P1:OTA/XYZ P2:ABC JWBK534-fm JWBK534-Bellandi January15,2012 10:33 PrinterName: YettoCome P1:OTA/XYZ P2:ABC JWBK534-fm JWBK534-Bellandi January15,2012 10:33 PrinterName: YettoCome WILEY The Handbook to IFRS Transition and to IFRS U.S. GAAP Dual Reporting P1:OTA/XYZ P2:ABC JWBK534-fm JWBK534-Bellandi January15,2012 10:33 PrinterName: YettoCome P1:OTA/XYZ P2:ABC JWBK534-fm JWBK534-Bellandi January15,2012 10:33 PrinterName: YettoCome WILEY The Handbook to IFRS Transition and to IFRS U.S. GAAP Dual Reporting Interpretation, Implementation and Application to Grey Areas By Francesco Bellandi, CPA, CA, ACCADipIFR, MBA A John Wiley & Sons, Ltd., Publication P1: OTA/XYZ P2: ABC JWBK534-fm JWBK534-Bellandi January 15, 2012 10:33 Printer Name: Yet to Come This edition first published 2012 © 2012 Francesco Bellandi Registered office John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com. 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Typesetin10/11ptTimesbyAptaraInc.,NewDelhi,India PrintedinGreatBritainbyTJInternational,Padstow,Cornwall P1:OTA/XYZ P2:ABC JWBK534-fm JWBK534-Bellandi January15,2012 10:33 PrinterName: YettoCome Tothememoryof MaestroNazarioCarloBellandi,myfather, whoseworksrepresentamilestoneinclassicalmusiccomposition P1:OTA/XYZ P2:ABC JWBK534-fm JWBK534-Bellandi January15,2012 10:33 PrinterName: YettoCome P1:OTA/XYZ P2:ABC JWBK534-fm JWBK534-Bellandi January15,2012 10:33 PrinterName: YettoCome CONTENTS Page Chapter Title No. Preface ........................................................ xxxiii AbouttheAuthor ............................................... xxxv 1 IntroductionandScopeofBook .................................. 1 1.1 NatureofAccountingLiteratureandPertinentPronouncements 1 1.2 SignificanceoftheIFRSTransition .......................... 1 1.3 IFRSTransitionScenario ................................... 3 1.4 ScopeoftheBook ......................................... 6 1.4.1 TheDualReportingPerspective ...................... 6 1.4.2 IFRSMigration,Transition,orFirst-TimeAdoption .... 7 1.4.3 WhythisBookIncludesGuidancetoForeign PrivateIssuers ...................................... 9 1.4.4 OtherUniqueFeaturesofthisBook ................... 9 1.4.5 UseofthisBookinJurisdictionsOtherthantheU.S. .... 10 1.4.6 TheBenefitsofReadingthisBook .................... 10 2 IFRSFirst-TimeAdoptionRequirementsandInteractionwithU.S. GAAPandSECRulesandRegulations ......................... 11 2.1 ChapterPreview ........................................... 11 2.2 IFRS1AmendmentsandEffectiveDates ..................... 11 2.2.1 HistoryofIFRS1 ................................... 11 2.2.2 RestructuredIFRS1 ................................. 12 2.3 RationaleofIFRS1 ........................................ 12 2.3.1 First-TimeAdoptionofaComprehensiveBasisof Accounting ......................................... 12 2.3.2 DerogationfromtheBasicPrincipleofRetrospective Application ......................................... 12 2.3.3 IFRS1versusSIC-8 ................................. 18 2.3.4 MainRationalesofIFRS1 ........................... 18 2.4 AccountingStepsinMigratingtoIFRSs ...................... 18 2.5 FirstIFRSFinancialStatements ............................. 20 2.5.1 Terminology ........................................ 20 2.5.2 FirstversusSubsequentIFRSFinancialStatements ..... 21 2.5.3 WhatFirstIFRSFinancialStatementsareandWhat TheyareNot ........................................ 21 2.5.4 ExternalUse ........................................ 21 2.5.5 CompleteSet ....................................... 22 2.5.6 PrimaryFinancialStatements ......................... 22 2.5.7 LocationandContextoftheFirstIFRSFinancial Statements .......................................... 23 2.5.8 FinancialStatementsofEntitiesIncorporatedintheFirst IFRSConsolidatedFinancialStatements ............... 24 2.5.9 IFRSFinancialStatementsofOtherEntitiesIncludedina Registrant’sReport .................................. 24 P1:OTA/XYZ P2:ABC JWBK534-fm JWBK534-Bellandi January15,2012 10:33 PrinterName: YettoCome viii Contents 2.5.10 PreviousGAAP .................................... 25 2.5.10.1 TimingofUseofPreviousGAAP .......... 25 2.5.10.2 PreviousversusHome-CountryGAAP ..... 25 2.5.10.3 UseofDifferentSetsofLocalGAAP ....... 26 2.5.10.4 TheImpactofPresentationCurrency ....... 26 2.5.10.5 RAP/SAPorOCBOA ..................... 27 2.5.11 ReissuedFinancialStatements ....................... 27 2.5.12 DifferenceswithProFormaFinancialStatements ...... 28 2.6 EntitiesAffectedbyIFRS1 ................................. 28 2.6.1 WhichCompaniesMustandWhichMayNot UseIFRS1 ........................................ 28 2.6.2 ConsolidatedversusSeparateversusEntity’s FinancialStatements ................................ 28 2.6.3 InterimFinancialStatements ........................ 29 2.7 CompliancewithIFRSs .................................... 29 2.7.1 TheStatementofCompliancewithIFRSs ............ 29 2.7.2 StatementofCompliancewiththeIFRSforSMEs ..... 29 2.7.3 FirstTime ......................................... 29 2.7.4 AdherencetoIFRSs ................................ 30 2.7.5 StatementAccuracy ................................ 30 2.7.6 TheMeaningofIASB-IFRSs ........................ 31 2.7.7 CompliancewithIFRSasAdoptedbytheEU ......... 31 2.7.8 WhethertheUseofanEndorsedVersionofIFRSsisa QualifiedCompliance .............................. 32 2.7.9 DualStatementofCompliancewithIASB-IFRSsand JurisdictionalIFRSs ................................ 32 2.7.10 SingleStatementofCompliancewithIASB-IFRSsby JurisdictionalIFRSAdopters ........................ 33 2.7.11 RelianceuponHomeStandardSetter’sCompliance withIFRSs ........................................ 33 2.7.12 LocationoftheStatementofCompliancewithIFRSs .. 34 2.7.13 Auditor’sOpiniononCompliancewithIFRSs ......... 34 2.7.14 ReturntoIFRSs .................................... 35 2.7.15 ReturntoIFRSforSMEs ........................... 36 2.7.16 DatefromWhichCompliancecanbeAsserted ........ 36 2.8 TransitionDate ............................................ 37 2.8.1 DeterminationoftheTransitionDate ................. 37 2.8.2 TransitionDatewhenanEntityPresentsMoreThanOne YearofIFRSComparativeFinancialStatements ....... 37 2.9 AccountingPolicies ........................................ 37 2.9.1 BasicRule ......................................... 37 2.9.2 EffectiveDateThreshold ............................ 37 2.9.3 TransitionalProvisions ............................. 38 2.9.4 EarlierAdoptionofNewlyIssuedIFRSs .............. 38 2.9.5 EarlierAdoptionofIFRS9 .......................... 39 2.9.6 EndorsementLag .................................. 41 2.9.7 OverrideofIAS8 .................................. 41 2.9.8 CorrectionofErrors ................................ 42