# IFRS Compliance Templates

Use these templates when producing structured compliance deliverables. Each template includes header fields, a tabular body, and summary sections. Adapt column widths and detail to the engagement scope.

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## 1. Disclosure Completeness Checklist

### Purpose

Systematically verify that all mandatory and encouraged disclosures required by a specific IFRS standard have been addressed in the financial statements. This is the primary tool for disclosure compliance reviews.

### Header Fields

| Field | Value |
|---|---|
| **Standard** | [e.g., IFRS 16 Leases] |
| **Entity** | [Legal entity name] |
| **Reporting Period** | [e.g., Year ended 31 December 2025] |
| **Prepared by** | [Name, title] |
| **Date of Review** | [DD/MM/YYYY] |
| **Reviewed by** | [Name, title] |
| **Review Date** | [DD/MM/YYYY] |

### Checklist Table

Draw the rows from the per-standard library in §1A below, which carries a verified paragraph reference against every requirement. Copy the table for the standard under review, delete the rows that are not applicable to the entity (rather than marking them N/A, if the checklist is being used as a working paper rather than as evidence of completeness), and add a Notes column:

| # | Disclosure Requirement | Paragraph Ref | Included (Yes / No / N/A) | Notes |
|---|---|---|---|---|
| 1 | [from §1A] | [from §1A] | [ ] | [Cross-reference to financial statement page/note] |

Two rules that decide most disclosure arguments before they start:

- **A requirement is not satisfied by a policy sentence.** Most of the lines in §1A ask for an amount, a reconciliation or a maturity band. A narrative paragraph describing the policy does not discharge a requirement to disclose the amount.
- **Immaterial disclosures are not merely permitted omissions -- including them is a defect.** IFRS Practice Statement 2 treats obscuring material information with immaterial information as a failure in its own right (IFRS Practice Statement 2.57). Run the materiality template in §6 over a completed checklist before concluding that every "No" is a gap.

### Summary Section

| Metric | Count |
|---|---|
| Total items assessed | [n] |
| Included (Yes) | [n] |
| Missing (No) | [n] |
| Not applicable (N/A) | [n] |
| **Completion rate** | [n]% |

### Key Gaps Identified

| # | Disclosure Requirement | Paragraph Ref | Impact / Risk | Recommended Action |
|---|---|---|---|---|
| 1 | [Missing item description] | [IFRS X.nn] | [e.g., Material omission / Qualified opinion risk] | [Specific remediation step] |

---

### Worked Example: IFRS 16 Lessee Disclosures (IFRS 16.47-60)

**Header**

| Field | Value |
|---|---|
| **Standard** | IFRS 16 Leases |
| **Entity** | Apex Manufacturing Ltd |
| **Reporting Period** | Year ended 31 December 2025 |
| **Prepared by** | J. Okafor, Senior Auditor |
| **Date of Review** | 15/02/2026 |
| **Reviewed by** | S. Chen, Audit Manager |
| **Review Date** | 20/02/2026 |

**Checklist**

| # | Disclosure Requirement | Paragraph Ref | Included | Notes |
|---|---|---|---|---|
| 1 | Depreciation charge for right-of-use assets by class of underlying asset | IFRS 16.53(a) | Yes | Note 12, p. 48 |
| 2 | Interest expense on lease liabilities | IFRS 16.53(b) | Yes | Note 8, p. 42 |
| 3 | Expense relating to short-term leases (if not included in ROU measurement) | IFRS 16.53(c) | Yes | Note 12, p. 49 |
| 4 | Expense relating to leases of low-value assets (if not included in short-term) | IFRS 16.53(d) | N/A | Entity does not apply low-value exemption separately from short-term |
| 5 | Expense relating to variable lease payments not included in lease liabilities | IFRS 16.53(e) | No | Variable payments exist per Note 12 narrative but no quantified disclosure |
| 6 | Income from sub-leasing right-of-use assets | IFRS 16.53(f) | N/A | No sub-leases identified |
| 7 | Total cash outflow for leases | IFRS 16.53(g) | Yes | Cash flow statement and Note 12 |
| 8 | Additions to right-of-use assets | IFRS 16.53(h) | Yes | Note 12, p. 48 |
| 9 | Gains or losses arising from sale and leaseback transactions | IFRS 16.53(i) | N/A | No sale and leaseback transactions |
| 10 | Carrying amount of right-of-use assets at end of period by class | IFRS 16.53(j) | Yes | Note 12, table format by class |
| 11 | Maturity analysis of lease liabilities (separate from other financial liabilities) | IFRS 16.58 | Yes | Note 25, p. 71; bands: <1yr, 1-5yr, >5yr |
| 12 | Additional qualitative and quantitative information about leasing activities, where necessary to meet the disclosure objective in IFRS 16.51 | IFRS 16.59 (factors to consider: IFRS 16.B48) | Yes | Note 12 narrative, pp. 48-49 |
| 13 | Nature of the entity's leasing activities | IFRS 16.59(a) | Yes | Property, vehicles, and equipment described |
| 14 | Future cash outflows to which the lessee is potentially exposed that are not reflected in the measurement of lease liabilities | IFRS 16.59(b) | No | Variable rent based on revenue not quantified. The four named sources are variable lease payments (59(b)(i), see IFRS 16.B49), extension and termination options (59(b)(ii)), residual value guarantees (59(b)(iii)) and leases not yet commenced to which the lessee is committed (59(b)(iv)) |
| 15 | Restrictions or covenants imposed by leases | IFRS 16.59(c) | No | Loan covenants mention lease constraints but no specific lease covenant disclosure |
| 16 | Sale and leaseback transactions | IFRS 16.59(d) | N/A | None |
| 17 | Significant judgements management made in applying the entity's accounting policies (e.g., whether a contract contains a lease, allocation of consideration, discount rate, extension/termination options). IFRS 16 contains no general judgement-disclosure requirement -- the requirement sits in the presentation standard | IAS 1.122 (IAS 8.27G for periods beginning on or after 1 Jan 2027) | Yes | Note 3 critical judgments, p. 28 |
| 18 | Fact that the entity accounts for short-term leases or leases of low-value assets applying the recognition exemption | IFRS 16.60 | Yes | Note 2 accounting policies, p. 26 |
| 19 | Weighted average lessee's incremental borrowing rate applied at the date of initial application | IFRS 16.C12(a) | N/A | Transition-only disclosure under the modified retrospective approach. Entity's date of initial application was 1 January 2019; not required for a 2025 year end. (The 4.8% rate in Note 12 is a voluntary continuing disclosure.) |
| 20 | Right-of-use assets presented separately from other assets, or the line items that include them disclosed | IFRS 16.47(a) | Yes | Note 12, table by class (property, vehicles, equipment) |
| 21 | Lease liabilities presented separately from other liabilities, or the line items that include them disclosed | IFRS 16.47(b) | Yes | Current/non-current split in Note 25 |
| 22 | Lease disclosures given in a single note or separate section (without duplicating information already presented elsewhere) | IFRS 16.52 | Yes | Note 12 is the single lease note; Note 25 cross-references it |
| 23 | IFRS 16.53 disclosures provided in tabular format unless another format is more appropriate, and including costs capitalised into the carrying amount of another asset during the period | IFRS 16.54 | Yes | Note 12 uses tabular format for ROU assets and depreciation |
| 24 | Amount of lease commitments for short-term leases, where the short-term portfolio committed to at period end is dissimilar to the portfolio behind the IFRS 16.53(c) expense | IFRS 16.55 | N/A | Committed short-term portfolio consistent in composition with the current-year expense |
| 25 | Right-of-use assets meeting the definition of investment property: IAS 40 disclosure requirements applied, in which case IFRS 16.53(a), (f), (h) and (j) are not required for those assets | IFRS 16.56 | N/A | No ROU assets classified as investment property |

**Summary**

| Metric | Count |
|---|---|
| Total items assessed | 25 |
| Included (Yes) | 15 |
| Missing (No) | 3 |
| Not applicable (N/A) | 7 |
| **Completion rate** (Yes / (Yes + No)) | 83% |

**Key Gaps Identified**

| # | Disclosure Requirement | Paragraph Ref | Impact / Risk | Recommended Action |
|---|---|---|---|---|
| 1 | Variable lease payments not included in lease liabilities | IFRS 16.53(e) | Medium -- incomplete picture of lease costs; potential audit finding | Quantify variable lease payments by class and disclose in Note 12 |
| 2 | Future cash outflows not reflected in lease liabilities, including exposure to variable lease payments | IFRS 16.59(b), IFRS 16.59(b)(i), IFRS 16.B49 | Medium -- users cannot assess exposure to variable rents or understand the basis of the variability | Add the nature and basis of the variability (revenue-linked rents) and a sensitivity or range disclosure |
| 3 | Restrictions or covenants imposed by leases | IFRS 16.59(c) | Low -- existing covenant note partially addresses this | Expand loan covenant note to separately address lease-specific restrictions |

**Reference corrections applied to this example.** Eight paragraph references in an earlier version of this worked example cited paragraphs that exist but deal with something else, and one row duplicated another. All were re-checked against the text of IFRS 16 and corrected above. The recurring traps: IFRS 16.51 is the disclosure *objective*, not the presentation requirement (that is 47(a)); IFRS 16.52 is the single-note requirement, not the lease liability presentation requirement (that is 47(b)); IFRS 16.55 is the short-term lease *commitment* disclosure, not a general "additional information" catch-all (that is 59); IFRS 16.C12(a) is the weighted average IBR and C12(b) is the IAS 17 commitments reconciliation; IFRS 16.56 and 16.57 concern right-of-use assets meeting the investment property definition and revalued right-of-use assets, not variable lease payments; and IFRS 16 has no general judgement-disclosure requirement at all.

---

## 1A. Per-Standard Disclosure Checklist Library

### Purpose

A verified, paragraph-referenced checklist for every standard in `standards-reference.md`. Copy
the relevant table into the §1 template. Every reference has been checked against the paragraph
text of the standard; where a lettered sub-item is cited, that sub-item exists in that paragraph.

### How to use it

1. Identify the standards in scope from the entity's balance sheet and the trial balance, not
   from last year's checklist. A standard becomes relevant the first time a transaction occurs.
2. Work the table top to bottom. Mark `N/A` only where the underlying transaction or balance
   does not exist — not where the amount is small. Size is a materiality question (§6), not an
   applicability question.
3. Any line marked `No` goes to the Key Gaps table in §1 with an impact assessment.

### Which of IAS 1 / IFRS 18 applies

| Annual period beginning | Presentation standard | Going concern | Accounting policy disclosures | Judgements and estimation uncertainty |
|---|---|---|---|---|
| Before 1 Jan 2027 (unless early-adopting IFRS 18) | IAS 1 | IAS 1.25-26 | IAS 1.117-117E | IAS 1.122-133 |
| On or after 1 Jan 2027 | IFRS 18 | IAS 8.6K-6L | IAS 8.27A-27E | IAS 8.27G, IAS 8.31A-31I |

IFRS 18 does not carry the going-concern requirement. IFRS 18 moved it, unchanged, into IAS 8,
and IAS 8 was retitled *Basis of Preparation of Financial Statements* to reflect that it now
holds fair presentation, compliance, going concern, the accrual basis and accounting-policy
disclosure. Preparers looking for going concern in IFRS 18 will not find it there.

### Known gap — IFRS 20

**There is no IFRS 20 checklist in this library, and its absence is a known gap rather than an oversight.** IFRS 20 *Regulatory Assets and Regulatory Liabilities* was issued on 27 May 2026, effective for annual periods beginning on or after 1 January 2029 with earlier application permitted, and is not yet EU-endorsed. It was issued after the annual edition of the Standards from which every table below was built closed, so its paragraph-numbered text was not available to verify against and no table could be written to the evidential standard the rest of this library meets. IFRS 20 supersedes **IFRS 14 *Regulatory Deferral Accounts***, which is covered below and remains the applicable Standard until an entity applies IFRS 20. Anyone adding the IFRS 20 table will need a source outside that edition — the Standard's own landing page or the issued PDF.

No other standard in `standards-reference.md` is missing from this library.

