An Executive Guide to IFRS: Content, Costs and Benefits to Business

First time adoption

This is a very significant standard, but one that most companies only get to apply once (although the IFRS Interpretations Committee in 2010 came to the conclusion that it was possible to have to apply it more than once if for some reason you left IFRS and then came back later). This standard, the first issued by the current standard-setter, sets out the basis on which people who are switching to IFRS from another GAAP should make the appropriate adjustments. IFRS 1 is a key standard in that companies very rarely get the opportunity to revisit all of their accounting policies, and careful thought is necessary so as not to waste that opportunity. First time adoption is a move to a new comprehensive basis of accounting. Often the new basis will not allow choices, but where it does, these need careful evaluation of their impact.

In headline terms, the standard says that you should adjust your existing figures to what they would have been had you always applied IFRS. However, it recognizes that in many cases this is impossible because you just would not have the data, or it is impractical because the costs of reconstituting the data outweigh the benefits. The IASB also systematically prohibits the use of hindsight in making restatements. Consequently the standard provides a useful collection of exceptions and workarounds which constitute this special opportunity, although changing estimates from those used in ‘previous GAAP’ is not encouraged. All of the changes ...