4IFRS - Intermediate Accounting (Kieso)

Question

Becker Ltd. is planning to adopt IFRS and prepare its first IFRS financial statements at December 31, 2018. What is the date of Becker’s opening balance sheet, assuming one year of comparative information? What periods will be covered in Becker’s first IFRS financial statements?

Step-by-Step Solution

Answer

The opening balance sheet will be prepared on January 1, 2017. The first IFRS financial statement will be covered between January 1, 2018, to December 31, 2018.

Step 1: Explanation of First-Time Adoption of IFRS

In case the company wants to use IFRS for preparing its financial statements, then the first IFRS financial statement should include high-quality information. As per IFRS 1, the information furnished in the first statement should be transparent, must include a suitable starting point, and should have a cost that should not be greater than its benefits.

Step 2: Explanation of reporting financial statements

In case of conversion from GAAP to IFRS, the company is required to choose the transition date, which is the beginning of the earliest period for which the comparative IFRS statement is prepared. The company is required to prepare comparative IFRS financial statements for two years. The reporting date is the date of the ending balance sheet for the first IFRS financial statement.