IFRS 1 - First-time adoption of IFRS

Publication date: 02 Apr 2019

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In December 2016, the IASB issued Annual improvements with minor amendments affecting IFRS 1,' First-time adoption of IFRS', effective 1 January 2018.

For further details see In brief INT2016-19.


An entity moving from national GAAP to IFRS should apply the requirements of IFRS 1. It applies to an entity’s first IFRS financial statements and the interim reports presented under IAS 34, ‘Interim financial reporting’, that are part of that period. It also applies to entities under ‘repeated first-time application’. The basic requirement is for full retrospective application of all IFRSs effective at the reporting date. However, there are a number of optional exemptions and mandatory exceptions to the requirement for retrospective application.

The optional exemptions cover standards for which the IASB considers that retrospective application could prove too difficult or could result in a cost likely to exceed any benefits to users. Any, all or none of the optional exemptions may be applied.

The optional exemptions relate to:

  • business combinations;
  • deemed cost;
  • cumulative translation differences;
  • compound financial instruments;
  • assets and liabilities of subsidiaries, associates and joint ventures;
  • designation of previously recognised financial instruments;
  • share-based payment transactions;
  • insurance contracts;
  • fair value measurement of financial assets or financial liabilities at initial recognition;
  • decommissioning liabilities included in the cost of property, plant and equipment;
  • leases;
  • financial assets or intangible assets accounted for in accordance with IFRIC 12;
  • borrowing costs;
  • investments in subsidiaries, joint ventures and associates;
  • designation of contracts to buy or sell a non-financial item;
  • customer contracts;
  • extinguishing financial liabilities with equity instruments;
  • regulatory deferral accounts (IFRS 14)
  • severe hyperinflation;
  • joint arrangements; and
  • stripping costs in the production phase of a surface.

The mandatory exceptions cover areas in which retrospective application of the IFRS requirements is considered inappropriate. The following exceptions are mandatory, not optional:

  • estimates;
  • hedge accounting;
  • derecognition of financial assets and liabilities;
  • non-controlling interests;
  • classification and measurement of financial assets (IFRS 9);
  • embedded derivatives (IFRS 9/IAS 39);
  • impairment of financial assets; and
  • government loans.

Certain reconciliations from previous GAAP to IFRS are also required.

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