380 / 488
Chapter
33 /
First-Time Adoption of Int ernal Financial Reporting Standards (IFRS
I)
369
14. EMPLOYEE BENEFITS
14.1
Under lAS 19, an entity may have unrecogni zed act uarial gai ns or losses in case it uses the
corridor approach. Retrospective ap plication of this approach would necessitate splitting the cu–
mulative ga ins and losses, from incept ion of the plan until the date of transition to IFRS, into a
recognize d and an unre cogni zed portion .
14.2
IFRS I allows a first-time ado pter to elect to recognize all cumulative actuarial ga ins and
losses at the dat e of transition to IFRS , even if it uses the corridor appro ach for subse quent actu ar–
ial gains or losses. IFRS I does, however , mand ate that if an elec tion is made for one employee
benefit plan , it should appl y to all other employee plans.
15. CUMULATIVE TRANSLATION DIFFERENCES
15.1
lAS 2 1 requires an entity to classi fy certai n translation differences as a separa te component
of eq uity and upon disposal of the foreign operation to transfer the cumulative translation differ–
ence (CTA) relating to the foreign operation to the income statement as pa rt of the gai n or loss on
dis posal.
15.2
A first-time adopter is exe mpted from this transfer of the CTA that ex isted on the date of
transition to IFRS . If it uses this exemption, the CTD for all foreig n operations would be deemed to
be zero at the date of tran siti on to IFRS, and the ga in or loss on subse quent di sposal of any foreign
operation should exclude translation differences that arose before the date of transiti on to IFRS but
should include all subsequent tran slati on adju stment s.
16. COMPOUND FINANCIAL INSTRUMENTS
16.1
If an entity has issued a compo und financial instrument, say , a co nvertible deben ture, lAS
32 requ ires that at ince ption, it should sp lit and separate the liability component of the compound
fina ncial instrument from eq uity. If the liability portion is no longe r outstandi ng, retrospec tive
ap plication of lAS 32 would prod uce this result with respect to the equ ity portion still outstanding:
The part representing cumulative interest accreted to the liabil ity compo nent is in retained earni ngs
and the other portion represents the original equity component.
16.2
IFRS I exempts a first-time ado pter from this split accounting if the liabili ty component is
no longer outsta nding at the date of transition to IFRS.
17. ASSETS AND LIABILITIES OF SUBSIDIARIES, ASSOCIATES, AND JOINT
VENTURES
IFRS I discusses exemptions under two circumstan ces.
( I) If a subsidia ry becomes a firs t-time ado pte r later than its pa rent, the subs idiary sha ll, in its
separa te ("stand-alone") fina ncial sta teme nts, meas ure its assets and liabilities at eithe r: (a)
the carrying amou nts tha t would be inc luded in its paren t' s conso lidated financial state–
ment s, based on its paren t' s date of transition to IFRS (if no adj ustme nts were made for
conso lida tion procedur es and for the effect of the business combi nation in which the parent
acquired the subsidiary), or (b) the carrying amounts requi red by the rest of this IFRS,
based on subsidiary's date of transition to IFRS.
(2) If an entity becomes a first-time adopt er later than its subsidiary (or associate or joint ven–
ture), the entity shall , in its consolidated financial statements, measure the assets and
liabilities of the subsidiary (or associate or j oint venture) at the same carryi ng amounts as
in the separate ("s tand-alone") finan ci al statements of the subs idiary (or associ ate or j oint
venture), after adjusting for conso lidation and equity accounting adju stments and for
effects of the business combination in which an entity acquired the subsi diary . In a similar
manner, if a parent beco mes a first-t ime adop ter for its separate financi al statements earli er
or later than for its conso lidated financia l statements, it sha ll measure its assets and liabili–
ties at the same amounts in both financial sta tements , except for con sol idat ion adj ustments .
18,
EXCEPTIONS TO RETROSPECTIVE APPLICATION OF OTHER IFRS
IFRS I
prohibits
retrospecti ve application of some aspects of oth er IFRS relating to