### IFRS 1 — First-time Adoption of International Financial Reporting Standards

**Explanation of transition to IFRSs**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Explanation of how transition from previous GAAP to IFRSs affected reported financial position, performance and cash flows | IFRS 1.23 | [ ] |
| 2 | If entity did not present financial statements for previous periods: disclose that fact | IFRS 1.28 | [ ] |
| 3 | If entity previously applied IFRSs then stopped: reason it stopped applying IFRSs | IFRS 1.23A(a) | [ ] |
| 4 | If entity previously applied IFRSs then stopped: reason it is resuming application of IFRSs | IFRS 1.23A(b) | [ ] |
| 5 | If entity does not elect to reapply IFRS 1 under para 4A: explain reasons for electing to apply IFRSs as if never stopped | IFRS 1.23B | [ ] |

**Reconciliations**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Reconciliation of equity under previous GAAP to equity under IFRSs at date of transition | IFRS 1.24(a)(i) | [ ] |
| 2 | Reconciliation of equity under previous GAAP to equity under IFRSs at end of latest period presented under previous GAAP | IFRS 1.24(a)(ii) | [ ] |
| 3 | Reconciliation of total comprehensive income under previous GAAP to total comprehensive income under IFRSs for latest period presented | IFRS 1.24(b) | [ ] |
| 4 | If impairment losses/reversals recognised for the first time on transition: disclosures IAS 36 would have required had they been recognised from transition date | IFRS 1.24(c) | [ ] |
| 5 | Reconciliations give sufficient detail to enable users to understand material adjustments to statement of financial position and statement of comprehensive income; explain material adjustments to statement of cash flows if previously presented | IFRS 1.25 | [ ] |
| 6 | If errors under previous GAAP are discovered: distinguish correction of those errors from changes in accounting policies within the reconciliations | IFRS 1.26 | [ ] |

**Designation of financial assets and liabilities**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If a previously recognised financial asset is designated at fair value through profit or loss on transition: its fair value at designation date and its classification/carrying amount in previous financial statements | IFRS 1.29 | [ ] |
| 2 | If a previously recognised financial liability is designated at fair value through profit or loss on transition: its fair value at designation date and its classification/carrying amount in previous financial statements | IFRS 1.29A | [ ] |

**Use of fair value or revaluation as deemed cost**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If fair value used as deemed cost for PP&E, investment property, intangible asset or right-of-use asset: aggregate of those fair values, by line item | IFRS 1.30(a) | [ ] |
| 2 | If fair value used as deemed cost for PP&E, investment property, intangible asset or right-of-use asset: aggregate adjustment to carrying amounts reported under previous GAAP, by line item | IFRS 1.30(b) | [ ] |
| 3 | If deemed cost used for investment in subsidiary, joint venture or associate in separate financial statements: aggregate deemed cost where deemed cost is previous GAAP carrying amount | IFRS 1.31(a) | [ ] |
| 4 | If deemed cost used for investment in subsidiary, joint venture or associate in separate financial statements: aggregate deemed cost where deemed cost is fair value | IFRS 1.31(b) | [ ] |
| 5 | If deemed cost used for investment in subsidiary, joint venture or associate in separate financial statements: aggregate adjustment to carrying amounts reported under previous GAAP | IFRS 1.31(c) | [ ] |
| 6 | If exemption for oil and gas assets under D8A(b) used: disclose that fact and basis on which previous GAAP carrying amounts were allocated | IFRS 1.31A | [ ] |
| 7 | If exemption for operations subject to rate regulation under D8B used: disclose that fact and basis on which carrying amounts were determined under previous GAAP | IFRS 1.31B | [ ] |
| 8 | If fair value used as deemed cost because of severe hyperinflation: explanation of how and why entity had, and then ceased to have, a hyperinflationary functional currency | IFRS 1.31C | [ ] |

**Historical summaries and previous GAAP comparatives**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If historical summaries or previous GAAP comparative information presented: label that information prominently as not prepared in accordance with IFRSs | IFRS 1.22(a) | [ ] |
| 2 | If historical summaries or previous GAAP comparative information presented: disclose nature of main adjustments needed to comply with IFRSs (quantification not required) | IFRS 1.22(b) | [ ] |

**Interim financial reports (IAS 34) covering part of first IFRS reporting period**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If comparable prior-year interim report was presented: reconciliation of equity under previous GAAP to IFRSs at end of that comparable interim period | IFRS 1.32(a)(i) | [ ] |
| 2 | If comparable prior-year interim report was presented: reconciliation to total comprehensive income under IFRSs for that comparable interim period (current and year to date) | IFRS 1.32(a)(ii) | [ ] |
| 3 | First interim financial report: include reconciliations described in para 24(a)–(b), supplemented by paras 25–26 detail, or cross-reference to another published document containing them | IFRS 1.32(b) | [ ] |
| 4 | If accounting policies or use of IFRS 1 exemptions changed during the covered period: explain changes in each interim report and update the reconciliations | IFRS 1.32(c) | [ ] |
| 5 | If most recent previous-GAAP annual financial statements omitted information material to understanding the current interim period: disclose that information or cross-reference to a published document containing it | IFRS 1.33 | [ ] |

**Share-based payment transition**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | For equity instrument grants to which IFRS 2 has not been applied on transition: disclose information required by IFRS 2 paragraphs 44–45 | IFRS 1.D2 | [ ] |

**Early application of amendments**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If IFRS 1 and IAS 27 amendments on cost of investment in subsidiary/JCE/associate (para 31, D1(g), D14, D15) applied before 1 July 2009: disclose that fact | IFRS 1.38 | [ ] |
| 2 | If Additional Exemptions amendments (paras 31A, D8A, D9A, D21A) applied before 1 January 2010: disclose that fact | IFRS 1.39A | [ ] |
| 3 | If Improvements to IFRSs 2010 amendments (paras 27A, 31B, D8B) applied before 1 January 2011: disclose that fact | IFRS 1.39E | [ ] |
| 4 | If entity applies amendment to D8 retrospectively in first annual period after it is effective: disclose that fact | IFRS 1.39E | [ ] |
| 5 | If Annual Improvements 2009–2011 amendment adding paras 4A–4B and 23A–23B applied before 1 January 2013: disclose that fact | IFRS 1.39P | [ ] |
| 6 | If Annual Improvements 2009–2011 amendment to D23 applied before 1 January 2013: disclose that fact | IFRS 1.39Q | [ ] |
| 7 | If Annual Improvements 2009–2011 amendment to paragraph 21 applied before 1 January 2013: disclose that fact | IFRS 1.39R | [ ] |
| 8 | If Equity Method in Separate Financial Statements amendments (D14, D15A) applied before 1 January 2016: disclose that fact | IFRS 1.39Z | [ ] |
| 9 | If Annual Improvements 2018–2020 amendment (D1(f), D13A) applied before 1 January 2022: disclose that fact | IFRS 1.39AG | [ ] |
| 10 | If Deferred Tax related to Assets and Liabilities from a Single Transaction amendments (B1, B14) applied before 1 January 2023: disclose that fact | IFRS 1.39AH | [ ] |
| 11 | If Annual Improvements Volume 11 amendment (B5–B6) applied before 1 January 2026: disclose that fact | IFRS 1.39AK | [ ] |

### IFRS 2 — Share-based Payment

**Nature and extent of share-based payment arrangements**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Description of each type of arrangement that existed during the period, incl. terms, vesting conditions and settlement method | IFRS 2.45(a) | [ ] |
| 2 | Movement in number and weighted average exercise price of options: outstanding at start, granted, forfeited, exercised, expired, outstanding at end, exercisable at end | IFRS 2.45(b) | [ ] |
| 3 | For options exercised during the period, weighted average share price at date of exercise | IFRS 2.45(c) | [ ] |
| 4 | For options outstanding at period end, range of exercise prices and weighted average remaining contractual life | IFRS 2.45(d) | [ ] |

**How the fair value of goods/services or equity instruments granted was determined**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If fair value of goods/services measured indirectly by reference to equity instruments granted: for options granted during the period, weighted average fair value at measurement date, pricing model used and inputs (share price, exercise price, volatility, life, dividends, risk-free rate) | IFRS 2.47(a)(i) | [ ] |
| 2 | If X: how expected volatility was determined, incl. extent based on historical volatility | IFRS 2.47(a)(ii) | [ ] |
| 3 | If X: whether and how other features of the option grant (e.g. a market condition) were incorporated into the fair value measurement | IFRS 2.47(a)(iii) | [ ] |
| 4 | If X: for other equity instruments granted (not options), number and weighted average fair value at measurement date, and how determined if not based on an observable market price | IFRS 2.47(b)(i) | [ ] |
| 5 | If X: whether and how expected dividends were incorporated into the fair value of other equity instruments granted | IFRS 2.47(b)(ii) | [ ] |
| 6 | If X: whether and how any other features of other equity instruments granted were incorporated into fair value | IFRS 2.47(b)(iii) | [ ] |
| 7 | If a share-based payment arrangement was modified during the period: explanation of the modification | IFRS 2.47(c)(i) | [ ] |
| 8 | If modified: incremental fair value granted as a result of the modification | IFRS 2.47(c)(ii) | [ ] |
| 9 | If modified: how the incremental fair value granted was measured | IFRS 2.47(c)(iii) | [ ] |
| 10 | If fair value of goods/services received was measured directly, how that fair value was determined | IFRS 2.48 | [ ] |
| 11 | If the presumption in para 13 that the fair value of goods/services received can be estimated reliably was rebutted: disclose that fact and the reasons | IFRS 2.49 | [ ] |

**Effect of share-based payment transactions on profit or loss and financial position**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Total expense recognised for the period from share-based payment transactions, with the equity-settled portion disclosed separately | IFRS 2.51(a) | [ ] |
| 2 | For liabilities arising from share-based payment transactions, total carrying amount at period end | IFRS 2.51(b)(i) | [ ] |
| 3 | For liabilities arising from share-based payment transactions, total intrinsic value at period end of vested amounts | IFRS 2.51(b)(ii) | [ ] |
| 4 | If disclosures above do not meet the objectives in paras 44, 46 and 50: additional information necessary, e.g. estimated amount to be transferred to a tax authority for net-share-settled equity-classified arrangements | IFRS 2.52 | [ ] |

### IFRS 3 — Business Combinations

**Business combinations occurring during the period**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Name and description of the acquiree | IFRS 3.B64(a) | [ ] |
| 2 | Acquisition date | IFRS 3.B64(b) | [ ] |
| 3 | Percentage of voting equity interests acquired | IFRS 3.B64(c) | [ ] |
| 4 | Primary reasons for the combination and how the acquirer obtained control of the acquiree | IFRS 3.B64(d) | [ ] |
| 5 | Qualitative description of factors making up the goodwill recognised (e.g. expected synergies, non-separable intangibles) | IFRS 3.B64(e) | [ ] |
| 6 | Acquisition-date fair value of total consideration transferred and of each major class of consideration (cash, other assets, liabilities incurred, equity interests) | IFRS 3.B64(f) | [ ] |
| 7 | Contingent consideration/indemnification assets: amount recognised as of acquisition date | IFRS 3.B64(g)(i) | [ ] |
| 8 | Contingent consideration/indemnification assets: description of arrangement and basis for determining the payment amount | IFRS 3.B64(g)(ii) | [ ] |
| 9 | Contingent consideration/indemnification assets: estimated range of outcomes (undiscounted), or reasons a range cannot be estimated; state if maximum payment is unlimited | IFRS 3.B64(g)(iii) | [ ] |
| 10 | Acquired receivables by major class: fair value, gross contractual amounts receivable, and best estimate of contractual cash flows not expected to be collected | IFRS 3.B64(h) | [ ] |
| 11 | Amounts recognised as of acquisition date for each major class of assets acquired and liabilities assumed | IFRS 3.B64(i) | [ ] |
| 12 | For each contingent liability recognised: IAS 37.85 information, or (if unrecognised due to unreliable measurement) IAS 37.86 information and the reasons it cannot be measured reliably | IFRS 3.B64(j) | [ ] |
| 13 | Total amount of goodwill expected to be deductible for tax purposes | IFRS 3.B64(k) | [ ] |
| 14 | For transactions recognised separately from the business combination: description, accounting treatment, amounts recognised and line item, and (if settling a pre-existing relationship) method used to determine the settlement amount | IFRS 3.B64(l) | [ ] |
| 15 | Amount of acquisition-related costs, separately the amount expensed and its line item, and any issue costs not expensed and how they were recognised | IFRS 3.B64(m) | [ ] |
| 16 | For a bargain purchase: amount of the gain recognised and its line item, and reasons the transaction resulted in a gain | IFRS 3.B64(n) | [ ] |
| 17 | For an acquiree less than 100% owned: amount of non-controlling interest recognised at acquisition date and the measurement basis used | IFRS 3.B64(o)(i) | [ ] |
| 18 | For each non-controlling interest measured at fair value: valuation technique(s) and significant inputs used | IFRS 3.B64(o)(ii) | [ ] |
| 19 | For a business combination achieved in stages: acquisition-date fair value of the equity interest held immediately before the acquisition date | IFRS 3.B64(p)(i) | [ ] |
| 20 | For a business combination achieved in stages: gain or loss on remeasuring the previously held equity interest to fair value, and its line item | IFRS 3.B64(p)(ii) | [ ] |
| 21 | Revenue and profit or loss of the acquiree since the acquisition date included in the period's results | IFRS 3.B64(q)(i) | [ ] |
| 22 | Pro forma revenue and profit or loss of the combined entity as if the acquisition date had been the start of the period (or state impracticable and explain why) | IFRS 3.B64(q)(ii) | [ ] |

**Individually immaterial business combinations**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If individually immaterial business combinations occurring in the period are material collectively: disclose the B64(e)–(q) information in aggregate | IFRS 3.B65 | [ ] |

**Business combinations after the reporting period**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If acquisition date is after period end but before financial statements are authorised for issue: disclose the B64 information, unless initial accounting is incomplete | IFRS 3.B66 | [ ] |
| 2 | If initial accounting for such a combination is incomplete: describe which disclosures could not be made and why | IFRS 3.B66 | [ ] |

