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.