You are an accounting adviser in an entity in a particular country. The entity faces the problem of first translation of its financial statements into IFRS. You are asked to explain the process of first adoption of IFRS
Note 1: You are required to prepare a case study which is NOT based on accounting records or financial statements of any existing company. It is impossible to translate financial statements from one accounting system to another without additional information gathered from the top management of particular company.
Required:
1. Select the country where an entity is domiciled and list the main differences between the local accounting requirements (local GAAP) and IFRS.
2. Prepare the statement of financial position and income statement (or equivalent of statement of comprehensive income, if applicable) according to the local GAAP for two accounting periods. Preparing these two statements, include some (minimum 3) typical differences between local GAAP and IFRS from the list you have produced in question 1.
3. Translate the Statement of financial position and the Income statement (or equivalent of statement of comprehensive income, if applicable) into IFRS for the year 2. (I.e. the date of IFRS opening statement of financial position is the beginning of year 2. Use the “Translation Table”.
4. Prepare all financial statements required by IAS 1 Presentation of Financial Statements. (Notes to financial statements are not required).
5. Explain the impact of the first adoption of IFRS on the entity’s financial position and performance according to the requirements of IFRS 1.
6. Write a commentary describing the problems relating to the first time adoption of IFRS in the chosen country and on business entities in this country.