Commission Regulation (EC) No 1136/2009 of 25 November 2009 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard (IFRS) 1 (Text with EEA relevance) (c. 1136)

ANNEX U.K.

INTERNATIONAL FINANCIAL REPORTING STANDARD 1 First-time Adoption of International Financial Reporting Standards U.K.

OBJECTIVE U.K.

1 The objective of this IFRS is to ensure that an entity’s first IFRS financial statements, and its interim financial reports for part of the period covered by those financial statements, contain high quality information that: U.K.

(a)

is transparent for users and comparable over all periods presented;

(b)

provides a suitable starting point for accounting in accordance with International Financial Reporting Standards (IFRSs); and

(c)

can be generated at a cost that does not exceed the benefits.

SCOPE U.K.

2 An entity shall apply this IFRS in: U.K.

(a)

its first IFRS financial statements; and

(b)

each interim financial report, if any, that it presents in accordance with IAS 34 Interim Financial Reporting for part of the period covered by its first IFRS financial statements.

3 An entity’s first IFRS financial statements are the first annual financial statements in which the entity adopts IFRSs, by an explicit and unreserved statement in those financial statements of compliance with IFRSs. Financial statements in accordance with IFRSs are an entity’s first IFRS financial statements if, for example, the entity: U.K.

(a)

presented its most recent previous financial statements:

(i)

in accordance with national requirements that are not consistent with IFRSs in all respects;

(ii)

in conformity with IFRSs in all respects, except that the financial statements did not contain an explicit and unreserved statement that they complied with IFRSs;

(iii)

containing an explicit statement of compliance with some, but not all, IFRSs;

(iv)

in accordance with national requirements inconsistent with IFRSs, using some individual IFRSs to account for items for which national requirements did not exist; or

(v)

in accordance with national requirements, with a reconciliation of some amounts to the amounts determined in accordance with IFRSs;

(b)

prepared financial statements in accordance with IFRSs for internal use only, without making them available to the entity’s owners or any other external users;

(c)

prepared a reporting package in accordance with IFRSs for consolidation purposes without preparing a complete set of financial statements as defined in IAS 1 Presentation of Financial Statements (as revised in 2007); or

(d)

did not present financial statements for previous periods.

4 This IFRS applies when an entity first adopts IFRSs. It does not apply when, for example, an entity: U.K.

(a)

stops presenting financial statements in accordance with national requirements, having previously presented them as well as another set of financial statements that contained an explicit and unreserved statement of compliance with IFRSs;

(b)

presented financial statements in the previous year in accordance with national requirements and those financial statements contained an explicit and unreserved statement of compliance with IFRSs; or

(c)

presented financial statements in the previous year that contained an explicit and unreserved statement of compliance with IFRSs, even if the auditors qualified their audit report on those financial statements.

5 This IFRS does not apply to changes in accounting policies made by an entity that already applies IFRSs. Such changes are the subject of: U.K.

(a)

requirements on changes in accounting policies in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors; and

(b)

specific transitional requirements in other IFRSs.

RECOGNITION AND MEASUREMENT U.K.

Opening IFRS statement of financial position U.K.

6 An entity shall prepare and present an opening IFRS statement of financial position at the date of transition to IFRSs. This is the starting point for its accounting in accordance with IFRSs. U.K.

Accounting policies U.K.

7 An entity shall use the same accounting policies in its opening IFRS statement of financial position and throughout all periods presented in its first IFRS financial statements. Those accounting policies shall comply with each IFRS effective at the end of its first IFRS reporting period, except as specified in paragraphs 13–19 and Appendices B–E. U.K.

8 An entity shall not apply different versions of IFRSs that were effective at earlier dates. An entity may apply a new IFRS that is not yet mandatory if that IFRS permits early application. U.K.

Example: Consistent application of latest version of IFRSs U.K.

Background U.K.

The end of entity A’s first IFRS reporting period is 31 December 20X5. Entity A decides to present comparative information in those financial statements for one year only (see paragraph 21). Therefore, its date of transition to IFRSs is the beginning of business on 1 January 20X4 (or, equivalently, close of business on 31 December 20X3). Entity A presented financial statements in accordance with its previous GAAP annually to 31 December each year up to, and including, 31 December 20X4.

Application of requirements U.K.

Entity A is required to apply the IFRSs effective for periods ending on 31 December 20X5 in:

(a)

preparing and presenting its opening IFRS statement of financial position at 1 January 20X4; and

(b)

preparing and presenting its statement of financial position for 31 December 20X5 (including comparative amounts for 20X4), statement of comprehensive income, statement of changes in equity and statement of cash flows for the year to 31 December 20X5 (including comparative amounts for 20X4) and disclosures (including comparative information for 20X4).

If a new IFRS is not yet mandatory but permits early application, entity A is permitted, but not required, to apply that IFRS in its first IFRS financial statements.

