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Wiley IFRS: Practical Implementation Guide and Workbook
11.2
Under IFRS I, paragraph 13, a first-time adopter of IFRS may elect to use exemptions from
the general measurement and restatement principles in one or more of these instances:
( I) Business combinations that occurred before or prior to the date of transition to IFRS
(2) Assets (property, plant, and equipment; intangible asse ts; and inves tment property) mea-
sured at fair value or reva lued under previous GAAP
(3) Employee benefits
(4) Cumulative translation diffe rences
(5) Compound financi al instruments
(6) Assets and liabilities of subsidiaries, associates, and joint ventures at the date of transition
to IFRS
(7)
Decommi ssioning liabilities included in the cos t of property, plant and equipment
NOTE: This is an amendment made by "IFRIC I "
10
IFRS I and effec tive for annual periods be–
ginning on or after September I, 2004. This has been properly Illustrated in IG Example 201 to
"IFRIC I."
12. BUSINESS COMBINATIONS
12.1
IFRS I allows an exemption to the first-time adopter from retros pective applicatio n in case
of business combinations that occurred before the date of transition to IFRS . In other words, under
IFRS I an entit y may elect to use previous GAAP accounting relating to such business combina–
tions. The lASB allowed this exemption because, if retrospective application of lAS 22,
Busin ess
Combina tions,
was to be made mandatory, it would lead to an entity making subjective estimates
(or educated guesses) about conditions that were supposedly prevalent at the dates of the business
combinatio ns in the past, as the entity may not have preserved data from the dates of past business
combinatio ns. These factors could affect the releva nce and reliabi lity of fina ncial stateme nts.
12.2 In evaluating the comment letters received in response to ED I, the IASB concluded that
notwithstanding the fact that restatement of past business combinations is conceptually preferable,
based on pragmatism, on the grounds of cost versus benefit, it would
p ermit
but
not require
re–
statement. However, the IASB decided to place some limits on this election; if a first-time adopter
restates any business combination, it should restate all business combinations that took place there–
after.
Example 4
For instance,
if
Merger
Inc .,
a fi rst-time adopter, did not seek this exemption but instead opted to apply
IFRS
3
retrospectively and restated a major business combination that took place two years ago, then
under this requirement of IFRS
3,
Merger Inc. is required to restate all business combinations that took
place subsequent to the date of this major business combination to which it applied IFRS
3
retrospec–
tively.
13. FAIR VALUE OR REVALUATION AS DEEMED COST
13.1
An entity may elect to measure an item of propert y, plant, and equipment at fair value at the
date of its transition to IFRS and use the fair value as its deemed cos t at that date. A first-time
adopter may elect to use a previo us GAAP revalu ation of a item of property, plant, and equipment
at or before the date of transi tion to IFRS as deemed cost at the date of revaluation if the reva lua–
tion amount, at the date of reval uation, was broadly comparable to either its fair value or cost (or
depreciated cos t under IFRS adjusted for changes in general or spec ific price index) .
13.2 These elections are equally available for investment property measured under the cost model
and intangible assets that meet the recognition criteria and the criteria for reva luation (including
existence of an active market).
13.3 If a first-time adopter has established a deemed cost under the previous GAAP for any of its
asse ts or liabilit ies by measuring them at their fair values at a particular date because of an event
such as privatization or an initial public offering (IPO), it is allowe d to use such an event-driven
fair value as deemed cost for IFRS at the date of that meas urement.