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ACCA Strategic Professional · Strategic Business Reporting (International) · The applications, strengths and weaknesses of the accounting framework

Nandi plc, a listed entity, is preparing its first IFRS financial statements for the year ending 31 December 20X5, with a transition date of 1 January 20X4. Which statement about its first-time adoption under IFRS 1 is correct?

Under IFRS 1, a first-time adopter applies the standards effective at its first IFRS reporting date retrospectively to the opening statement of financial position at the transition date, using only the specified exemptions and exceptions. It cannot keep local GAAP selectively or omit comparatives.

  1. AIt must apply the IFRS Accounting Standards effective at 31 December 20X5 retrospectively to its opening statement of financial position, subject to specified exemptions and exceptionsCorrect
  2. BIt must apply the standards in force at 1 January 20X4 to the opening position and those at 31 December 20X5 only to later transactions
  3. CIt may continue to use previous local GAAP for any item where IFRS would reduce profit
  4. DIt must present only the current year because comparatives are exempt for first-time adopters

Explanation

IFRS 1 requires one consistent set of standards effective at the reporting date, applied retrospectively to the opening IFRS statement of financial position at the transition date, with limited exemptions. Using different versions of standards or retaining old GAAP selectively is not allowed. At least one year of comparatives is required.

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