IFRS Means international financial reporting standard. For making financial statement globally comparable, we need to follow IFRSs. These IFRS are issued by international accounting standard committee. Today, we are explaining first international financial reporting standard. Its name is First Time Adoption of IFRS.
First Time Adoption Meaning
First time adoption means to follow IFRS first time by any entity for making of financial statement. An entity who follow it first time, will be first time adopter.
1. Derecognition of GAAP Assets and Liabilities
If your company is following IFRS first time, it is the rule of IFRS 1 that you should stop to show the assets and liabilities in the opening balance sheet if these assets and liabilities are disqualify or are not recognition under IFRSs
A) Intangible Assets which have no recognition under IFRSs
First Time Adoption Meaning
First time adoption means to follow IFRS first time by any entity for making of financial statement. An entity who follow it first time, will be first time adopter.
1. Derecognition of GAAP Assets and Liabilities
If your company is following IFRS first time, it is the rule of IFRS 1 that you should stop to show the assets and liabilities in the opening balance sheet if these assets and liabilities are disqualify or are not recognition under IFRSs
A) Intangible Assets which have no recognition under IFRSs
- Expenditure on Research
- start-up, pre-operating, and pre-opening costs
- training
- advertising and promotion
- moving and relocation
B) Liabilities which have no recognition under IFRSs
- General Reserve for Restructuring
- General Reserve for Future Operating Losses
2. Recognition of Assets and Liabilities under IFRS
There are some assets and liabilities which were not shown in balance sheet because they were not recognized by GAAP. If such assets and liabilities are now recognized by IFRS, we should include these assets and liabilities in the balance sheet. Following are its examples
- Derivatives of financial assets and liabilities
- Future Liabilities of Employer toward employees like obligations under medical and life insurance and compensation.
- Provision Liability for Restoration, warranties and guarantees.
- Deferred Tax Asset or Liability
3. Reclassification of Dividend After Balance Sheet Date
Company can not reclassify the dividend after balance sheet date after first time adoption of IFRS.
4. Disclosure in Interim Financial Statements
Any company who is adopting IFRS first time, should disclose this information in his interim financial statements in very clear words.
We are changing from GAAP to IFRS. So, it is necessary to do some adjustment after IFRS in the financial statements.
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