First-time Adoption of International

Financial Reporting Standards

Adoption Nepal
Nepal is a little behind in adoption of IFRS
Announced to be the first IFRS reporting period
is 2012- 2013 (July 16th 2012 July 15th
2013)
Bigger Challenge - convergence rather than
adoption
Biggest challenge - first time adoption
2


2. Which of the following are underlying
assumptions of financial statements?
(a) Relevance and reliability
(b) Financial capital maintenance and physical
capital maintenance
(c) Accrual basis and going concern
(d) Prudence and conservatism
To ensure that an entitys first IFRS financial
statements, and its interim financial reports
contain high quality information that is:
Transparent for users and comparable over
all periods presented
Provides a suitable starting point for
accounting in accordance with IFRSs
Can be generated at a cost that does not
exceed the benefits


An enterprise for the first time making explicit
and unreserved statement that GPFS (general
purpose financial statements) comply with IFRS
If enterprise in its published GPFS asserted
Compliance with some but not all IFRSs
GPFS included only reconciliation of selected
figures from previous GAAP to IFRSs
Not first time adopter if in the preceding year
its published financial statements asserted
Compliance with IFRSs even if auditors report
contained a qualification with respect to
conformity to IFRS
Compliance with both previous GAAP and
IFRSs

Derecognize items as assets or liabilities if
IFRSs do not permit such recognition
Recognise all assets and liabilities whose
recognition is required by IFRSs
Reclassification of items that were recognised
under previous GAAP as one type of asset,
liability or component of equity, which are
different type of asset, liability or component
of equity under IFRSs.
Apply IFRSs in measuring all recognised
assets and liabilities

IAS 28 prohibits recognition of expenditure on intangible
assets like
Research
Start up, pre-operating cost
Training costs
Moving and relocation

Eliminate these
If previous GAAP allowed recognition of reimbursements
and contingent assets not virtually certain, be eliminated
If previous GAAP allowed recognition of future operating
losses or major overhauls as provisions, but do not meet
recognition criteria per IAS -37
New Assets and Liabilities
IAS - 39 - recognition of all derivative financial assets
and liabilities

IAS 19 Employer to recognize liabilities under defined
benefit plans (not only pensions but also obligations
for medical, vacation, deferred compensation etc)

IAS 37 liabilities on onerous contract, restructuring,
decommissioning, site restoration, warranties, guarantees

IAS 10 (Events after Reporting Date) Proposed
Dividend not recognized as liability
Reclassify as part of retained earnings
Previous GAAP allowed Treasury Stock as asset, to
be reclassified as component of equity
IAS 32 ( Financial Instruments Presentation)
Redeemable Preference Shares not part of equity
but liability
Offsetting or Netting of assets/ Liabilities or Income/
Expenses


Subject to certain exception to general
measurement principles
Measurement principles applicable on the
day of adoption. If enterprises in Nepal
adopts IFRS first time for year ended 15th
July 2013, measurement
principles applicable on that date
Adjustments recognized directly in retained
earnings or other apt category of equity on
the date of transition .
Same accounting policies in its opening IFRS
statement of financial position and throughout
all periods presented in its first IFRS financial
statements
Shall comply with each IFRS effective at the
end of its first IFRS reporting period


financial assets and financial liabilities
Not permitted to recognize financial assets or
financial liabilities if these were de-recognized in
erstwhile GAAP
if a first-time adopter derecognised non-derivative
financial assets or non-derivative financial liabilities
in accordance with its previous GAAP as a result of a
transaction that occurred before date of transition, it
shall not recognise those assets and liabilities in
accordance with IFRSs (unless they qualify for
recognition as a result of a later transaction or event)

It is consistent with the transition provision of
IAS 39


Certain IAS 27 requirements not to apply
retrospectively prior to date of transition to IFRSs
Total comprehensive income is attributed to the
owners of the parent and to the non-controlling
interests even if this results in the non-
controlling interests having a deficit balance; The
accounting of changes in the parents ownership
interest in a subsidiary that do not result in a loss
of control

Exception - Howsoever if first-time adopter
elects to apply IFRS 3 retrospectively to past
business combinations 18

Carried under Cost Model Fair Value becomes
Deemed cost (including for intangibles if active
market exists)
Revalued under previous GAAP, revalued amount at
the Revaluation Date becomes deemed cost
Before date of first IFRS balance sheet, any IPO/
privatization done, and the revaluation at Fair
Value done, it becomes deemed cost after initial
adoption of IFRS Adjustment for subsequent
depreciation, amortization and impairment
required.

Selected financial data for periods before first
IFRS Balance Sheet
IAS 1 requires one year of full comparative
financial statements
If enterprise desires to disclose selected data,
conformity to earlier data under IFRS optional
Prominently disclose non conformity to IFRS
for such select data
Disclose nature of main adjustment that
would make IFRS compliant
Narrative disclosure - not necessarily
quantified 23

In the GPFS of first time adopter
To explain how the transition from previous GAAP to IFRS
affected enterprises reported financial position, performance
and cash flows

Reconciliations of equity on the date of transition to IFRSs,
and end of latest period presented in the entitys most recent
annual financial statements under previous GAAP

Reconciliations of IFRSs based profit or loss with that
reported under previous GAAP recognition and reversal of any
impairment loss explaining that such would have been
required under IAS 36 even other wise Reconciliations should
provide sufficient details to enable users to understand the
material adjustments
Subsidiary adopts in Enterprise Only (stand
alone)
GPFS, before the Group for Consolidated FS
the date on which it adopted (date - not for the
group)
> If group adopts before subsidiary, Subsidiary
has two options elect group date as its
transition date or first time adopt in its
enterprise only statement
> If group adopts before the Parent
Parents adoption date is date of Group adoption




Thank you!