**Adjustments recognised in the current period relating to business combinations**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If initial accounting for a combination is incomplete: reasons why it is incomplete | IFRS 3.B67(a)(i) | [ ] |
| 2 | If initial accounting is incomplete: the assets, liabilities, equity interests or consideration items for which it is incomplete | IFRS 3.B67(a)(ii) | [ ] |
| 3 | If initial accounting is incomplete: nature and amount of measurement period adjustments recognised in the period | IFRS 3.B67(a)(iii) | [ ] |
| 4 | For contingent consideration: changes in recognised amounts, including differences arising on settlement | IFRS 3.B67(b)(i) | [ ] |
| 5 | For contingent consideration: changes in the range of outcomes (undiscounted) and the reasons for those changes | IFRS 3.B67(b)(ii) | [ ] |
| 6 | For contingent consideration: valuation techniques and key model inputs used to measure it | IFRS 3.B67(b)(iii) | [ ] |
| 7 | For contingent liabilities recognised in a business combination: IAS 37 paragraphs 84 and 85 information for each class of provision | IFRS 3.B67(c) | [ ] |
| 8 | Goodwill reconciliation: gross amount and accumulated impairment losses at beginning of period | IFRS 3.B67(d)(i) | [ ] |
| 9 | Goodwill reconciliation: additional goodwill recognised during the period | IFRS 3.B67(d)(ii) | [ ] |
| 10 | Goodwill reconciliation: adjustments from subsequent recognition of deferred tax assets during the period | IFRS 3.B67(d)(iii) | [ ] |
| 11 | Goodwill reconciliation: goodwill in a disposal group classified as held for sale, and goodwill derecognised in the period without prior held-for-sale classification | IFRS 3.B67(d)(iv) | [ ] |
| 12 | Goodwill reconciliation: impairment losses recognised in the period | IFRS 3.B67(d)(v) | [ ] |
| 13 | Goodwill reconciliation: net exchange rate differences arising in the period | IFRS 3.B67(d)(vi) | [ ] |
| 14 | Goodwill reconciliation: any other changes in carrying amount during the period | IFRS 3.B67(d)(vii) | [ ] |
| 15 | Goodwill reconciliation: gross amount and accumulated impairment losses at end of period | IFRS 3.B67(d)(viii) | [ ] |
| 16 | Amount and explanation of any gain or loss recognised in the current period relating to identifiable assets/liabilities from a current- or prior-period combination, where significant to understanding the combined entity's results | IFRS 3.B67(e) | [ ] |

**General**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If the specific disclosures above do not meet the objectives in paras 59 and 61: disclose whatever additional information is necessary to meet those objectives | IFRS 3.63 | [ ] |

### IFRS 5 — Non-current Assets Held for Sale and Discontinued Operations

**Discontinued operations**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Single post-tax amount: profit/loss of discontinued operations plus gain/loss on remeasurement or disposal | IFRS 5.33(a) | [ ] |
| 2 | Analysis: revenue, expenses and pre-tax profit or loss of discontinued operations | IFRS 5.33(b)(i) | [ ] |
| 3 | Related income tax expense on discontinued operations' pre-tax result | IFRS 5.33(b)(ii) | [ ] |
| 4 | Gain or loss on remeasurement to fair value less costs to sell, or on disposal | IFRS 5.33(b)(iii) | [ ] |
| 5 | Related income tax expense on the remeasurement/disposal gain or loss | IFRS 5.33(b)(iv) | [ ] |
| 6 | Net cash flows from operating, investing and financing activities of discontinued operations | IFRS 5.33(c) | [ ] |
| 7 | Income from continuing and from discontinued operations attributable to owners of the parent | IFRS 5.33(d) | [ ] |
| 8 | Re-present prior-period disclosures for all operations discontinued by the end of the reporting period | IFRS 5.34 | [ ] |
| 9 | Nature and amount of current-period adjustments directly related to a prior-period discontinued operation's disposal | IFRS 5.35 | [ ] |

**Held-for-sale non-current assets and disposal groups**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Present held-for-sale non-current assets/disposal-group assets separately from other assets | IFRS 5.38 | [ ] |
| 2 | Present disposal-group liabilities separately from other liabilities, not offset against its assets | IFRS 5.38 | [ ] |
| 3 | Major classes of assets and liabilities classified as held for sale, if not presented separately on the face | IFRS 5.38 | [ ] |
| 4 | Cumulative income or expense in OCI relating to the held-for-sale asset/disposal group | IFRS 5.38 | [ ] |

**Disclosures in the period of classification as held for sale or of sale**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Description of the non-current asset or disposal group | IFRS 5.41(a) | [ ] |
| 2 | Facts and circumstances of the sale/expected disposal, and its expected manner and timing | IFRS 5.41(b) | [ ] |
| 3 | Gain or loss recognised and, if not separately presented, its line item in the statement of comprehensive income | IFRS 5.41(c) | [ ] |
| 4 | If applicable: reportable segment (per IFRS 8) in which the asset/disposal group is presented | IFRS 5.41(d) | [ ] |
| 5 | If held-for-sale criteria met after period end but before authorisation for issue: disclose info per para 41(a),(b),(d) | IFRS 5.12 | [ ] |

**Changes to a plan of sale**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If a decision changes the plan of sale (para 26/29 applies): facts/circumstances and effect on results of current and prior periods presented | IFRS 5.42 | [ ] |

### IFRS 6 — Exploration for and Evaluation of Mineral Resources

**Amounts arising from exploration and evaluation**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Accounting policies for exploration and evaluation expenditures, including recognition of E&E assets | IFRS 6.24(a) | [ ] |
| 2 | Amounts of assets, liabilities, income and expense arising from exploration and evaluation | IFRS 6.24(b) | [ ] |
| 3 | Operating and investing cash flows arising from exploration and evaluation | IFRS 6.24(b) | [ ] |
| 4 | Exploration and evaluation assets presented as a separate class of assets, with IAS 16/IAS 38 disclosures consistent with their classification | IFRS 6.25 | [ ] |

**Transitional provisions**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If IFRS 6 applied before 1 January 2006: disclose that fact | IFRS 6.26 | [ ] |
| 2 | If impracticable to apply paragraph 18's impairment-assessment requirement to comparative information before 1 January 2006: disclose that fact | IFRS 6.27 | [ ] |

### IFRS 7 — Financial Instruments: Disclosures

**Categories and statement of financial position**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Group financial instruments into classes suited to the disclosed information, sufficient to reconcile to SOFP line items | IFRS 7.6 | [ ] |
| 2 | Carrying amount of financial assets at FVTPL, split designated, IFRS 9 3.3.5 election, IAS 32 33A election, and mandatorily measured | IFRS 7.8(a) | [ ] |
| 3 | Carrying amount of financial liabilities at FVTPL, split designated vs meeting the held-for-trading definition | IFRS 7.8(e) | [ ] |
| 4 | Carrying amount of financial assets measured at amortised cost | IFRS 7.8(f) | [ ] |
| 5 | Carrying amount of financial liabilities measured at amortised cost | IFRS 7.8(g) | [ ] |
| 6 | Carrying amount of financial assets at FVOCI, split debt instruments (4.1.2A) and equity instruments designated (5.7.5) | IFRS 7.8(h) | [ ] |
| 7 | Disclose in the notes the loss allowance on FVOCI debt instruments (not presented as a reduction of carrying amount in the SOFP) | IFRS 7.16A | [ ] |
| 8 | If an asset is designated FVTPL that would otherwise be FVOCI/amortised cost: maximum credit risk exposure at period end | IFRS 7.9(a) | [ ] |
| 9 | Amount by which related credit derivatives or similar instruments mitigate that maximum exposure | IFRS 7.9(b) | [ ] |
| 10 | Change in fair value of the designated asset attributable to changes in its credit risk, period and cumulative | IFRS 7.9(c) | [ ] |
| 11 | Change in fair value of related credit derivatives/similar instruments, period and cumulative since designation | IFRS 7.9(d) | [ ] |
| 12 | If a liability is designated FVTPL with own-credit-risk effects presented in OCI: cumulative change in fair value attributable to own credit risk | IFRS 7.10(a) | [ ] |
| 13 | Difference between the liability's carrying amount and the contractual amount payable at maturity | IFRS 7.10(b) | [ ] |
| 14 | Transfers of the cumulative gain or loss within equity during the period, including the reason | IFRS 7.10(c) | [ ] |
| 15 | If the liability is derecognised in the period: amount previously in OCI that was realised at derecognition | IFRS 7.10(d) | [ ] |
| 16 | If a liability is designated FVTPL with all fair value changes (including own credit risk) in profit or loss: change in fair value attributable to own credit risk, period and cumulative | IFRS 7.10A(a) | [ ] |
| 17 | Difference between the liability's carrying amount and the contractual amount payable at maturity | IFRS 7.10A(b) | [ ] |
| 18 | Detailed description of the methods used to determine the credit-risk-attributable fair value changes in 9(c)/10(a)/10A(a), and why the method is appropriate | IFRS 7.11(a) | [ ] |
| 19 | If the disclosed amount does not faithfully represent the credit-risk-attributable change: reasons for that conclusion and the relevant factors | IFRS 7.11(b) | [ ] |
| 20 | Description of the methodology used to determine whether OCI presentation of own credit risk creates/enlarges an accounting mismatch; if presented in P&L, description of the economic relationship | IFRS 7.11(c) | [ ] |

**Equity investments designated at fair value through OCI**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If equity investments are designated at FVOCI (5.7.5): which investments have been so designated, by class | IFRS 7.11A(a) | [ ] |
| 2 | Reasons for using the FVOCI presentation alternative | IFRS 7.11A(b) | [ ] |
| 3 | Fair value of the designated investments at period end | IFRS 7.11A(c) | [ ] |
| 4 | Dividends recognised during the period, split between investments derecognised and investments still held | IFRS 7.11A(d) | [ ] |
| 5 | Transfers of the cumulative gain or loss within equity during the period, including the reason | IFRS 7.11A(e) | [ ] |
| 6 | Fair value gain or loss recognised in OCI during the period, split between derecognised and still-held investments | IFRS 7.11A(f) | [ ] |
| 7 | If such investments were derecognised in the period: reasons for disposing of the investments | IFRS 7.11B(a) | [ ] |
| 8 | Fair value of the investments at the date of derecognition | IFRS 7.11B(b) | [ ] |
| 9 | Cumulative gain or loss on disposal | IFRS 7.11B(c) | [ ] |
| 10 | Transfers of cumulative gain or loss within equity related to the investments derecognised in the period | IFRS 7.11B(d) | [ ] |

**Reclassification of financial assets**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If financial assets are reclassified (business model change, IFRS 9 4.4.1): date of reclassification | IFRS 7.12B(a) | [ ] |
| 2 | Detailed explanation of the change in business model and a qualitative description of its effect on the financial statements | IFRS 7.12B(b) | [ ] |
| 3 | Amount reclassified into and out of each category | IFRS 7.12B(c) | [ ] |
| 4 | For assets reclassified out of FVTPL, each period until derecognition: effective interest rate determined at the reclassification date | IFRS 7.12C(a) | [ ] |
| 5 | Interest revenue recognised on those reclassified assets | IFRS 7.12C(b) | [ ] |
| 6 | If financial assets were reclassified since the last annual reporting date (out of FVOCI to amortised cost, or out of FVTPL): fair value at period end | IFRS 7.12D(a) | [ ] |
| 7 | Fair value gain or loss that would have been recognised in P&L or OCI had the assets not been reclassified | IFRS 7.12D(b) | [ ] |

**Offsetting of financial assets and financial liabilities**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Gross amounts of recognised financial assets and financial liabilities subject to set-off/master netting arrangements | IFRS 7.13C(a) | [ ] |
| 2 | Amounts set off under IAS 32.42 in determining the net amounts presented in the SOFP | IFRS 7.13C(b) | [ ] |
| 3 | Net amounts presented in the statement of financial position | IFRS 7.13C(c) | [ ] |
| 4 | Amounts under an enforceable master netting/similar arrangement not otherwise offset, including non-qualifying set-off amounts and financial collateral | IFRS 7.13C(d) | [ ] |
| 5 | Net amount after deducting the 13C(d) amounts from the 13C(c) amounts | IFRS 7.13C(e) | [ ] |
| 6 | Description of the nature of rights of set-off associated with instruments disclosed under 13C(d), including enforceable master netting arrangements | IFRS 7.13E | [ ] |
| 7 | If netting information is presented in more than one note: cross-refer between those notes | IFRS 7.13F | [ ] |
| 8 | Fair value of financial instruments pledged or received as financial collateral disclosed under 13C(d)(ii) | IFRS 7.B48 | [ ] |

**Collateral**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Carrying amount of financial assets pledged as collateral for liabilities or contingent liabilities | IFRS 7.14(a) | [ ] |
| 2 | Terms and conditions relating to the pledge | IFRS 7.14(b) | [ ] |
| 3 | If the entity holds collateral it may sell or repledge absent owner default: fair value of the collateral held | IFRS 7.15(a) | [ ] |
| 4 | Fair value of collateral sold or repledged, and whether there is an obligation to return it | IFRS 7.15(b) | [ ] |
| 5 | Terms and conditions associated with the entity's use of the collateral | IFRS 7.15(c) | [ ] |
| 6 | If assets obtained by taking possession of collateral or calling on other credit enhancements: nature and carrying amount of assets held at period end | IFRS 7.38(a) | [ ] |
| 7 | If those assets are not readily convertible to cash: policies for disposing of them or using them in operations | IFRS 7.38(b) | [ ] |