9 The transitional provisions in other IFRSs apply to changes in accounting policies made by an entity that already uses IFRSs; they do not apply to a first-time adopter’s transition to IFRSs, except as specified in Appendices B–E. U.K.

10 Except as described in paragraphs 13–19 and Appendices B–E, an entity shall, in its opening IFRS statement of financial position: U.K.

(a)

recognise all assets and liabilities whose recognition is required by IFRSs;

(b)

not recognise items as assets or liabilities if IFRSs do not permit such recognition;

(c)

reclassify items that it recognised in accordance with previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with IFRSs; and

(d)

apply IFRSs in measuring all recognised assets and liabilities.

11 The accounting policies that an entity uses in its opening IFRS statement of financial position may differ from those that it used for the same date using its previous GAAP. The resulting adjustments arise from events and transactions before the date of transition to IFRSs. Therefore, an entity shall recognise those adjustments directly in retained earnings (or, if appropriate, another category of equity) at the date of transition to IFRSs. U.K.

12 This IFRS establishes two categories of exceptions to the principle that an entity’s opening IFRS statement of financial position shall comply with each IFRS: U.K.

(a)

Appendix B prohibits retrospective application of some aspects of other IFRSs.

(b)

Appendices C–E grant exemptions from some requirements of other IFRSs.

Exceptions to the retrospective application of other IFRSs U.K.

13 This IFRS prohibits retrospective application of some aspects of other IFRSs. These exceptions are set out in paragraphs 14–17 and Appendix B. U.K.

Estimates U.K.

14 An entity’s estimates in accordance with IFRSs at the date of transition to IFRSs shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. U.K.

15 An entity may receive information after the date of transition to IFRSs about estimates that it had made under previous GAAP. In accordance with paragraph 14, an entity shall treat the receipt of that information in the same way as non-adjusting events after the reporting period in accordance with IAS 10 Events after the Reporting Period. For example, assume that an entity’s date of transition to IFRSs is 1 January 20X4 and new information on 15 July 20X4 requires the revision of an estimate made in accordance with previous GAAP at 31 December 20X3. The entity shall not reflect that new information in its opening IFRS statement of position (unless the estimates need adjustment for any differences in accounting policies or there is objective evidence that the estimates were in error). Instead, the entity shall reflect that new information in profit or loss (or, if appropriate, other comprehensive income) for the year ended 31 December 20X4. U.K.

16 An entity may need to make estimates in accordance with IFRSs at the date of transition to IFRSs that were not required at that date under previous GAAP. To achieve consistency with IAS 10, those estimates in accordance with IFRSs shall reflect conditions that existed at the date of transition to IFRSs. In particular, estimates at the date of transition to IFRSs of market prices, interest rates or foreign exchange rates shall reflect market conditions at that date. U.K.

17 Paragraphs 14–16 apply to the opening IFRS statement of financial position. They also apply to a comparative period presented in an entity’s first IFRS financial statements, in which case the references to the date of transition to IFRSs are replaced by references to the end of that comparative period. U.K.

Exemptions from other IFRSs U.K.

18 An entity may elect to use one or more of the exemptions contained in Appendices C–E. An entity shall not apply these exemptions by analogy to other items. U.K.

19 Some exemptions in Appendices C–E refer to fair value. In determining fair values in accordance with this IFRS, an entity shall apply the definition of fair value in Appendix A and any more specific guidance in other IFRSs on the determination of fair values for the asset or liability in question. Those fair values shall reflect conditions that existed at the date for which they were determined. U.K.

PRESENTATION AND DISCLOSURE U.K.

20 This IFRS does not provide exemptions from the presentation and disclosure requirements in other IFRSs. U.K.

Comparative information U.K.

21 To comply with IAS 1, an entity’s first IFRS financial statements shall include at least three statements of financial position, two statements of comprehensive income, two separate income statements (if presented), two statements of cash flows and two statements of changes in equity and related notes, including comparative information. U.K.

Non-IFRS comparative information and historical summaries U.K.

22 Some entities present historical summaries of selected data for periods before the first period for which they present full comparative information in accordance with IFRSs. This IFRS does not require such summaries to comply with the recognition and measurement requirements of IFRSs. Furthermore, some entities present comparative information in accordance with previous GAAP as well as the comparative information required by IAS 1. In any financial statements containing historical summaries or comparative information in accordance with previous GAAP, an entity shall: U.K.

(a)

label the previous GAAP information prominently as not being prepared in accordance with IFRSs; and

(b)

disclose the nature of the main adjustments that would make it comply with IFRSs. An entity need not quantify those adjustments.

Explanation of transition to IFRSs U.K.

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

Reconciliations U.K.

24 To comply with paragraph 23, an entity’s first IFRS financial statements shall include: U.K.

(a)

reconciliations of its equity reported in accordance with previous GAAP to its equity in accordance with 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 in accordance with previous GAAP.

