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Commission Regulation (EC) No 707/2004 of 6 April 2004 amended by Regulation (EC) No 1751/2005, Regulation (EC) No 1864/2005 and Regulation (EC) No 1910/2005.

Content

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Explanation of transition to IFRSs

38. An entity shall explain how the transition from previous GAAP to IFRSs affected its reported financial position, financial performance and cash flows.

Reconciliations

39. To comply with paragraph 38, an entity’s first IFRS financial statements shall include:

(a) reconciliations of its equity reported under previous GAAP to its equity under IFRSs for both of the following dates:

(i) the date of transition to IFRSs; and

(ii) the end of the latest period presented in the entity’s most recent annual financial statements under previous GAAP;

(b) a reconciliation of the profit or loss reported under previous GAAP for the latest period in the entity’s most recent annual financial statements to its profit or loss under IFRSs for the same period; and

(c) if the entity recognised or reversed any impairment losses for the first time in preparing its opening IFRS balance sheet, the disclosures that IAS 36 Impairment of Assets would have required if the entity had recognised those impairment losses or reversals in the period beginning with the date of transition to IFRSs.

40. The reconciliations required by paragraph 39(a) and (b) shall give sufficient detail to enable users to understand the material adjustments to the balance sheet and income statement. If an entity presented a cash flow statement under its previous GAAP, it shall also explain the material adjustments to the cash flow statement.

41. If an entity becomes aware of errors made under previous GAAP, the reconciliations required by paragraph 39(a) and (b) shall distinguish the correction of those errors from changes in accounting policies.

42. IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies does not deal with changes in accounting policies that occur when an entity first adopts IFRSs. Therefore, IAS 8’s requirements for disclosures about changes in accounting policies do not apply in an entity’s first IFRS financial statements.

43. If an entity did not present financial statements for previous periods, its first IFRS financial statements shall disclose that fact. Use of fair value as deemed cost.

Designation of financial assets or financial liabilities

43A An entity is permitted to designate a previously recognised financial asset or financial liability as a financial asset or financial liability at fair value through profit or loss or a financial asset as available for sale in accordance with paragraph 25A. The entity shall disclose the fair value of financial assets or financial liabilities designated into each category at the date of designation and their classification and carrying amount in the previous financial statements.

44. If an entity uses fair value in its opening IFRS balance sheet as deemed cost for an item of property, plant and equipment, an investment property or an intangible asset (see paragraphs 16 and 18), the entity’s first IFRS financial statements shall disclose, for each line item in the opening IFRS balance sheet:

(a) the aggregate of those fair values; and

(b) the aggregate adjustment to the carrying amounts reported under previous GAAP.

Interim financial reports

45. To comply with paragraph 38, if an entity presents an interim financial report under IAS 34 Interim Financial Reporting for part of the period covered by its first IFRS financial statements, the entity shall satisfy the following requirements in addition to the requirements of IAS 34:

(a) Each such interim financial report shall, if the entity presented an interim financial report for the comparable interim period of the immediately preceding financial year, include reconciliations of:

(i) its equity under previous GAAP at the end of that comparable interim period to its equity under IFRSs at that date; and

(ii) its profit or loss under previous GAAP for that comparable interim period (current and year-to-date) to its profit or loss under IFRSs for that period.

(b) In addition to the reconciliations required by (a), an entity’s first interim financial report under IAS 34 for part of the period covered by its first IFRS financial statements shall include the reconciliations described in paragraph 39(a) and (b) (supplemented by the details required by paragraphs 40 and 41) or a cross-reference to another published document that includes these reconciliations.

46. IAS 34 requires minimum disclosures, which are based on the assumption that users of the interim financial report also have access to the most recent annual financial statements. However, IAS 34 also requires an entity to disclose ‘any events or transactions that are material to an understanding of the current interim period’. Therefore, if a first-time adopter did not, in its most recent annual financial statements under previous GAAP, disclose information material to an understanding of the current interim period, its interim financial report shall disclose that information or include a cross-reference to another published document that includes it.

Effective Date

47. An entity shall apply this IFRS if its first IFRS financial statements are for a period beginning on or after 1 January 2004. Earlier application is encouraged. If an entity’s first IFRS financial statements are for a period beginning before 1 January 2004 and the entity applies this IFRS instead of SIC-8 First-time Application of IASs as the Primary Basis of Accounting, it shall disclose that fact.

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