**Compound instruments, defaults and puttable instruments**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | If a compound instrument has multiple interdependent embedded derivatives: disclose the existence of those features | IFRS 7.17 | [ ] |
| 2 | For loans payable in default at period end: details of defaults on principal, interest, sinking fund or redemption terms | IFRS 7.18(a) | [ ] |
| 3 | Carrying amount of loans payable in default at period end | IFRS 7.18(b) | [ ] |
| 4 | Whether the default was remedied or the loan terms renegotiated before the financial statements were authorised for issue | IFRS 7.18(c) | [ ] |
| 5 | If other loan covenant breaches occurred that permitted accelerated repayment and remain unremedied at period end: disclose the same information as for defaults | IFRS 7.19 | [ ] |
| 6 | For puttable instruments classified as equity: summary quantitative data about the amount classified as equity | IFRS 7.19A(a) | [ ] |
| 7 | Objectives, policies and processes for managing the obligation to repurchase/redeem the instruments, including changes | IFRS 7.19A(b) | [ ] |
| 8 | Expected cash outflow on redemption or repurchase of that class of instrument | IFRS 7.19A(c) | [ ] |
| 9 | How the expected cash outflow on redemption or repurchase was determined | IFRS 7.19A(d) | [ ] |
| 10 | If puttable or pro-rata-share instruments were reclassified between financial liabilities and equity: amount reclassified each way, timing and reason | IFRS 7.19B | [ ] |

**Statement of comprehensive income**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Net gains/losses on FVTPL financial assets/liabilities, split designated vs mandatorily FVTPL; for designated liabilities, split OCI and P&L amounts | IFRS 7.20(a)(i) | [ ] |
| 2 | Net gains/losses on financial liabilities measured at amortised cost | IFRS 7.20(a)(v) | [ ] |
| 3 | Net gains/losses on financial assets measured at amortised cost | IFRS 7.20(a)(vi) | [ ] |
| 4 | Net gains/losses on equity investments designated at FVOCI | IFRS 7.20(a)(vii) | [ ] |
| 5 | Net gains/losses on FVOCI debt instruments, split the OCI amount and the amount reclassified to P&L on derecognition | IFRS 7.20(a)(viii) | [ ] |
| 6 | Total interest revenue and total interest expense (effective interest method) for instruments not at FVTPL, shown separately | IFRS 7.20(b) | [ ] |
| 7 | Fee income and expense (excluding amounts in the effective interest rate) from instruments not at FVTPL and from trust/fiduciary activities | IFRS 7.20(c) | [ ] |
| 8 | Analysis of gain/loss on derecognition of financial assets at amortised cost, gains and losses shown separately, including reasons for derecognition | IFRS 7.20A | [ ] |
| 9 | If contractual cash flows can change on a contingent event unrelated to basic lending risk (e.g. ESG-linked terms), by class: qualitative description of the contingent event | IFRS 7.20C(a) | [ ] |
| 10 | Quantitative information about possible changes to contractual cash flows resulting from those terms | IFRS 7.20C(b) | [ ] |
| 11 | Gross carrying amount of assets, or amortised cost of liabilities, subject to those contractual terms | IFRS 7.20C(c) | [ ] |

**Other disclosures (accounting policies, hedge accounting, fair value)**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Material accounting policy information for financial instruments, including the measurement basis(es) used | IFRS 7.21 | [ ] |
| 2 | Hedge accounting: information about the risk management strategy and how it is applied | IFRS 7.21A(a) | [ ] |
| 3 | Hedge accounting: how hedging activities affect the amount, timing and uncertainty of future cash flows | IFRS 7.21A(b) | [ ] |
| 4 | Hedge accounting: effect on the SOFP, statement of comprehensive income and statement of changes in equity | IFRS 7.21A(c) | [ ] |
| 5 | If a specific risk component is designated as the hedged item: how the component was determined, including its relationship to the item as a whole | IFRS 7.22C(a) | [ ] |
| 6 | How the risk component relates to the item in its entirety | IFRS 7.22C(b) | [ ] |
| 7 | By risk category: breakdown of the timing profile of the nominal amount of hedging instruments | IFRS 7.23B(a) | [ ] |
| 8 | If applicable: average price or rate of the hedging instruments | IFRS 7.23B(b) | [ ] |
| 9 | If the dynamic-hedging (frequent reset) exemption is used: the ultimate risk management strategy for those hedging relationships | IFRS 7.23C(b)(i) | [ ] |
| 10 | Description of how hedge accounting reflects the risk management strategy for those relationships | IFRS 7.23C(b)(ii) | [ ] |
| 11 | Indication of how frequently those hedging relationships are discontinued and restarted | IFRS 7.23C(b)(iii) | [ ] |
| 12 | By risk category: description of sources of hedge ineffectiveness expected to affect the hedging relationship during its term | IFRS 7.23D | [ ] |
| 13 | If other sources of ineffectiveness emerge: disclose those sources by risk category and explain the resulting ineffectiveness | IFRS 7.23E | [ ] |
| 14 | For cash flow hedges: description of any forecast transaction previously hedged that is no longer expected to occur | IFRS 7.23F | [ ] |
| 15 | Tabular disclosure, by risk category and hedge type, of the carrying amount of hedging instruments (assets separate from liabilities) | IFRS 7.24A(a) | [ ] |
| 16 | Line item in the SOFP that includes the hedging instrument | IFRS 7.24A(b) | [ ] |
| 17 | Change in fair value of the hedging instrument used as the basis for recognising hedge ineffectiveness for the period | IFRS 7.24A(c) | [ ] |
| 18 | Nominal amounts (including quantities) of the hedging instruments | IFRS 7.24A(d) | [ ] |
| 19 | Fair value hedges: carrying amount of the hedged item (assets separate from liabilities) | IFRS 7.24B(a)(i) | [ ] |
| 20 | Fair value hedges: accumulated fair value hedge adjustment included in the hedged item's carrying amount | IFRS 7.24B(a)(ii) | [ ] |
| 21 | Fair value hedges: line item in the SOFP that includes the hedged item | IFRS 7.24B(a)(iii) | [ ] |
| 22 | Fair value hedges: change in value of the hedged item used as the basis for recognising hedge ineffectiveness | IFRS 7.24B(a)(iv) | [ ] |
| 23 | Fair value hedges: accumulated fair value hedge adjustment remaining for hedged items that ceased to be adjusted | IFRS 7.24B(a)(v) | [ ] |
| 24 | Cash flow/net investment hedges: change in value of the hedged item used as the basis for hedge ineffectiveness | IFRS 7.24B(b)(i) | [ ] |
| 25 | Cash flow/net investment hedges: balances in the cash flow hedge reserve and FX translation reserve for continuing hedges | IFRS 7.24B(b)(ii) | [ ] |
| 26 | Cash flow/net investment hedges: balances remaining in those reserves from hedges no longer applying hedge accounting | IFRS 7.24B(b)(iii) | [ ] |
| 27 | Fair value hedges: hedge ineffectiveness recognised in P&L (or OCI for certain equity hedges) | IFRS 7.24C(a)(i) | [ ] |
| 28 | Fair value hedges: line item in the statement of comprehensive income that includes the recognised ineffectiveness | IFRS 7.24C(a)(ii) | [ ] |
| 29 | Cash flow/net investment hedges: hedging gains/losses of the period recognised in OCI | IFRS 7.24C(b)(i) | [ ] |
| 30 | Cash flow/net investment hedges: hedge ineffectiveness recognised in P&L | IFRS 7.24C(b)(ii) | [ ] |
| 31 | Cash flow/net investment hedges: line item that includes the recognised ineffectiveness | IFRS 7.24C(b)(iii) | [ ] |
| 32 | Cash flow/net investment hedges: amount reclassified from reserve to P&L, differentiating no-longer-expected transactions from those affecting P&L | IFRS 7.24C(b)(iv) | [ ] |
| 33 | Cash flow/net investment hedges: line item that includes the reclassification adjustment | IFRS 7.24C(b)(v) | [ ] |
| 34 | For hedges of net positions: hedging gains/losses recognised in a separate line item | IFRS 7.24C(b)(vi) | [ ] |
| 35 | If the frequently-reset-hedges exemption is used and the period-end volume is unrepresentative: disclose that fact and the reason | IFRS 7.24D | [ ] |
| 36 | Reconciliation of each equity component/OCI analysis differentiating amounts per 24C(b)(i)/(iv) and IFRS 9 6.5.11(d)(i)/(iii) | IFRS 7.24E(a) | [ ] |
| 37 | Differentiate amounts for the time value of options between transaction-related and time-period-related hedged items | IFRS 7.24E(b) | [ ] |
| 38 | Differentiate amounts for forward elements/FX basis spreads between transaction-related and time-period-related hedged items | IFRS 7.24E(c) | [ ] |
| 39 | Provide the 24E information separately by risk category | IFRS 7.24F | [ ] |
| 40 | If an instrument is designated FVTPL because a credit derivative manages its credit risk: reconciliation of the nominal amount and fair value of the credit derivative, beginning to end of period | IFRS 7.24G(a) | [ ] |
| 41 | Gain or loss recognised in P&L on designating the instrument as FVTPL | IFRS 7.24G(b) | [ ] |
| 42 | On discontinuing FVTPL measurement: the instrument's fair value becoming its new carrying amount, and the related nominal/principal amount | IFRS 7.24G(c) | [ ] |
| 43 | For hedges applying the IBOR-reform exceptions: the significant interest rate benchmarks to which hedges are exposed | IFRS 7.24H(a) | [ ] |
| 44 | Extent of risk exposure directly affected by the benchmark reform | IFRS 7.24H(b) | [ ] |
| 45 | How the entity is managing the transition to alternative benchmark rates | IFRS 7.24H(c) | [ ] |
| 46 | Significant assumptions or judgements made in applying the IBOR exceptions | IFRS 7.24H(d) | [ ] |
| 47 | Nominal amount of the hedging instruments in those hedging relationships | IFRS 7.24H(e) | [ ] |
| 48 | Nature and extent of risks from instruments subject to IBOR reform and how they are managed | IFRS 7.24J(a) | [ ] |
| 49 | Disaggregated by benchmark: quantitative information on instruments yet to transition, split non-derivative assets, non-derivative liabilities and derivatives | IFRS 7.24J(b) | [ ] |
| 50 | If IBOR-reform risks changed the entity's risk management strategy: description of those changes | IFRS 7.24J(c) | [ ] |
| 51 | Fair value of each class of financial assets/liabilities, presented comparably with carrying amount (except as exempted by para 29) | IFRS 7.25 | [ ] |
| 52 | If no gain/loss is recognised at initial recognition because fair value is not evidenced by a Level 1 input or an observable-only valuation technique: accounting policy for recognising the day-one difference in P&L | IFRS 7.28(a) | [ ] |
| 53 | Aggregate unrecognised day-one difference at the beginning and end of the period, and a reconciliation of changes | IFRS 7.28(b) | [ ] |
| 54 | Why the transaction price was not the best evidence of fair value, including supporting evidence | IFRS 7.28(c) | [ ] |

**Contracts referencing nature-dependent electricity**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Information about contractual features exposing the entity to variability in the underlying electricity amount | IFRS 7.30A(a)(i) | [ ] |
| 2 | Information about the risk of being required to buy electricity during a delivery interval the entity cannot use | IFRS 7.30A(a)(ii) | [ ] |
| 3 | Estimated future cash flows from buying electricity under such contracts, by appropriate time bands | IFRS 7.30A(b)(i) | [ ] |
| 4 | Qualitative information about how the entity assesses whether such a contract might become onerous | IFRS 7.30A(b)(ii) | [ ] |
| 5 | Costs from electricity purchases under the contracts, separately showing electricity unused at time of delivery | IFRS 7.30A(c)(i) | [ ] |
| 6 | Proceeds from sales of unused electricity | IFRS 7.30A(c)(ii) | [ ] |
| 7 | Costs from electricity purchases made to offset sales of unused electricity | IFRS 7.30A(c)(iii) | [ ] |
| 8 | Disaggregate by risk category, for these contracts, the hedging-instrument terms/conditions information required by paragraph 23A | IFRS 7.30B | [ ] |
| 9 | If information on such contracts also appears in other notes: cross-reference those notes in the single required note | IFRS 7.30C | [ ] |

**Nature and extent of risks — general**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | For each type of risk arising from financial instruments: the exposures to risk and how they arise | IFRS 7.33(a) | [ ] |
| 2 | Objectives, policies and processes for managing the risk and the methods used to measure it | IFRS 7.33(b) | [ ] |
| 3 | Changes in the exposures or the management objectives/policies/processes from the previous period | IFRS 7.33(c) | [ ] |
| 4 | Summary quantitative data about exposure to each risk at period end, based on information given internally to key management personnel | IFRS 7.34(a) | [ ] |
| 5 | Concentrations of risk if not apparent from the data given under 34(a)/(b) | IFRS 7.34(c) | [ ] |
| 6 | If the quantitative risk data at period end is unrepresentative of exposure during the period: provide further representative information | IFRS 7.35 | [ ] |