(b)

a reconciliation to its total comprehensive income in accordance with IFRSs for the latest period in the entity’s most recent annual financial statements. The starting point for that reconciliation shall be total comprehensive income in accordance with previous GAAP for the same period or, if an entity did not report such a total, profit or loss under previous GAAP.

(c)

if the entity recognised or reversed any impairment losses for the first-time in preparing its opening IFRS statement of financial position, 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.

25 The reconciliations required by paragraph 24(a) and (b) shall give sufficient detail to enable users to understand the material adjustments to the statement of financial position and statement of comprehensive income. If an entity presented a statement of cash flows under its previous GAAP, it shall also explain the material adjustments to the statement of cash flows. U.K.

26 If an entity becomes aware of errors made under previous GAAP, the reconciliations required by paragraph 24(a) and (b) shall distinguish the correction of those errors from changes in accounting policies. U.K.

27 IAS 8 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. U.K.

28 If an entity did not present financial statements for previous periods, its first IFRS financial statements shall disclose that fact. U.K.

Designation of financial assets or financial liabilities U.K.

29 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 D19. 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. U.K.

Use of fair value as deemed cost U.K.

30 If an entity uses fair value in its opening IFRS statement of financial position as deemed cost for an item of property, plant and equipment, an investment property or an intangible asset (see paragraphs D5 and D7), the entity’s first IFRS financial statements shall disclose, for each line item in the opening IFRS statement of financial position: U.K.

(a)

the aggregate of those fair values; and

(b)

the aggregate adjustment to the carrying amounts reported under previous GAAP.

Use of deemed cost for investments in subsidiaries, jointly controlled entities and associates U.K.

31 Similarly, if an entity uses a deemed cost in its opening IFRS statement of financial position for an investment in a subsidiary, jointly controlled entity or associate in its separate financial statements (see paragraph D15), the entity’s first IFRS separate financial statements shall disclose: U.K.

(a)

the aggregate deemed cost of those investments for which deemed cost is their previous GAAP carrying amount;

(b)

the aggregate deemed cost of those investments for which deemed cost is fair value; and

(c)

the aggregate adjustment to the carrying amounts reported under previous GAAP.

Interim financial reports U.K.

32 To comply with paragraph 23, if an entity presents an interim financial report in accordance with IAS 34 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: U.K.

(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:

(i)

a reconciliation of its equity in accordance with previous GAAP at the end of that comparable interim period to its equity under IFRSs at that date; and

(ii)

a reconciliation to its total comprehensive income in accordance with IFRSs for that comparable interim period (current and year to date). The starting point for that reconciliation shall be total comprehensive income in accordance with previous GAAP for that period or, if an entity did not report such a total, profit or loss in accordance with previous GAAP.

(b)

In addition to the reconciliations required by (a), an entity’s first interim financial report in accordance with IAS 34 for part of the period covered by its first IFRS financial statements shall include the reconciliations described in paragraph 24(a) and (b) (supplemented by the details required by paragraphs 25 and 26) or a cross reference to another published document that includes these reconciliations.

33 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 in accordance with 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. U.K.

EFFECTIVE DATE U.K.

34 An entity shall apply this IFRS if its first IFRS financial statements are for a period beginning on or after 1 July 2009. Earlier application is permitted. U.K.

35 An entity shall apply the amendments in paragraphs D1(n) and D23 for annual periods beginning on or after 1 July 2009. If an entity applies IAS 23 Borrowing Costs (as revised in 2007) for an earlier period, those amendments shall be applied for that earlier period. U.K.

36 IFRS 3 Business Combinations (as revised in 2008) amended paragraphs 19, C1 and C4(f) and (g). If an entity applies IFRS 3 (revised 2008) for an earlier period, the amendments shall also be applied for that earlier period. U.K.

37 IAS 27 Consolidated and Separate Financial Statements (as amended in 2008) amended paragraphs 13 and B7. If an entity applies IAS 27 (amended 2008) for an earlier period, the amendments shall be applied for that earlier period. U.K.

38 Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (Amendments to IFRS 1 and IAS 27), issued in May 2008, added paragraphs 31, D1(g), D14 and D15. An entity shall apply those paragraphs for annual periods beginning on or after 1 July 2009. Earlier application is permitted. If an entity applies the paragraphs for an earlier period, it shall disclose that fact. U.K.

39 Paragraph B7 was amended by Improvements to IFRSs issued in May 2008. An entity shall apply those amendments for annual periods beginning on or after 1 July 2009. If an entity applies IAS 27 (amended 2008) for an earlier period, the amendments shall be applied for that earlier period. U.K.

WITHDRAWAL OF IFRS 1 (ISSUED 2003) U.K.

40 This IFRS supersedes IFRS 1 (issued in 2003 and amended at May 2008). U.K.