Logo
Standard IFRS 1 - First-time Adoption of IFRS

Standard IFRS 1 – First-time Adoption of IFRS

25/03/2024

IFRS 1 is issued to apply to entities preparing financial statements under IFRS for the first time. Accordingly, Vietnamese enterprises will follow the guidance in this standard to transition their financial statements for the first time to IFRS according to the Ministry of Finance’s roadmap.

IFRS 1 guides financial statement preparers on how to set up the opening balances for the accounting system under IFRS. This is usually done through the opening balance sheet, where items in the balance sheet are typically adjusted through equity accounts to record differences when first applying IFRS standards.

Below are some key points to note when first applying IFRS, to ensure consistency and proper reflection of the effects when first adopting IFRS in the Financial Statements.

TaskDetails
Prepare the opening balance sheet
  • The first step when transitioning to IFRS is to prepare the opening balance sheet at the “Transition Date.” This is the first day of the first financial year to be compared under IFRS (for example, January 1, 2025, for companies applying a calendar year-end).
  • This needs to be prepared but does not need to be disclosed in the financial statement notes. However, it is still necessary to disclose the reconciliation and comparison of equity items at the transition date.
  • The opening balance sheet will reflect all adjustments from VAS (Vietnamese Accounting Standards) to IFRS at the transition date. These are usually made through the retained earnings account, except for specific accounts that are otherwise designated.
  • The opening balance sheet is typically prepared based on the assumption that all effective IFRS guidance at the final transition date is applied retrospectively. However, some exemptions from mandatory application may apply, apart from general requirements (see below).
Identifying optional exemptions from the general principles of measurement and disclosure under IFRS 1The optional exemptions from the general principles of measurement and disclosure under IFRS 1 include:

  • Business combinations,
  • Share-based payment transactions,
  • Insurance contracts,
  • Fair value, carrying amount, and estimated value,
  • Lease operations,
  • Foreign exchange differences,
  • Investments in subsidiaries, associates, joint ventures, and joint arrangements,
  • Assets and liabilities to be settled with subsidiaries, associates, joint ventures, and joint arrangements,
  • Financial instruments,
  • Changes in the nature of financial instruments previously recognized,
  • Fair value of assets and liabilities at the date of initial recognition,
  • Costs of major inspections included in the carrying amount of property, plant, and equipment,
  • Financial assets and intangible assets subject to concession arrangements (IFRIC 12),
  • Borrowing costs,
  • Customer advances,
  • Settlement of financial liabilities with equity instruments,
  • Impact of hyperinflation,
  • Joint arrangements,
  • Costs for stripping activities during the production phase (mining activities).
Exemptions when applying other IFRSs retrospectivelyCurrently, there are five exemptions when applying IFRS for the first time:

  • IAS 39 – Derecognition of financial instruments,
  • IFRS 9 – Hedge accounting,
  • IAS 27 – Non-controlling interests,
  • Oil and gas asset values,
  • Determining whether an arrangement contains a lease.
Preparing and presenting disclosures for interim financial reportsDisclosure requirements for interim financial reports:

  • Reconciliation of equity items under VAS and IFRS at the transition date and at the end of the financial year;
  • Reconciliation of equity items under VAS and IFRS at the date of preparing the financial report;
  • Reconciliation of profit or loss statements between VAS and IFRS for the financial year – applicable to both quarterly and year-end reports;
  • Reconciliation of profit or loss statements between VAS and IFRS for the most recent financial year;
  • Details of significant adjustments in the cash flow statement; and
  • Details of the impact of asset impairment or the reversal of impairment recognized for the first-time IFRS adoption.
Preparing and presenting disclosures for annual financial statementsDisclosures for annual financial statements include:

  • Reconciliation of equity items under VAS and IFRS at the transition date (and at the financial year-end if these two dates are different);
  • Reconciliation of profit or loss between VAS and IFRS for the most recent financial year;
  • Details of the impact of impairment of assets or reversal of previously recognized impairments under IFRS;
  • Details of significant adjustments in the cash flow statement.

Please refer to the detailed guidance on first-time IFRS adoption requirements at this link

Businesses should note the following after first-time IFRS adoption:

  • Pay attention to exemptions when applying retrospective principles – this will help save time and reduce costs.
  • Plan ahead to collect data to meet measurement and disclosure requirements, especially for information needed to prepare the opening balance sheet at the transition date.
  • Regularly update guidance from the Ministry of Finance to stay current with implementation timelines.
  • Share this article on:
Facebook
Twitter
LinkedIn
  • Article Author:
Picture of Crowe Vietnam Team

Crowe Vietnam Team

This content has been prepared by the expert team at Crowe Vietnam, aiming to deliver valuable and practical insights to enterprises.

Related insights

Insights

Latest News

Scroll to Top