**Nature and extent of risks — credit risk**

| # | Disclosure Requirement | Paragraph Ref | Y / N / N/A |
|---|---|---|---|
| 1 | Information about credit risk management practices and how they relate to recognition/measurement of ECL, including methods, assumptions and information used | IFRS 7.35B(a) | [ ] |
| 2 | Quantitative/qualitative information allowing evaluation of ECL amounts in the financial statements, including changes and reasons | IFRS 7.35B(b) | [ ] |
| 3 | Information about credit risk exposure, including significant credit risk concentrations | IFRS 7.35B(c) | [ ] |
| 4 | How significant increases in credit risk since initial recognition are determined, including use of the low-credit-risk simplification (5.5.10) | IFRS 7.35F(a)(i) | [ ] |
| 5 | If and how the 30-days-past-due rebuttable presumption (5.5.11) has been rebutted | IFRS 7.35F(a)(ii) | [ ] |
| 6 | Entity's definitions of default and the reasons for selecting them | IFRS 7.35F(b) | [ ] |
| 7 | How instruments were grouped when ECL is measured on a collective basis | IFRS 7.35F(c) | [ ] |
| 8 | How the entity determines that a financial asset is credit-impaired | IFRS 7.35F(d) | [ ] |
| 9 | Write-off policy, including indicators of no reasonable expectation of recovery and policy for written-off assets still subject to enforcement | IFRS 7.35F(e) | [ ] |
| 10 | How the entity determines whether credit risk on a modified financial asset has improved enough to revert to 12-month ECL | IFRS 7.35F(f)(i) | [ ] |
| 11 | How the entity monitors the extent to which loss allowances subsequently revert to lifetime ECL | IFRS 7.35F(f)(ii) | [ ] |
| 12 | Basis of inputs, assumptions and estimation techniques used to measure 12-month and lifetime ECL | IFRS 7.35G(a)(i) | [ ] |
| 13 | Basis used to determine whether credit risk has increased significantly since initial recognition | IFRS 7.35G(a)(ii) | [ ] |
| 14 | Basis used to determine whether a financial asset is credit-impaired | IFRS 7.35G(a)(iii) | [ ] |
| 15 | How forward-looking information, including macroeconomic information, was incorporated into the determination of ECL | IFRS 7.35G(b) | [ ] |
| 16 | Changes in estimation techniques or significant assumptions during the period and the reasons for those changes | IFRS 7.35G(c) | [ ] |
| 17 | Reconciliation from opening to closing loss allowance, by class, for the 12-month ECL stage | IFRS 7.35H(a) | [ ] |
| 18 | Reconciliation of the lifetime-ECL stage for instruments with a significant credit risk increase that are not credit-impaired | IFRS 7.35H(b)(i) | [ ] |
| 19 | Reconciliation of the lifetime-ECL stage for credit-impaired assets that are not purchased or originated credit-impaired | IFRS 7.35H(b)(ii) | [ ] |
| 20 | Reconciliation of the lifetime-ECL stage for trade receivables/contract assets/lease receivables under the simplified approach (5.5.15) | IFRS 7.35H(b)(iii) | [ ] |
| 21 | Reconciliation for purchased or originated credit-impaired assets, plus total undiscounted ECL at initial recognition on such assets originated in the period | IFRS 7.35H(c) | [ ] |
| 22 | Explanation of how significant changes in gross carrying amount during the period contributed to changes in the loss allowance, by 35H stage | IFRS 7.35I | [ ] |
| 23 | If contractual cash flows were modified without derecognition while the loss allowance was lifetime-ECL: amortised cost before modification and net modification gain/loss | IFRS 7.35J(a) | [ ] |
| 24 | Gross carrying amount at period end of assets modified since initial recognition (while lifetime ECL) whose allowance has reverted to 12-month ECL | IFRS 7.35J(b) | [ ] |
| 25 | Maximum exposure to credit risk at period end without taking account of collateral/credit enhancements, by class | IFRS 7.35K(a) | [ ] |
| 26 | Narrative description of collateral held and other credit enhancements, including nature and quality | IFRS 7.

# Feature Review

Reviewing software that produces accounting figures, and reporting what is wrong with
it in language a developer can act on.

This is **not** an audit. `compliance-templates.md` reviews financial statements; this
reviews the software that produces them. Nothing here is assurance, an opinion, or
advice on an accounting policy.

**Cost.** A review runs several agents in parallel where the host supports them — one
per standard the feature touches, plus one verification agent per blocking finding.
Say so before starting, and give the count.

---

## 1. Refuse to start without both inputs

| Required | Why |
|---|---|
| **The implementation** — the files or directory that produce the figure | What the code intends |
| **One real generated output** — an actual balance sheet, invoice, report or posting | What it actually produced |

Code alone shows intent. A review that reads code and pronounces it correct is guessing
at the output rather than looking at it. If only one is offered, ask for the other and
do not proceed. If no output can be produced because the feature does not run, that is
itself the finding, and the only one.

Also establish the **reporting period end**. It decides which presentation rules apply
(see step 6).

---

## 2. Locate

Do not read the whole codebase. Find only the files where money is calculated, stored,
or rendered — typically far fewer than expected.

Search for: monetary field names (`amount`, `total`, `net`, `gross`, `tax`, `price`,
`balance`), decimal or money types, currency codes, anything named for a financial
statement or its line items, and the report generation path itself.

Everything after this step reads only the located files. Report how many files were
located out of how many exist; a reader needs to know what was and was not looked at.

---

## 3. Trigger map

Match what the located code contains against this table. It gives the standards to
check, and their sections in `standards-reference.md`. **The number of standards it
returns is the number of review agents to run** — never a fixed number.

| The code contains… | Check | Section |
|---|---|---|
| Invoices, receivables, an AR table | IFRS 15, IFRS 9 | *IFRS 15*, *IFRS 9 Part B* |
| A revenue, bookings or earnings figure | IFRS 15 | *IFRS 15* |
| Subscriptions, plans, deferred or unearned revenue | IFRS 15 | *IFRS 15* |
| Milestones, delivery, fulfilment, `shipped_at`, `delivered_at` | IFRS 15 | *IFRS 15* |
| Discounts, refunds, credit notes, returns, rebates | IFRS 15 | *IFRS 15* |
| Sales tax or VAT fields on amounts | IFRS 15 | *IFRS 15* |
| Payment terms longer than twelve months | IFRS 15, IFRS 9 | *IFRS 15*, *IFRS 9 Part A* |
| An allowance, provision, bad-debt or write-off field | IFRS 9 | *IFRS 9 Part B* |
| Ageing buckets, `days_overdue`, dunning logic | IFRS 9 | *IFRS 9 Part B* |
| Loans, advances, deposits, accrued interest | IFRS 9 | *IFRS 9 Parts A, B* |
| Any receivable with **no** allowance anywhere near it | IFRS 9 | *IFRS 9 Part B* |
| A balance sheet or statement-of-financial-position renderer | IAS 1 **and** IFRS 18 | *IAS 1*, *IFRS 18* |
| A P&L or income statement renderer | IAS 1 **and** IFRS 18 | *IAS 1*, *IFRS 18* |
| Hard-coded line-item names, ordering, subtotals or totals | IFRS 18 | *IFRS 18* |
| A management-defined or non-GAAP metric on a statement | IFRS 18 | *IFRS 18* |
| A currency field, `fx_rate`, exchange conversion | IAS 21 | *IAS 21* |
| Balances held in more than one currency | IAS 21 | *IAS 21* |
| A reporting currency distinct from a transaction currency | IAS 21 | *IAS 21* |
| Leases, rentals, hire agreements, right-of-use terms | IFRS 16 | *IFRS 16* |
| A cash flow statement | IAS 7 | *IAS 7* |
| A cash-equivalents or short-term-investment classification | IAS 7 | *IAS 7* |

**Covered standards are these six only.** Where the code touches anything else —
inventory, share-based payment, insurance, tax provisioning — say so explicitly in the
output as unchecked. Never review it, and never stay silent about it. Silence reads as
approval.

---

## 4. Review — one agent per standard

Run these in parallel where the host supports it, sequentially where it does not. The
findings are identical either way; only the speed differs. Say in the output which
happened.

At most **six** review agents — one per covered standard, with IAS 1 and IFRS 18 sharing
one. Never split a standard across two agents: two agents on the same standard produce the
same finding twice.

Each agent gets: the located files, one section of `standards-reference.md`, the sample
output, the period end. Each returns findings in the schema below, and returns
`Conforms` explicitly when it finds nothing — an agent that reports nothing is
indistinguishable from an agent that failed.

---

## 5. Verify — blocking findings only

Every finding marked **Blocking** goes to a fresh agent whose job is to disprove it. It
re-reads the code and asks: is this actually absent, or did the reviewer miss where it
happens? Is the figure actually wrong, or does something downstream correct it?

A blocking finding that survives is reported. One that does not is either downgraded or
dropped, with the reason. **Needs work** and **Conforms** findings are not verified —
the cost of a wrong "needs work" is a shrug, not a halted release.

This roughly doubles the token cost of a review. It buys a verdict that can stop a
release without being wrong.

---

## 6. The 2027 boundary — always checked

IFRS 18 replaces IAS 1 for periods beginning on or after **1 January 2027** and changes
what financial statements must show. Anything built today is still running then.

Any feature that renders a financial statement is checked against **both**. Where it
works now but breaks later, that is its own finding, severity **Needs work**, never
Blocking. `SKILL.md` §4 carries the full before-and-after table; read it there rather
than restating it.

Phrase it as a date, not a standard: *"This is fine under the rules in force now. They
change on 1 January 2027, and this will need X. Not urgent — cheaper now than later."*

---

## 7. Classifying a finding

Every finding carries exactly one **Class** and one **Severity**.

| Class | The defect is | Who fixes it |
|---|---|---|
| **Non-compliant** | A requirement is broken | Accounting logic |
| **Wrong** | Approach is permitted, figures or timing come out incorrect | Calculation |
| **Incomplete** | Figures right, data for a required disclosure never captured | Data model |
| **Untraceable** | Figures right and complete, no evidence trail | Logging, audit trail |

| Severity | Means |
|---|---|
| **Blocking** | A figure reaching the financial statements is wrong today, or a required figure is absent today. Verified in step 5. |
| **Needs work** | The figures are right today, and will be wrong or unsupportable under conditions that will occur |
| **Conforms** | Checked, nothing found. Stated explicitly. |

**Class and Severity are independent.** Class says what kind of defect it is and who
fixes it; Severity says whether it stops a release. A broken requirement whose figures
happen to be right today is **Non-compliant / Needs work** — the requirement is still
broken, but nothing on today's statement is wrong yet. Never read one off the other.

**The verdict is arithmetic: any Blocking finding means not ready.** It is never a
judgement call, and never a business recommendation.

---

## 8. Writing a finding

The reader is a developer or product manager. Technical, not an accountant. They do not
know what a standard is and will not look one up.

| Rule | |
|---|---|
| **No standard numbers in the body** | They mean nothing to the reader. The evidence line carries them. |
| **Define every accounting term at first use** | Every time. Do not assume a previous finding taught it. |
| **Name the file and function** | A finding without a location is not actionable. |
| **Quantify from the sample output** | "Overstates receivables by 9,600.00" beats "overstates receivables". |
| **Group, never enumerate** | The same defect in eleven places is one finding that lists eleven places. |
| **State the requirement, never the policy** | "An allowance is required and there is none" is the finding. "Use 2%" is not yours to say. |

### Shape

```
**<What is wrong, in one plain sentence.>**

<Why it matters, in the reader's language. What the rules require, what the code
does instead, and what it does to the numbers — with figures from the sample output.>

**Fix:** <what to change in the code or data model.>

**In practice — how finance teams usually handle this. Not a requirement.**
<What teams typically do. Optional. Omitted where there is nothing useful to say.>

<sub>Source: IFRS 9.5.5.15</sub>
```

The **In practice** block is the only uncited content permitted anywhere in this skill,
and its heading is fixed and never varied — see `docs/adr/0001-uncited-practice-notes.md`.
It describes convention, never obligation. If a sentence in it could be read as "you
must", it belongs above the line with a citation, or not at all.

The **evidence line** closes every finding and is the only place a standard is named. It
carries one paragraph reference per rule in force — normally one, and two for a finding that
spans the 2027 boundary, where the rule that applies now and the rule that replaces it are
both named. A reader ignores it; their accountant does not.

---

## 9. Output

````
## IFRS feature review — <feature>

**<Ready | Not ready>.** <n> blocking, <n> need work, <n> conform.

Reviewed <n> of <n> files, against <standards>. <Parallel across n agents |
Run sequentially.> Period end <date>.
Not checked: <standards outside the covered six that this feature touches>.

| # | Finding | Class | Severity |
|---|---|---|---|
| 1 | <one line> | <class> | **Blocking** |

---

### 1. <Finding title>

<the shape from §8>
````

Verdict first, table second, detail third. A product manager reads the first eight
lines and knows what to do. A developer reads the rest.

