IFRS Conversion Notes

Introduction to IFRS Conversion

• In January 2025, LPRC engaged ALLIANCE, CPA for IFRS conversion services.
• ALLIANCE, CPA is required to:
  • Prepare IFRS accounts, including opening balance sheet and reconciliation statements.
  • Review and provide feedback on IFRS accounting policies.
  • Provide IFRS update training.
  • Support the first statutory audit in IFRS.
  • Assist in stakeholder communication.

Issues with First-Time Adoption of IFRS

• Key issues:
  • Date of transition to IFRSs.
  • Which IFRSs to adopt.
  • Accounting for gains/losses on adopting IFRS.
  • Available exemptions.
  • Required explanations and disclosures.

Explanation & Disclosure Requirements

• Entities must explain how the IFRS transition affects financial performance, position, and cash flows.
• Required disclosures:
  • Reconciliation of equity and profits.
  • Reconciliation of equity under previous GAAP to IFRS at two dates:
  • The date of transition.
  • The end of the latest period in the most recent annual financial statements.
  • Reconciliation to total comprehensive income under IFRSs for the latest period.
• Starting point for reconciliation: total comprehensive income under previous GAAP or profit/loss under previous GAAP.
• Explanations should enable users to understand material adjustments to:
  • Statement of financial position.
  • Statement of comprehensive income.
  • Statement of cash flows.
• Reconciliations should distinguish between errors under previous GAAP and adjustments due to accounting policy changes.

Applying IFRS 1

• Apply IFRS 1 when:
  • An entity adopts IFRSs for the first time with an explicit and unreserved statement of compliance.
  • Previous financial statements were:
  • Inconsistent with IFRSs in all respects.
  • Did not contain an explicit and unreserved statement of IFRS compliance.
  • Complied with some, but not all, IFRSs.
  • Used some individual IFRSs where national requirements did not exist.
  • Included a reconciliation of some amounts to IFRS.
• Further examples:
  • IFRS financial statements for internal use only.
  • Reporting package under IFRSs for consolidation without a complete set of financial statements.
  • No prior financial statements presented.

Not Applying IFRS 1

• Do not apply IFRS 1 when an entity:
  • Stops presenting financial statements under national requirements after presenting another set with IFRS compliance.
  • Presented financial statements with an explicit and unreserved statement of IFRS compliance in the previous year.
  • Presented financial statements in the previous year with an explicit and unreserved statement of IFRS compliance, even if the audit report was qualified.

Key Definitions

• Date of transition to IFRS:
  • Beginning of the earliest period for which full comparative information is presented under IFRSs.
• Opening IFRS Statement of Financial Position:
  • An entity’s statement of financial position at the date of transition to IFRSs.
  • Starting point for all subsequent accounting under IFRS.

IFRS Conversion Process Phases

• Phase 1: GAP Analysis and Impact Assessment.
  • Define requirements for financial information.
  • Draft project timetable and overall organization.
  • Estimate financial and systems impact.
  • Outline work plan, required resources, and costs.
  • Conduct an in-depth comparison of LPRC's current financial statements under US GAAP and IFRS requirements.
  • Raise awareness of the IFRS issues within the Company.
  • Identify key differences and assess impacts on accounting policies.
  • Provide a quantitative analysis of impacts.
  • Provide recommendations on the structure and approach of the overall conversion project.
  • Draft GAP analysis and impact assessment Report.
• Phase 2: Preparation of First Complete IFRS Financial Statements.
  • Project Set-up: Confirm roles, set up project management office, create project plan, train teams, communicate policies, select champions.
  • Component Evaluation and Issues Resolution: Prepare evaluations, analyze impacts, identify new data requirements, resolve accounting treatment issues.
  • Financial Statement Preparation: Prepare IFRS GAAP adjustments, post adjustments, systems diagnosis, identify and calculate GAAP differences.
• Phase 3: Systems and Process Changes.
  • Integrate information into financial systems and processes.
  • Impact analysis on recurring business and accounting/finance divisions.
  • Design and document IFRS GAAP reporting procedure.
  • Systems design and development.
  • Review IT systems and accounting processes to identify modifications needed.
  • Select accounting, reporting, and tax solutions in compliance with IFRS requirements.
  • Develop a systems modification plan.
  • Support in configuring systems and training staff.
• Phase 4: Data Collection and Conversion.
  • Identify data relevant to IFRS reporting and develop collection/conversion procedures.
  • Ensure completeness and accuracy of data and align data formats for IFRS compliance.
  • Provide guidance and input on accounting systems data.
• Phase 5: Preparation of IFRS Financial Statements.
  • Provide templates and guidance for preparing IFRS skeleton financial statements and footnotes.
  • Review first drafts of IFRS financials.
  • Communicate IFRS conversion impacts to external stakeholders.
  • Advise on developing a Compliance Monitoring Plan.
  • Finalize and review first full IFRS financial statements, including transition notes, disclosures, and supplementary notes.

IFRS 1 - Key Requirements

• A first-time adopter must:
  • Recognize all assets and liabilities required by IFRSs.
  • Not recognize items as assets or liabilities if IFRSs do not permit recognition.
  • Reclassify items recognized under previous GAAP as different types of assets, liabilities, or equity components under IFRSs.
  • Apply IFRSs in measuring all recognized assets and liabilities.
• Changes to disclosures.
• Adjustments at first-time adoption are recognised directly in equity.

