IFRS 1 – First-time Adoption of International Financial Reporting Standards

Objective

The objective of IFRS 1 is to guide the entity in preparing its first IFRS financial statements and to ensure that those financial statements include high quality information that is:

• Transparent for users and comparable over all periods presented;

• Provides a suitable starting point for accounting under IRFSs; and

• Can be generated in a cost that does not exceed the benefits.

Scope

• IFRS 1 applies to the first complete set of financial statements that contain an explicit and unreserved statement of compliance with IFRSs (if the statement of compliance is not available, then the financial statements are not considered the first IFRS financial statements).

• IFRS 1 applies to interim financial statements for a period covered by those first IFRS financial statements.

• IFRS 1 does not apply to entities already adopting IFRSs.

Opening IFRS Statement of Financial Position

• An opening IFRS statement of financial position is prepared in the date of transition.

• The date of transition is the beginning of the earliest period for which full comparative IFRS information is presented (for example if a company decided to present its first IFRS financial statements for the year ended December, 31, 2017. Therefore, the date of transition to IFRS is January, 1, 2016, and its reporting date is December, 31, 2017).

• The entity must present at least three statements of financial position, the first one will be at the date of transition January, 1, 2016 or December, 31 ,2015, the second one will be at the end of the earliest comparative period December, 31, 2016, the third one will be at the reporting date December, 31, 2017. Also the entity must present at least two of each of the other financial statements.

• Preparation of opening IFRS statement of financial position involves adjusting the amounts reported at the same date under previous GAAP. Those adjustments are recognized in retained earnings or another category of equity (not profit or loss).

Steps in Transition to IFRS

• The entity should select accounting policies that comply with IFRSs effective at the reporting date.

• Recognize all assets and liabilities whose recognition is required under IFRS.

• Derecognize any assets and liabilities that do not qualify for recognition under IFRS.

• Reclassify all assets, liabilities, and equity in accordance with IFRS.

• Measure all assets and liabilities according to IFRS.

Exemptions from Applying IFRS in the Opening IFRS Statement of Financial Position

Required Exemptions:

• Estimates under IFRS at the date of transition should be consistent with estimates made at the same date under previous GAAP.

• Derecognized financial assets or financial liabilities under previous GAAP should not be recognized under IFRS, unless they qualify for recognition as a result of a later transaction.

• Hedge accounting (IAS 39) is prohibited from retrospective application in first time adoption of IFRS.

• Non-controlling interests (IFRS 3) is prohibited from retrospective application in first time adoption of IFRS.

Optional (Elective) Exemptions:

An entity may elect to use one or more of the following exemptions, which provide specific relief, on adoption of IFRSs:

• Business combinations.

• Share-based payment transactions.

• Insurance contracts.

• Fair value or revaluation as deemed cost.

• Use of revalued amount as deemed cost for “event driven fair values” between transition date and date of the first IFRSs reporting period.

• Deemed cost for assets used in operations subject to rate regulation.

• Cumulative translation differences.

• Investments in subsidiaries, jointly controlled entities and associates.

• Assets and liabilities of subsidiaries, associates and joint ventures.

• Compound financial instruments.

• Designation of previously recognized financial instruments.

• Fair value measurement of financial assets/liabilities at initial recognition.

• Decommissioning liabilities included in the cost of property, plant and equipment.

• Financial assets or intangible assets accounted for in accordance with IFRIC 12 Service Concession Arrangements.

• Borrowing costs.

• Transfers of assets from customers accounted for in accordance with IFRIC 18 Transfers of Assets from Customers.

• Extinguishing financial liabilities with equity instruments accounted for in accordance with IFRIC 19 –Extinguishing Financial Liabilities with Equity Instruments.

• Joint arrangements.

• Severe hyperinflation.

• Government loans.

• Stripping costs in the production phase of a surface mine in accordance with IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine.

Disclosure

• A reconciliation of previous GAAP equity to IFRSs equity is required at the date of transition to IFRSs January, 1, 2016 and at the end of the earliest comparative period December, 31, 2016.

• A reconciliation of total comprehensive income reported under previous GAAP to total comprehensive income under IFRSs at the end of the earliest comparative period December, 31, 2016.

• Explanation of material adjustments that were made in adopting IFRSs for the first time.

• Errors in previous GAAP that were discovered in the course of transition must be separately disclosed.