---

## 10. Never

- Recommend a rate, an estimate, a percentage, an ageing band or a policy choice.
- Give a business recommendation, or a verdict not derived arithmetically from severity.
- Review a standard outside the covered six, or stay silent about one that was touched.
- Report a blocking finding that did not survive step 5.
- Put a standard number in the body of a finding.
- Present an **In practice** note as a requirement, or a requirement as practice.
- Narrow scope silently to fit a context window. Say what was skipped, or do not skip it.

---
name: ifrs
description: Use when answering questions about IFRS standards, IAS standards, IASB, financial reporting, revenue recognition, lease accounting, impairment, financial instruments, expected credit loss, ECL, hedge accounting, consolidation, business combinations, fair value measurement, first-time adoption, deferred tax, Pillar Two, provisions, insurance contracts, hyperinflation, journal entries, disclosure requirements, IFRS compliance checks, audit support, GAAP differences, goodwill, IFRS 18, IFRS 19, IFRS 20, presentation and disclosure, management-defined performance measures, MPM, IFRS S1, IFRS S2, sustainability disclosure, ISSB, IFRIC, SIC, agenda decision, IFRS for SMEs, Conceptual Framework, EU endorsement, transitioning from local GAAP to IFRS, or reviewing whether a feature, codebase or system produces correct accounting figures — feature review, implementation review, does this code handle revenue correctly, is this implementation IFRS-compliant.
---

# IFRS

Comprehensive IFRS guidance, compliance support, and GAAP-to-IFRS transition assistance covering all current IFRS and IAS standards, interpretations, and sustainability disclosure standards.

## Decision Flow

### 1. Detect Task Type and Load Files

- **Guidance question** — Read `standards-reference.md` for the relevant standard(s)
- **Multi-step calculation or journal entries** — Read `workflows.md`; add `standards-reference.md` for the underlying requirements
- **Compliance/audit task** — Read `compliance-templates.md` + `standards-reference.md`
- **Reviewing an implementation** — a repository, a directory, or a report produced by a system — Read `feature-review.md`
- **Transition task** — Read `transition-guide.md` + `standards-reference.md`
- **Interpretations / agenda decisions** — Read the IFRIC and SIC section of `standards-reference.md`
- **Effective dates, amendments, endorsement status** — Read the amendment register at the end of `standards-reference.md`
- **Sustainability (IFRS S1/S2, ISSB)** — Read the sustainability section of `standards-reference.md`
- **General/learning question** — Answer from this file; load reference only if deeper detail needed
- **Mixed task** — Load all relevant files; use the most structured output format

**Which review?** `compliance-templates.md` reviews **financial statements**. `feature-review.md` reviews **the software that produces them**. The discriminator is whether code or a system is involved, not whether the user said "compliance".

### 2. Detect Audience

- **Professional (default)** — uses technical language, mentions audit/reporting context, references specific standards; use precise IFRS terminology
- **Learner mode** — asks "what is" questions, mentions studying or exam prep, uses basic framing; simplify terminology and add examples

### 3. Citation Rules

- **Professional:** Cite as `IFRS 15.35(c)`, `IAS 36.12`. Group at end of paragraph.
- **Learner:** No citations unless asked. Offer references for deeper study.
- A citation marked `[para-unconfirmed]` means the standard is right but the paragraph was not verified against the standard's own text — reproduce that marker; never silently upgrade it to a bare citation.
- Basis for Conclusions paragraphs are normally cited as **pointers only** — the BC text itself is not in this skill. State what a BC paragraph says **only** where an accessible source quotes it (an IFRIC agenda decision, an effect analysis, a feedback statement), and attribute it to that source. Never characterise a BC paragraph from memory.

### 4. Which Standard Applies — Check the Date First

Several answers changed for periods beginning on or after **1 January 2027**. Establish the entity's reporting period before answering, and give both positions where the period is unclear.

| Topic | Periods before 1 Jan 2027 | Periods from 1 Jan 2027 (or earlier if IFRS 18 adopted early) |
|---|---|---|
| Presentation of financial statements | IAS 1 | **IFRS 18** (supersedes IAS 1) |
| Going concern | IAS 1.25–26 | **IAS 8.6K–6L** |
| Critical judgements | IAS 1.122 | **IAS 8.27G** |
| Estimation uncertainty | IAS 1.125–133 | **IAS 8.31A–31I** |
| Material accounting policy information | IAS 1.117 | **IAS 8.27A** |
| Title of IAS 8 | *Accounting Policies, Changes in Accounting Estimates and Errors* | ***Basis of Preparation of Financial Statements*** |

**IFRS 19** is elective, never mandatory: `IFRS 19.A1` says an eligible subsidiary **may elect** to apply it for periods beginning on or after 1 January 2027 — that is when the election becomes available, not a deadline. Contrast `IFRS 18.C1`, "an entity **shall** apply".

### 5. Select Output Format

| Task Type | Format |
|---|---|
| compliance-audit | Structured checklist or table; cite paragraph references |
| guidance / technical | Cited narrative; include standard number and paragraph |
| calculation / entries | Numbered steps, worked figures, complete Dr/Cr entries that balance |
| transition | Step-by-step with before/after comparison |
| general-learning | Conversational; analogies welcome; cite standards lightly |

### 6. Verify Currency

Content is current as at **28 August 2026**. Use web search to confirm effective dates, amendment status, or jurisdiction timelines — and always when users ask about "latest", "current", or "most recent" requirements. Do not rely on training data for these.

Two standing caveats:
- **IFRS 20** *Regulatory Assets and Regulatory Liabilities* (issued 27 May 2026, effective 1 January 2029) is covered at status level only; its paragraph text was not available. IFRS 14 applies until an entity adopts it.
- **EU-adopted IFRS is not the same as IFRS as issued by the IASB.** An unendorsed standard cannot be applied in the EU. Check the amendment register's endorsement column before advising an EU or UK preparer.

Note: IFRS adoption varies by jurisdiction; some countries apply IFRS with local modifications.

---

## Supporting Files

| File | Purpose |
|---|---|
| `standards-reference.md` | Standard-by-standard detail, IFRIC/SIC interpretations and agenda decisions, sustainability standards, and the amendment and effective-date register |
| `workflows.md` | Multi-step procedures with worked examples and journal entries (ECL, leases, CSM roll-forward, goodwill impairment, diluted EPS, IFRS 18 categorisation) |
| `compliance-templates.md` | Per-standard disclosure checklists with paragraph references, plus materiality, going-concern, interim, first-time-adoption, MPM and audit-response templates |
| `feature-review.md` | Reviewing software that produces accounting figures: the locate-and-fan-out procedure, the code-artefact-to-standard trigger map, finding classes and severities, and the plain-English output template |
| `transition-guide.md` | First-time adoption, IFRS 1 exemptions and exceptions, US GAAP and local GAAP difference matrices, and transition to IFRS 18 |

*This skill provides technical guidance but does not replace professional judgment. Consult qualified professionals for specific accounting decisions.*

# IFRS Standards Reference

## How to Use This File

Search for the specific standard number (e.g. "IFRS 15" or "IAS 36") rather than reading the entire file. Each standard follows a consistent format: **Scope**, **Status and amendments**, **Core principle**, **Key rules**, **Disclosure requirements**, **Common pitfalls** and **Related standards**.

The file runs IFRS 1–20, then IAS 1–41, then the IFRIC and SIC Interpretations, then the IFRS Interpretations Committee agenda decisions, then material adjacent to IFRS Accounting Standards (the Conceptual Framework, the ISSB Standards, the IFRS for SMEs and the jurisdictional adoption map), and closes with the amendment and effective-date register. **Currency date: 28 August 2026.** Where a requirement changes on 1 January 2027 because of IFRS 18, both the current and the post-2027 position are given.

---

## IFRS 1 — First-time Adoption of International Financial Reporting Standards

**Scope:** Applies to an entity preparing its first IFRS financial statements — i.e., the first annual financial statements in which the entity explicitly and unreservedly states compliance with IFRS. Also applies to interim financial reports presented under IAS 34 that cover part of the period covered by those first IFRS financial statements. Does not apply to entities that previously applied IFRS, discontinued, and are resuming (unless the gap was less than one full annual period).

**Status and amendments:** Issued June 2003 (revised and reissued November 2008); effective for an entity's first IFRS financial statements. Amendments relevant now:
- *Annual Improvements to IFRS Accounting Standards—Volume 11* — issued 18 July 2024; amended IFRS 1 paragraphs **B5–B6** (hedge accounting by a first-time adopter); effective for annual reporting periods beginning on or after **1 January 2026**; earlier application permitted. EU-endorsed 9 July 2025, OJ 10 July 2025, EU effective 1 January 2026; UK adopted 11 February 2025.
- *IFRS 18* (issued 9 April 2024) amended IFRS 1 paragraphs **1, 3, 4, 4A, 5, 22, 32, D30, E2**, amended Appendix A and added paragraph **32(za)**; applied when IFRS 18 is applied — annual periods beginning on or after **1 January 2027**, earlier application permitted. EU-endorsed 13 February 2026, OJ 16 February 2026.
- *Annual Improvements 2018–2020* — issued May 2020; amended D1(f) and added **D13A**; effective 1 January 2022.
- **IFRS 20** *Regulatory Assets and Regulatory Liabilities* (issued 27 May 2026, effective 1 January 2029) is **not** referenced in the current IFRS 1 text, which pre-dates it. First-time adopters after 2029 should not assume a dedicated exemption exists. [status-unconfirmed for post-May-2026 text]

**Core principle:** A first-time adopter must prepare an opening IFRS statement of financial position at the date of transition (the beginning of the earliest comparative period presented) and, in general, apply all IFRS effective at the end of its first IFRS reporting period retrospectively to that opening balance sheet.

**Key rules:**
- **Date of transition:** The beginning of the earliest comparative period presented in the first IFRS financial statements. For example, if the first IFRS financial statements cover the year ended 31 December 2025 with one comparative year, the transition date is 1 January 2024.
- **Estimates — in the body, not Appendix B (IFRS 1.14–17):** IFRS estimates at the transition date must be **consistent** with estimates made under previous GAAP at that date, unless there is objective evidence of error. IFRS 1.17 extends the same rule to the **comparative period**. Information received after the transition date about a previous-GAAP estimate is treated as a **non-adjusting event** under IAS 10 (IFRS 1.15). This is not one of the Appendix B mandatory exceptions, and treating it as one hides the extension to comparatives.
- **Mandatory exceptions — Appendix B (IFRS 1.B1), retrospective application prohibited:**
  - (a) Derecognition of financial assets and liabilities (B2–B3) — items derecognised under previous GAAP before the transition date are generally not reinstated
  - (b) Hedge accounting (B4–B6) — relationships that did not qualify under IFRS 9 cannot be retrospectively designated
  - (c) Non-controlling interests (B7) — specific requirements under IFRS 10
  - (d) Classification and measurement of financial assets (B8–B8C) — assessed on facts and circumstances **at the transition date**; where assessing a modified time-value-of-money element under IFRS 9.B4.1.9B–B4.1.9D is impracticable, the entity assesses the contractual cash flow characteristics at transition date ignoring the modified-time-value requirements (B8A)
  - (e) Impairment of financial assets (B8D–B8G) — a distinct category from (d)
  - (f) Embedded derivatives (B9)
  - (g) Government loans (B10–B12)
  - Insurance contracts (B13) — apply IFRS 17 Appendix C paragraphs C1–C24 and C28, reading the IFRS 17 transition date as the IFRS 1 date of transition. **This is a mandatory exception, not an elective exemption.**
  - **Deferred tax related to leases and decommissioning, restoration and similar liabilities (B14)** — the IAS 12.15/24 initial recognition exemption does **not** shelter these; the temporary differences must be grossed up at the transition date
- **Business combinations — Appendix C (C1–C5), elective and separate from Appendix D:** an entity may elect not to restate combinations before the transition date. Two features preparers miss: restating any one combination forces restatement of **all later combinations** and application of IFRS 10 from that same date (C1); and the exemption extends to past acquisitions of **associates, joint ventures and joint operations that are businesses**, with the same cut-off date (C5).
- **Optional exemptions from other IFRSs — Appendix D (D1).** The full list is (a) share-based payment; (c) deemed cost; (d) leases; (f) cumulative translation differences; (g) investments in subsidiaries, JVs and associates; (h) assets and liabilities of subsidiaries, associates and JVs; (i) compound financial instruments; (j) designation of previously recognised financial instruments; (k) fair value measurement at initial recognition; (l) decommissioning liabilities in PP&E cost; (m) IFRIC 12 service concession assets; (n) borrowing costs; (p) extinguishing financial liabilities with equity instruments; (q) severe hyperinflation; (r) joint arrangements; (s) stripping costs; (t) designation of contracts to buy or sell a non-financial item; (u) revenue; (v) foreign currency transactions and advance consideration. **Items (b), (e) and (o) are deleted** — the old employee-benefits/corridor and cumulative-actuarial-gains exemptions no longer exist. **IFRS 1.D1 closes with an anti-analogy clause**: the exemptions must not be applied by analogy to other items (repeated at IFRS 1.18). The most-used elections:
  - Deemed cost — fair value, a revaluation, or a previous GAAP carrying amount as deemed cost for PP&E, investment property (if using the cost model), or intangible assets at the transition date
  - Leases — apply IFRS 16 at the transition date without restating comparatives (modified retrospective approach)
  - Cumulative translation differences — reset cumulative FX differences to zero at the transition date
  - Share-based payments — need not apply IFRS 2 to equity instruments granted before 7 November 2002, or vested before the transition date
  - Designation of previously recognised financial instruments — designate financial assets/liabilities at FVTPL, or equity instruments at FVOCI, at the transition date
- **Resuming adopters (IFRS 1.4A–4B, 23A–23B):** an entity that previously applied IFRS but whose most recent annual financial statements lacked an explicit and unreserved compliance statement must **either** apply IFRS 1 **or** apply IFRS retrospectively under IAS 8 as if it had never stopped. Either way it discloses why it stopped and why it is resuming (23A); if it elects the IAS 8 route it also explains that election (23B). IFRS 19 preparers substitute IFRS 19.22–23 and 173–187.
- **Minimum set of statements (IFRS 1.21):** three statements of financial position, two statements of profit or loss and OCI, two separate statements of profit or loss (if presented), two statements of cash flows and two statements of changes in equity, with related notes.
- **Interim reports from 2027 (IFRS 1.32(za), added by IFRS 18):** in an interim report under IAS 34 covering part of the first IFRS period, the entity must present **every heading it expects to use under IFRS 18 and the subtotals required by IFRS 18.69–74**, notwithstanding IAS 34.10. The IAS 34.10 relief for condensed statements becomes available only *after* the first IFRS financial statements have been issued.
- **Reconciliations required:**
  - Equity at transition date and at the end of the last period under previous GAAP
  - Total comprehensive income for the last period under previous GAAP
  - Cash flows if material differences exist
- **Impairment:** Must apply IAS 36 impairment indicators at the transition date; any resulting impairment is recognised in retained earnings or OCI as appropriate.

