Question 1
On first adopting IFRS, para 7 of IFRS 1 requires an entity to comply with ‘each IFRS effective at the end of its first IFRS reporting period’ (subject to certain exceptions). In response to one or more requests, the IASB proposes to clarify that a new or revised IFRS is considered ‘effective’ if it can be adopted early by the end of the entity’s first IFRS period, even if mandatory adoption is at a later date. This clarification will be added to the Basis for Conclusions, and confirms that first-time adopters can (but are not required to) adopt early, as is the case for existing adopters.
ACCA agrees with the proposed amendment, which in our view clarifies what is already provided for in paras 7 and 8 of IFRS 1.
It is not entirely clear why this clarification is in fact needed. Para 8 of IFRS 1 already states: ‘An entity may apply a new IFRS that is not yet mandatory if that IFRS permits early application.’ An explanation may possibly lie in the Basis for Conclusions, where a reference to the ‘current’ version of IFRS has been removed (BC11), and a new sub-paragraph added (BC11A). We would be able to comment more fully if the IASB had explained, in the Introduction to the amendment, the nature of the difficulties reported and how the proposed amendment aims to address these.
References throughout the amendment are to ‘new’ IFRS, whilst the issue mentioned in the Introduction to this section relates to the adoption of both new and revised IFRS. Consequently, we suggest that fuller clarification would be provided if the Basis for Conclusions refers to revised IFRS as well as new IFRS.
Question 2
No effective date is proposed. As the amendment is a clarification involving a choice by preparers, and the first-time adoption of IFRS is a one-off occurrence, ACCA agrees that the amendment should be effective immediately.