IFRS 1 FIRST TIME ADOPTION OF IFRS

1. IFRS 1FIRST TIME ADOPTION OF IFRS Asish K Bhattacharyya

2. First-time Adoption of IFRS -Introduction and Overview Objective • is transparent for users and comparable over all periods presented; • provides a suitable starting point for accounting under International Financial Reporting Standards (IFRSs); and • can be generated at a cost that does not exceed the benefits to users. Application • to the first IFRS financial statements (March 31, 2012); and • each interim financial report under IFRS in the first period (2011-12)

3. First-time Adoption of IFRS -Introduction andOverview (Contd..) Requires Identification of date of transition (April 1, 2010) Selection of accounting policies that comply with IFRS Preparation of an opening IFRS balance sheet as at April 1, 2010 The first IFRS financial statements are: The first financial statements to contain “an explicit and unreserved statement of compliance with IFRSs”

4. First-time Adoption of IFRS -Introduction andOverview (Contd..) IFRS 1 requires retrospective adoption of most IFRSs, but • the guidance is more comprehensive • there are specific exemptions • the latest version of each IFRS will be applied • there is guidance on the use of previous estimates • the disclosure requirements are more extensive Financial statements are notIFRS financial statements when • there is no explicit statement of compliance with IFRSs • they do not comply with all aspects of IFRSs • IFRSs are used to fill gaps in local guidance

5. Recognition and measurement

6. Key Dates • Transition date: • April 1,2010 • First balance sheet to be prepared (not to be published) • Adoption date: April 1, 2011 • First financial statements under IFRS: March 31, 2012 • Apply all IFRSs applicable on March 31, 2012

7. First-time Adoption of IFRS -Opening IFRS balance sheet • An entity need not present its opening IFRS balance sheet in its first IFRS financial statements. Adjustments are required to move from previous GAAP to IFRS (except where an exemption or exception allows or requires otherwise) • recognition of some new assets and liabilities • derecognition of some old assets and liabilities • reclassification previous-GAAP opening balance sheet items into the appropriate IFRS classification • apply IFRSs in measuring all recognised assets and liabilities

8. First-time Adoption of IFRS -Accounting policies Accounting policies based on current version of IFRSs at the reporting date • All standards that will be mandatory in the first year of IFRS financial statements • Early adoption of other standards is permitted • Retrospective application to opening IFRS balance sheet and all periods, subject to • Optional exemptions; and • Mandatory exceptions Transitional guidance in IFRSs not used by first time adopters unless specifically directed

9. Exemptions and Exceptions

10. IFRS 1Exemptions summary Sixteen optional exemptions Business combinations Compound instruments Property, plant and equipment, investment properties, intangibles Comparatives for financial Instruments* Standards in force at reporting date Employee benefits Designation of financial assets and Financial liabilities Share-based payments Cumulative translation adjustment Transition date for subsidiaries, associates and joint ventures Decommissioning liabilities Leases Insurance contracts* Borrowing cost Service concessions arrangements Fair value measurement of financial Instruments on initial recognition Exploration and Evaluation – O&G *Relief is for “2005 adopters” only

11. IFRS 1Exceptions summary Four mandatory exceptions Estimates Derecognition of financial assets and liabilities Standards in force at reporting date Hedge accounting Assets held for sale

12. First-time Adoption of IFRS -Optional exemptions from other IFRSs

13. First-time Adoption of IFRS -Optional exemptions from other IFRSs - (Contd..) *Relief is for “2005 adopters” only

14. First-time Adoption of IFRS -Business combinations exemption IFRS 3 need not be applied to combinations before date of transition (April 1, 2010) • BUT, if one combination is restated, all subsequent combinations are restated When the exemption is used • No change in classification • Post combination carrying amount deemed cost for assets and liabilities measured at cost • Assets and liabilities measured at fair value restated at date of transition – adjust retained earnings

15. First-time Adoption of IFRS - Business combinations exemption - (Contd..) Assets and liabilities not recognised at the time of a business combination under previous GAAP are: • Recognized as if subsidiary adopted IFRSs at the same date Subsidiaries not consolidated under previous GAAP are: • Consolidated as if subsidiary adopted IFRSs at the same date • Goodwill is the difference between cost of investment and net assets recognised at date of transition

16. First-time Adoption of IFRS - Business combinations exemption – (Contd..) Goodwill is recognised at the carrying amount under previous GAAP and adjusted for • Intangibles that are not recognised under IFRS • Intangibles that must be recognised under IFRS • Contingent consideration not recognised; and • Tested for impairment Goodwill deducted from equity remains in equity

17. First-time Adoption of IFRS -Mandatory exceptions This IFRS prohibits retrospective application of some aspects of other IFRSs relating to: • Derecognition of financial assets and financial liabilities • Hedge accounting • Estimates and • Assets classified as held for sale and discontinued operations.

18. IFRS 1Mandatory exceptions Retrospective application of IAS 39 is prohibited for • Financial assets and liabilities derecognised before 1 January 2004 but: • Recognise all derivatives and other interests retained from 1 January 2005; • Consolidate all SPEs controlled at transition date (SIC-12) • Hedge accounting • Where the relationship does not qualify • Until the documentation is in place

19. First-time Adoption of IFRS -Estimates Estimate required by previous GAAP? Evidence of error? Calculation consistent with IFRS? NO YES NO YES NO YES Make estimate reflecting conditions at relevant date Use previous estimate and adjust to reflect IFRS Use previous estimate

20. IFRS 1Mandatory exceptions Assets held for sale / discontinued operations • Apply IFRS 5 from 1 January 2005: no restatement of comparatives except: • May apply from earlier date only if information obtained at earlier date • First-time adopters after 2005 must apply retrospectively and restate comparatives

21. IFRS 1Disclosures • Reconciliation of equity from previous GAAP to IFRS at transition and last year end • Reconciliation of last year’s net profit under previous GAAP to IFRS • Sufficient detail to understand adjustments to each line item • Errors made under previous GAAP and identified during transition • Fair value as deemed cost and the amount of the adjustment • IAS 36 disclosures for impairment identified during transition

22. First-time Adoption of IFRS -Reconciliations Interim financial Reports • equity under previous GAAP at the end of that comparable interim period to its equity under IFRSs at that date; and • its profit or loss under previous GAAP for that comparable interim period (current and year-to-date) to its profit or loss under IFRSs for that period. • further information to comply with IAS 34

23. First-time Adoption of IFRS -Reconciliations Equity and net income Equity Equity and net income 31.03.20X1 30.09.20X1 31.03.20X1 30.09.20X0 01.04.20X0 Transition date Reporting date Interim – comparative Interim date Year end – comparative

24. First-time Adoption of IFRS -Existing IFRS subsidiaries • Subsidiaries already reporting under IFRS do not apply exemptions • Use subsidiary’s existing IFRS results for consolidation purposes, adjusted for • Consolidation adjustments • Accounting policy differences However, business combinations exemption is applied as normal

25. First-time Adoption of IFRS -Common implementation issues • Identification of Adoption Dates • Selection of Options – Multiple Scenarios • Enterprise-Wide Adoption for all Reporting Units • Needs Pro-active Decisions

26. Thank You