**Disclosure requirements:**
- Explanation of how the transition affected financial position, financial performance, and cash flows
- Reconciliation of equity (transition date and end of last previous GAAP period)
- Reconciliation of total comprehensive income for the last period
- Explanation of material adjustments to the cash flow statement
- If the entity recognised or reversed impairment losses for the first time, the disclosures required by IAS 36
- For deemed cost elections: aggregate of fair values used and aggregate adjustment to carrying amounts
- Description of each voluntary exemption applied and the basis

**Common pitfalls:**
- Failing to identify the correct transition date, particularly where comparative periods extend further back than expected
- Applying estimates with hindsight — IFRS 1 prohibits using information available after the transition date to revise estimates
- Overlooking mandatory exceptions while focusing on elective exemptions
- Inconsistent application of opening balance sheet adjustments between equity reconciliation and the actual opening balance sheet
- Not restating deferred tax for all temporary differences arising on transition
- Misclassifying financial instruments by applying IFRS 9 criteria based on current facts rather than facts at transition date

- Treating the estimates rule as permitting a fresh estimate at the transition date. IFRS 1.14 requires consistency with the previous-GAAP estimate for the same date unless there is objective evidence of error; later information is a non-adjusting event
- Restating one attractive historical business combination without appreciating the IFRS 1.C1 cascade — every later combination must be restated and IFRS 10 applied from that date
- Cherry-picking Appendix D by analogy for items not on the D1 list (prohibited by D1 and 18)
- Missing IFRS 1.B14 and leaving lease and decommissioning temporary differences ungrossed at the transition date, on the mistaken view that the IAS 12.15/24 initial recognition exemption applies
- Looking for an employee-benefits/corridor exemption in Appendix D — D1(b), (e) and (o) are deleted and it no longer exists
- Treating the insurance contracts item as an elective exemption; it is a mandatory exception at IFRS 1.B13
- From 2027, presenting first-year interim reports without the full IFRS 18 heading and subtotal structure required by IFRS 1.32(za)

**Related standards:** IFRS 3 (business combinations — the Appendix C exemption), IFRS 9 (classification and measurement at transition; B8–B8C), IFRS 16 (lease transition), IFRS 17 (insurance contracts — the mandatory exception at B13), IFRS 18 (interim presentation from 2027; IFRS 1.32(za)), IFRS 19 (reduced disclosures for eligible subsidiaries; IFRS 19.17–19), IAS 10 (post-transition information about a previous-GAAP estimate is non-adjusting), IAS 12 (deferred tax on transition adjustments; the B14 exception), IAS 21 (FX translation differences exemption), IAS 34 (first-year interim reports), IAS 36 (impairment at transition), IAS 38 (intangibles deemed cost), IFRIC 12 (service concession assets exemption)

---

## IFRS 2 — Share-based Payment

**Scope:** Applies to all share-based payment transactions in which an entity receives goods or services, including:
- Equity-settled share-based payments
- Cash-settled share-based payments
- Transactions with a choice of settlement (equity or cash)
Excludes: business combinations (IFRS 3), interests in subsidiaries/joint ventures/associates acquired in share-based transactions. Also excludes transactions within the scope of IAS 32/IFRS 9 where the entity acquires financial instruments (rather than goods or services).

**Status and amendments:** Issued February 2004; effective for annual periods beginning on or after 1 January 2005. Amendments in force:
- *Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)* — **issued June 2016**; effective for annual periods beginning on or after **1 January 2018**; earlier application permitted. EU-endorsed 26 February 2018, OJ 27 February 2018. Amended paragraphs **19, 30–31, 33, 52 and 63**; added **33A–33H, 59A–59B, 63D and B44A–B44C**. Transition (IFRS 2.59A–59B) is **prospective by default**; retrospective application is permitted **only if possible without hindsight**, and is all-or-nothing across the whole package.
- January 2008 scope-clarification amendment and the June 2009 group cash-settled amendments, which absorbed **IFRIC 8** and **IFRIC 11** into the standard.
- **No active IASB project affects IFRS 2** as at 28 August 2026, and no IFRIC agenda decision on IFRS 2 appears in the November 2025–April 2026 compilation.

**Core principle:** An entity must recognise the goods or services received in a share-based payment transaction when the goods are obtained or as the services are received, with a corresponding increase in equity (equity-settled) or a liability (cash-settled), measured at the fair value of those goods or services, or, if that fair value cannot be reliably estimated, at the fair value of the equity instruments granted.

**Key rules:**
- **Equity-settled transactions:**
  - Measured at the **grant date fair value** of the equity instruments granted; this amount is never subsequently remeasured
  - Fair value determined using an option pricing model (Black-Scholes, binomial/lattice model) considering: exercise price, expected life, current share price, expected volatility, expected dividends, and risk-free interest rate
  - If goods/services received from non-employees: measured at fair value of goods/services unless that cannot be reliably estimated, in which case use equity instrument fair value at the date of receipt
  - Recognised over the **vesting period** (from grant date to vesting date); expensed on a straight-line basis unless a different attribution is more appropriate
  - **Vesting conditions:**
    - *Service conditions*: reflected in the number of equity instruments expected to vest; estimate revised each period
    - *Performance conditions (market-based)*: e.g., TSR — incorporated into grant date fair value; not revised for actual outcome
    - *Performance conditions (non-market)*: e.g., EPS targets — reflected in the number expected to vest; revised each period
    - *Non-vesting conditions*: incorporated into grant date fair value measurement; not revised
  - On vesting: no adjustment if actual instruments differ from those expected (except for service and non-market performance conditions)
  - **Modifications (IFRS 2.B42–B44):**
    - **The floor (B42).** Irrespective of any modification, cancellation or settlement, the entity recognises **as a minimum** the services measured at the *original* grant-date fair value — unless the instruments fail to vest because of a **non-market vesting condition** specified at grant date.
    - **Beneficial modifications (B43).** Incremental fair value = fair value of the modified instrument less fair value of the original instrument, **both measured at the modification date**. If the modification occurs during the vesting period, that increment is spread from the modification date to the *modified* vesting date, **in addition to** the original grant-date amount recognised over the original vesting period. If after the vesting date, the increment is recognised immediately.
    - **Non-beneficial modifications (B44).** A reduction in fair value is **ignored** — the entity continues to recognise on the original grant-date fair value. A reduction in the **number** of instruments is accounted for as a **cancellation of that portion** under IFRS 2.28, which accelerates expense.
  - **Cancellations and settlements (IFRS 2.28):** Treat as vesting — accelerate recognition of the remaining expense. Any payment to the employee is a deduction from equity up to the fair value of the instruments **measured at the repurchase date** (IFRS 2.28(b)); any excess is an expense. Where the arrangement included **liability components**, the liability is **remeasured at the cancellation or settlement date** and any payment settling it is an **extinguishment of the liability**.
- **Cash-settled transactions:**
  - Recognise a liability measured at the **fair value of the liability** at each reporting date and at settlement date
  - Remeasure at each reporting date; changes in fair value recognised in profit or loss
  - Common example: share appreciation rights (SARs), phantom shares
  - **33A–33D (2016 amendments) — the cash-settled model now mirrors the equity-settled one:**
    - **33A–33B:** vesting conditions other than market conditions are reflected in the **number of awards expected to vest**, revised each period and trued up on the vesting date
    - **33C:** market conditions **and** non-vesting conditions are taken into account in the fair value of the award — at grant, on **every remeasurement**, and at settlement date
    - **33D:** the cumulative amount recognised equals the **cash actually paid**
- **Transactions with choice of settlement:**
  - If the *counterparty* has the choice: contains a debt component (present value of cash alternative) and an equity component (residual)
  - If the *entity* has the choice: account as cash-settled unless the entity has a past practice or stated policy of settling in equity, or the cash alternative has no commercial substance
- **Modification from cash-settled to equity-settled (IFRS 2.B44A–B44C):**
  - From the modification date the award is accounted for as equity-settled, measured by reference to the **fair value of the equity instruments at the modification date**, recognised in equity to the extent goods or services have already been received (B44A(a))
  - The cash-settled liability is **derecognised at that date** (B44A(b)) and any difference between the liability derecognised and the equity recognised goes **immediately to profit or loss** (B44A(c))
  - **B44B:** this applies even where the modification occurs **after** the vesting period, and a lengthened or shortened vesting period is reflected
  - **B44C:** where a cash-settled award is cancelled and equity instruments granted on that date are identified as its replacement, B44A–B44B apply
- **Net settlement for withholding tax (IFRS 2.33E–33H):**
  - **33F:** as an **exception to IFRS 2.34**, an award with a net settlement feature to fund an employee's tax withholding is classified **in its entirety as equity-settled** if it would have been so classified absent that feature. Without this exception the withheld portion would be bifurcated as cash-settled
  - **33G:** the payment to the tax authority is a **deduction from equity** for the shares withheld, except to the extent it exceeds the fair value at net settlement date of the instruments withheld
  - **33H:** the exception does **not** apply where (a) there is no statutory obligation on the entity to withhold, or (b) shares are withheld **in excess** of the employee's tax obligation — that excess is a cash-settled share-based payment when paid
- **Where IFRS 2 gives no answer — settlement contingent on a future event (IFRIC agenda decision, January 2010).** IFRS 2.34–43 give guidance **only** where the terms give the entity or the counterparty a *choice* of settlement. Where the manner of settlement turns on a **future event outside the control of both parties** — change of control, an IPO — the IFRIC noted that **IFRS 2 provides no guidance**, declined to interpret, and recommended the issue for a post-implementation review. The entity must develop and disclose an accounting policy rather than assume IFRS 2.41's entity-choice model applies.
- **Post-vesting transfer restrictions (IFRIC agenda decision, November 2006).** Under **IFRS 2.B3** a post-vesting transfer restriction is taken into account **only to the extent it affects the price a knowledgeable, willing market participant would pay**, and may have little or no effect where the shares trade in a deep and liquid market; **IFRS 2.B10** confirms that factors affecting value from the individual employee's perspective only are **not relevant**. Employee-specific illiquidity discounts do not survive this.
- **Incremental value from an unanticipated capital restructuring (IFRIC agenda decision, November 2006).** Where a restructuring not anticipated at grant date increases the value of instruments already granted and the plan contained no adjustment clause, the IFRIC **declined to say** whether the increment is a modification. There is no authoritative answer; the IFRS 2.B43 analysis is the natural analogue but is not mandated.
- **Group share-based payment arrangements (IFRS 2.43A–43C, application guidance B45–B61):**
  - The entity receiving goods or services accounts for the arrangement based on whether **its own** obligation is equity-settled or cash-settled
  - The entity settling the award accounts for it by reference to **its own** obligation, which may differ from the receiving entity's classification — the two need not agree

**Disclosure requirements:**
- Nature and extent: description of each type of arrangement, number and weighted-average exercise prices of options (granted, exercised, forfeited, expired, outstanding, exercisable)
- Fair value information: method, weighted-average assumptions used in the valuation model
- Effect on profit or loss and financial position: total expense recognised, liabilities at period-end and intrinsic value of vested liabilities
- For equity-settled: total carrying amount in equity

**Common pitfalls:**
- Remeasuring equity-settled awards after grant date (prohibited — only the number is revised, not fair value)
- Failing to recognise an expense when vesting conditions are not met due to market conditions (market-based conditions are embedded in fair value — expense is recognised regardless of whether target is met)
- Ignoring non-vesting conditions in the fair value model
- Using intrinsic value instead of fair value when a valuation model is practicable

- Measuring incremental fair value on a modification using grant-date inputs. IFRS 2.B43 requires **both** the original and the modified instrument to be valued as at the **modification date**
- Treating a reduction in the number of instruments as a non-beneficial modification to be ignored; IFRS 2.B44(b) makes it a **cancellation** of that portion, which accelerates expense
- On a cash-to-equity reclassification, sweeping the liability/equity difference to equity instead of to profit or loss (IFRS 2.B44A(c))
- Splitting an award with a tax net-settlement feature into equity and cash components where the 33F exception applies — or applying 33F where there is no statutory withholding obligation (33H(a))
- Reflecting cash-settled vesting conditions in the fair value of the liability rather than in the **number of awards expected to vest** (IFRS 2.33A–33B, post-2016)
- Assuming the receiving entity and the settling entity in a group arrangement reach the same classification (IFRS 2.43A–43C)
- Assuming IFRS 2 answers a settlement-contingent-on-a-future-event question; it does not (IFRIC, January 2010)

**Related standards:** IFRS 3 (business combinations exclusion; replacement awards under IFRS 3.B56–B62), IFRS 9 / IAS 32 (financial instruments exclusion), IFRS 13 (fair value — but note IFRS 13 excludes share-based payment from its scope), IAS 12 (deferred tax on share-based payments — a temporary difference arises when the tax deduction differs from the cumulative IFRS 2 expense), IAS 19 (employee benefits — IFRS 2 is carved out of IAS 19). **IFRIC 8 and IFRIC 11 were withdrawn in June 2009**; their requirements were absorbed into IFRS 2 (the group-arrangement requirements now sit at IFRS 2.43A–43C with application guidance at B45–B61).

