
CHANGES TO THE STATEMENT OF CASH FLOWS FROM CANADIAN GAAP TO IFRS
The net impact on the statement of cash flows as a result of adoption of IFRS was as follows for the fiscal year ended
January 31, 2011:
Cash flows from operating activities
$
14
Cash flows from investing activities
(52)
Cash flows from financing activities
38
$ –
The following items explain the most significant restatements to the statement of cash flows, resulting from the
changes in accounting policies upon adoption of IFRS:
●
Under Canadian GAAP, payments to and from sale and leaseback facilities for pre-owned aircraft were
classified as cash flows from operating activities. Under IFRS, such payments are treated as financing
transactions and are classified as cash flows from financing activities. For the fiscal year ended January 31,
2011, cash flows from financing activities increased by $38 million as amounts received from these facilities
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 67