Recognize Assets and Liabilities Based on IFRS

• Pension liabilities
• Deferred tax assets and liabilities
• Right of Use (RoU) assets and Lease liabilities
• Provisions (legal or constructive, restructuring, onerous, decommissioning liabilities)
• Warranty obligations, litigation
• Derivative financial instruments
• Acquired intangible assets
• Internal development Costs
• Liability for share based payment
• Web site cost

De-recognize Assets and Liabilities Based on IFRS

• Provisions (if no present obligation)
• Proposed dividend
• General reserves as Liabilities
• Deferred tax assets (if not Probable)
• Treasury shares as assets
• Intangible assets not meeting criteria
• Insurance reimbursement
• Start-up cost and training Cost
• Advertising promotional Cost
• Relocation cost

Re-measurement Examples Under IFRSs

• Financial Assets: Four categories under IAS 39, Three categories under IFRS 9.
• Financial Liabilities: Liability or equity under IAS 32; Preference shares from equity to liability.
• Offsetting: Presentation of gross amounts unless IFRSs allow offsetting.
• Statement of financial position: Separate presentation of noncurrent and current under IAS 1.
• Intangible assets: Not recognizable under IAS 38 and arose on business combination – adjust goodwill.
• Software: Software from office equipment to intangible assets.
• Securities in statement of cash flow: Classified as cash equivalents only if maturity < 3 months from date of acquisition.
• Financial instruments: Fair value or amortized cost under IFRS 9.
• Pension liabilities: Apply IAS 19, get an actuarial valuation on defined benefit plan.
• Provisions: Best estimate under IAS 37.
• Impairment of assets: Apply IAS 36.
• Inventory measurement: Re-measure if LIFO.
• Share-based payment: Apply IFRS 2 for equity-settled and cash-settled share-based payment transactions.
• Deferred revenue: Apply IFRS 15 to measure liability related to customer loyalty programs.
• Non-current assets held for sale: Apply IFRS 5 to measure HFS and disposal group.

Exemptions and Exceptions from Full Retrospective Adoption

• IFRS 1 requires some mandatory exceptions and permits more optional exemptions from full retrospective adoption.
• IFRS is applied prospectively from the date of transition to IFRS.
• Exemptions relate to accounting issues where retrospective adoption would be impracticable or introduce excessive subjectivity.
• Cost of full retrospective adoption would outweigh the benefit.

Changes to Disclosures

• New areas of disclosure (segment information, earnings per share, discontinuing operations, contingencies, fair values of financial instruments).
• Broadened disclosures (related party disclosures).
• Additional disclosure first time – Disclosure of selected financial data for periods before the first IFRS balance sheet).

IFRS Adoption/Conversion Status - May 2025

• LPRC provided information for structuring the IFRS conversion project.
• LPRC raised awareness of IFRS issues and provided updates on the conversion exercise.
• Alliance, CPA held a meeting with key stakeholders at LPRC, including GAC.
• Alliance, CPA’s IFRS team provided recommendations on the structure and approach of the overall conversion project.
• Alliance CPA, Inc. has forwarded the GAP Analysis and Impact Assessment report
• IFRSs applicable to LPRC communicated to Management
• IFRS 1 Exemptions and Exceptions discussed with LPRC
• Accounting policy options and selections agreed with Alliance CPA, Inc. team

Outstanding Matters

• IFRS Disclosures- LPRC
  • Expected credit losses- Note 30.1.3 Credit risk – Management written feedback on:
  • The Gap and Impact Assessment Report
  • First IFRS Financial Statements
    • Update of the Corporate Information page
    • The Meaning of Adjustment to opening balance at the Comparative date
  • Management Representation Letter for Compilation Engagement (Alliance CPA)

Transition Dates for LPRC

• Reporting date: 31 December 2023
• Comparative date: 31 December 2022
• Transition date: 1 January 2022

Applicable IFRS Standards

• IAS 1: Financial Statement Presentation and Disclosure
• IFRS 9: Financial Instruments
• IFRS 7: Financial Instrument Disclosures
• IAS 16: Property, Plant and Equipment
• IAS 36: Impairment
• IAS 2: Inventories
• IAS 12: Income Taxes
• IAS 38: Intangible assets
• IAS 19: Employee benefits
• IAS 37: Provisions, Contingent assets and contingent liabilities
• IAS 24: Related Party Disclosure
• IFRS 16: Leases

Financial Statement Basis

• Prepared on the basis of IFRSs effective as of 31 December 2023, with early adoption where applicable.
• Ongoing monitoring of the latest interpretations and industry practice.
• The draft First IFRS FS needs to be audited by the LPRC Auditor- GAC

IFRS Disclosures

• First IFRS financial statements must include a full set of disclosure notes and comply with presentation requirements.
• Specific disclosure requirements relate to exemptions and exceptions from full retrospective disclosure.
• Adjustments made from previous GAAP to IFRS must be disclosed.
• Organizations often underestimate the time and effort needed to prepare necessary notes.