Deck 42: First-Time Adoption of International Financial Reporting Standard

Question 1

In which of the following situations would an entity not be considered a first-time IFRS adopter?

A) The most recent financial statements were presented in accordance with IFRS, but with no explicit and unreserved statement of compliance with IFRS.
B) The entity prepared financial statements under IFRS for internal use only, and those statements were not released to external users.
C) The entity presented financial statements in compliance with IFRS with an explicit and unreserved statement of compliance with IFRS. The entity's auditor concluded that the financial statements should receive a qualified opinion due to their findings related to IFRS 4.
D) The most recent financial statements were presented with national GAAP, with some reconciling items to IFRS.

Answer 1

The entity presented financial statements in compliance with IFRS with an explicit and unreserved statement of compliance with IFRS. The entity's auditor concluded that the financial statements should receive a qualified opinion due to their findings related to IFRS 4.

Question 2

In 20X1, a major retail entity (Shop-a-lot) adopts IFRS on all accounts except for IFRS 9, Financial Instruments. In 20X2, Shop-a-lot also adopts IFRS 9, making its financial statements in full compliance with IFRS. In which year would Shop-a-lot be considered a first-time adopter?

A) 20X1
B) 20X2
C) Shop-a-lot still does not meet certain criteria to be considered a first-time adopter.

Answer 2

20X2

Question 3

In 20X5, a consulting entity adopts IFRS with an explicit an unreserved statement of compliance. Because the financial statements are missing certain comparative figures, the auditor issues a qualified report. In 20X6, the entity corrects the error and receives an unqualified audit report. Which year is the consulting entity considered a first-time adopter?

A) 20X5
B) 20X6
C) The entity still does not meet certain criteria to be considered a first-time adopter.

Answer 3

20X5

Question 4

A large construction entity (Build-a-lot) adopts IFRS in 20X9. The jurisdiction in which Build-a-lot operates requires one year of comparative information. However, Build-a-lot wants to meet its investors needs, and decides to present two years of comparative information. Which year is the date of transition to IFRS?

A) Jan. 1, 20X7
B) Jan. 1, 20X8
C) Jan. 1, 20X9
D) Dec. 31, 20X9

Question 5

Global Entity adopts IFRS and elects to include only one year of comparative financial information. How many statements of financial position will Global Entity include?

A) 1
B) 2
C) 3
D) More than 3

Question 6

Worldwide Entity adopts IFRS in 20X6 and includes one year of comparative financial data. In 20X4, a revised standard was released that went into effect beginning on or after 20X6. Which year's financial statements should adhere to the updated standard?

A) 20X5
B) 20X6
C) Both 20X5 and 20X6
D) Neither 20X5 nor 20X6

Question 7

When an entity first publishes its financial statements using IFRS, which of the following may be used:

A) IFRS effective at the end of the each reporting period presented.
B) IFRS effective at the beginning of the current period presented; previous periods may still be presented using previous GAAP.
C) IFRS effective at the end of the current period retroactively applied to current and all previous periods presented.
D) IFRS effective at the end of the current period presented; previous periods may be presented using previous GAAP.

Question 8

Which of the following is not an example of a mandatory exception to retrospective application of IFRS?

A) Transactions entered into before date of transition should not be retrospectively designated as hedges.
B) Cumulative translation differences
C) Receipt of information after the date of transition to IFRS affecting estimates made under previous GAAP.

Question 9

An entity is required to apply the current version of IFRS throughout all periods presented in its first IFRS financial statements.

Question 10

For first time adopters, the requirements of specific IFRS transitional provisions override IFRS.

Question 11

For IFRS issued before the first IFRS reporting date for which application is not yet mandatory, an entity is not permitted to apply the new IFRS.

Question 12

IFRS 1 does not apply to entities that have previously adopted IFRS.

Question 13

A first-time adopter may elect to present its financial statements as if IFRS had always been applied.

Question 14

IFRS 1 provides optional exemptions from the presentation and disclosure requirements in other IFRS.

Question 15

An entity is required to apply the current version of IFRS throughout all periods presented in its first IFRS financial requirements.

Question 16

Under IFRS 1, an entity's first published in complete conformity with IFRS without making an explicit a statement of compliance qualify as its first IFRS financial statements.

Question 17

Because first-time adopters of IFRS must use the latest IFRS, they must adopt a standard whose application is not yet mandatory for the first IFRS period but whose early adoption is permitted.

Question 18

Because of the complexity of implementing IFRS, first-time adopters are only subject to the presentation and disclosure requirements under IFRS 1.

Question 19

What is the overriding criterion in determining whether an entity is a first-time adopter?

Question 20

LaBolg Entity has reported under its national GAAP, but has recently converted all of its financial statements to IFRS in the year 20X5. Under LaBolg's national GAAP, an expenditure of $500,000 for R&D made in 20X2 should have been expensed immediately. However, under IFRS the expenditure should be capitalized and expensed over its 10-year useful life. Make the necessary adjusting journal entries that LaBolg would have to make to appropriately adjust the statement of financial position at the date of transition (Jan. 1, 20X4).

Question 21

Name at least three areas for which there are mandatory exceptions to IFRS 1:

Question 22

Identify the most important step in preparing first-time IFRS financial statements. Then, using the conceptual framework, explain why this component is most important.

Question 23

Explain how optional exemptions fulfill the objectives of the Conceptual Framework.