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## IFRS 3 — Business Combinations

**Scope:** Applies to transactions that meet the definition of a business combination — transactions in which an acquirer obtains control of one or more businesses. A **business** is an integrated set of activities and assets capable of being conducted and managed to provide a return to investors or other owners, members, or participants. Excludes: formation of joint arrangements (IFRS 11), combinations of entities under common control (no current IFRS; typically policy applied by analogy), acquisition of an asset or group of assets that does not constitute a business.

**Status and amendments:** IFRS 3 (2008) applies prospectively to combinations with an acquisition date on or after the beginning of the first annual period beginning on or after **1 July 2009** (IFRS 3.64). Amendments in force:
- *Definition of a Business (Amendments to IFRS 3)* — **issued October 2018**; applies to business combinations with an **acquisition date on or after the beginning of the first annual period beginning on or after 1 January 2020**, and to **asset acquisitions occurring on or after the beginning of that period**; earlier application permitted (IFRS 3.64P). Added **B7A–B7C, B8A and B12A–B12D**, amended the Appendix A definition of 'business' and paragraphs **3, B7–B9, B11, B12**, and **deleted B10**. EU-endorsed 21 April 2020, OJ 22 April 2020, EU effective 1 January 2020.
- *Reference to the Conceptual Framework (Amendments to IFRS 3)* — **issued May 2020**; applies to combinations with an acquisition date on or after the beginning of the first annual period beginning on or after **1 January 2022**; earlier application permitted only if *Amendments to References to the Conceptual Framework* (March 2018) is applied at the same time or earlier. Amended **11, 14, 21, 22, 23**; added **21A, 21B, 21C, 23A**. EU-endorsed 28 June 2021, OJ 2 July 2021, EU effective 1 January 2022.
- *Annual Improvements 2015–2017* added **42A** (a joint operator obtaining control of a joint operation), applicable to combinations with an acquisition date on or after the beginning of the first annual period beginning on or after 1 January 2019.
- **Pending — do not apply as requirements:** *Business Combinations—Disclosures, Goodwill and Impairment* (amendments to IFRS 3 and IAS 36). Exposure Draft March 2024; **still in redeliberation at 28 August 2026** — the IASB met on 20 May 2026 and again on 21 July 2026 and directed the staff to explore further what subsequent performance information would be required. **No final amendments have been issued and no effective date exists**; the project's next milestone is still "Decide Project Direction". The IASB has expressly **declined to reintroduce amortisation of goodwill**.

**Core principle:** All business combinations are accounted for using the **acquisition method**. On the acquisition date, the acquirer recognises and measures the identifiable assets acquired, liabilities assumed, and any non-controlling interest (NCI) in the acquiree, and recognises goodwill or a gain from a bargain purchase.

**Key rules:**
- **Business vs asset acquisition — the October 2018 framework:**
  - **Scope (IFRS 3.2).** IFRS 3 does not apply to (a) the formation of a joint arrangement *in the financial statements of the joint arrangement itself*; (b) the acquisition of an asset or group of assets that is **not a business** — in which case the cost is allocated to the individual identifiable assets and liabilities on the basis of their **relative fair values**, and **no goodwill arises**; (c) combinations of entities or businesses under common control (B1–B4). **IFRS 3.2A** additionally excludes an investment entity's acquisition of a subsidiary measured at FVTPL.
  - **Optional concentration test (B7A–B7B).** An entity may elect, **separately for each transaction**, to apply the test. If met, the set is **determined not to be a business** and no further assessment is needed. If not met, or if the entity elects not to apply it, the entity performs the full B8–B12D assessment — a failed test proves nothing. The test is met if **substantially all** of the fair value of the **gross assets acquired** is concentrated in a single identifiable asset or group of similar identifiable assets. Mechanics that get missed:
    - **B7B(a)** gross assets acquired **exclude** cash and cash equivalents, deferred tax assets, and goodwill arising from the effects of deferred tax liabilities
    - **B7B(b)** the fair value of gross assets acquired **includes** consideration transferred (plus the fair value of any NCI and of any previously held interest) in excess of the fair value of net identifiable assets acquired
    - **B7B(d)** a tangible asset attached to, and not physically removable from, another tangible asset (or an IFRS 16 underlying asset) without significant cost or diminution in utility or value — land and buildings being the standard example — is a **single identifiable asset**
    - **B7B(f)** these are never "similar": a tangible and an intangible asset; tangible assets in different classes; identifiable intangibles in different classes; a financial and a non-financial asset; financial assets in different classes; and assets in the same class with significantly different risk characteristics
  - **Full assessment (B8–B12D).** Outputs are **not** required (B8), but the set must include, at a minimum, **an input and a substantive process** that together significantly contribute to the ability to create output. **B8A**: where the set has outputs, continuation of revenue alone does not establish that both an input and a substantive process were acquired. **B11**: the test is whether the integrated set is capable of being conducted and managed as a business **by a market participant** — whether the seller operated it as a business, or the acquirer intends to, is irrelevant.
    - **B12B (no outputs at acquisition date)** — a process is substantive only if it is **critical** to developing or converting an acquired input into outputs **and** the acquired inputs include both an organised workforce with the necessary skills and other inputs it could develop or convert. **B12A**: an early-stage entity with no revenue is the archetype.
    - **B12C (outputs at acquisition date)** — a process is substantive if it is **critical** to continuing to produce outputs and an organised workforce with the necessary skills was acquired, **or** it **significantly contributes** to continuing to produce outputs and is unique or scarce (or could not be replaced without significant cost, effort or delay).
    - **B12D(a)** — an **acquired contract is an input, not a substantive process**; an outsourced management contract may nonetheless give access to an organised workforce, and the entity must assess whether that workforce performs a substantive process it **controls**, considering the contract's duration and renewal terms. **B12D(b)** — difficulty in replacing an acquired workforce indicates the workforce performs a critical process.
  - **The worked arithmetic (IFRS 3 Illustrative Examples, Example I, IE118–IE123).** Acquirer holds 20% of Entity A, buys a further 50% for CU200 and obtains control. Entity A holds a building at fair value CU500, an identifiable intangible at CU400, cash CU100, financial liabilities CU700, and a deferred tax liability of CU160. Fair value of Entity A is CU400, so NCI is CU120 and the previously held interest CU80. **Gross assets acquired = CU1,000**: building CU500 + intangible CU400 + an **excess of CU100**, being consideration CU200 + NCI CU120 + previously held interest CU80 = CU400, less the fair value of net identifiable assets of CU300 (= 500 + 400 + 100 − 700). The **CU100 cash is excluded** and the **CU160 deferred tax liability is not deducted** (IE122), which is how the excess ends up free of DTL-generated goodwill.
  - **Example E is the sharpest of the nine (IE101–IE103):** a closed manufacturing plant plus equipment plus a transferred workforce **fails** the concentration test (equipment and building are different classes of tangible asset with similar fair values) and then **also fails B12B**, because although an organised workforce was acquired, no *other* input was acquired that the workforce could develop or convert into outputs. **An acquired workforce alone does not make a business.**
  - **Allocating cost in an asset acquisition (IFRIC agenda decision, November 2017).** Where the transaction price differs from the sum of the individual fair values and the group contains assets initially measured both at cost and at an amount other than cost, **IFRS 3.2(b) supports two acceptable approaches** and neither is preferred: (i) allocate the whole cost on relative fair values, then apply each asset's own initial measurement requirement and account for the resulting difference under the relevant Standard; or (ii) measure the non-cost-measured items at their required amounts first, deduct those from the transaction price, and allocate the **residual** on relative fair values. The entity must **apply its chosen reading consistently to all such acquisitions** and disclose the approach selected (IAS 8.27A–27I). Before allocating anything, re-check the fair value procedures to confirm the difference is real.
  - **Deferred tax on a single-asset entity that is not a business (IFRIC agenda decision, March 2017).** Buying all the shares of an entity whose only asset is an investment property, at a price below the property's fair value because of the acquiree's deferred tax liability: because it is not a business combination, IFRS 3.2(b) applies and **IAS 12.15(b)'s initial recognition exception blocks recognition of the deferred tax liability**. The acquirer recognises **only the investment property and allocates the entire purchase price to it** — no day-one gain arises on subsequently fair-valuing it.
- **Identifying the acquirer:** The entity that obtains control (IFRS 10 definition of control); the acquirer is usually the entity that transfers cash/other assets, issues equity, or is larger. In reverse acquisitions, the legal subsidiary may be the accounting acquirer.
- **Acquisition date:** The date on which the acquirer obtains control.
- **Recognition and measurement of identifiable assets and liabilities:**
  - Measured at **fair value** at the acquisition date
  - Identifiable intangibles must be recognised separately from goodwill if they arise from contractual/legal rights or are separable — even if not previously recognised by the acquiree (e.g., customer relationships, trade names, in-process R&D)
  - Contingent liabilities assumed: recognised at fair value if a present obligation exists, regardless of probability — unlike IAS 37
  - Operating leases: acquiree's favourable/unfavourable contracts recognised as intangible assets/liabilities; acquirer's own right-of-use assets and lease liabilities recognised under IFRS 16
  - Deferred tax: recognised per IAS 12 on temporary differences arising from fair value adjustments
- **Non-controlling interests (NCI):**
  - Option 1 (full goodwill / fair value method): NCI measured at fair value — results in full goodwill including the NCI's share
  - Option 2 (partial goodwill / proportionate share method): NCI measured at proportionate share of identifiable net assets — results in goodwill attributable to the acquirer only
  - Election is available on a transaction-by-transaction basis, but **only for components of NCI that are present ownership interests entitling the holder to a proportionate share of net assets on liquidation** (IFRS 3.19). Other NCI components — share options held by NCI holders, most preference shares classified as equity — are measured at acquisition-date fair value or per another IFRS; **there is no election for them**
- **Goodwill:**
  - Goodwill = Consideration transferred + NCI + FV of previously held interest − FV of identifiable net assets
  - Not amortised; subject to annual impairment testing under IAS 36 (cash-generating unit level)
  - Negative goodwill (bargain purchase): reassess identification and measurement, then recognise the gain immediately in profit or loss
- **Consideration transferred:**
  - Measured at fair value at acquisition date
  - Includes cash, other assets, equity instruments issued, contingent consideration
  - **Contingent consideration — classification is fixed at the acquisition date (IFRS 3.40)** on the IAS 32.11 definitions of a financial liability and an equity instrument; a right to the **return** of previously transferred consideration is classified as an **asset**. Initial recognition at acquisition-date fair value (IFRS 3.39). **Subsequent measurement (IFRS 3.58) has three outcomes, and the split is not the one most preparers describe:**
    - **58(a)** equity-classified: **never remeasured**; settlement is accounted for within equity
    - **58(b)(i)** other contingent consideration **within IFRS 9 scope**: fair value at each reporting date, changes in profit or loss (IFRS 9.4.2.1(e), 5.7.5)
    - **58(b)(ii)** other contingent consideration **not within IFRS 9 scope**: **also** fair value at each reporting date with changes in profit or loss. **There is no IAS 37 route** — measuring a non-financial contingent consideration obligation at an IAS 37 best estimate is a common error
    - Changes reflecting *additional information about facts and circumstances that existed at the acquisition date* are **measurement period adjustments** (IFRS 3.45–49) and go to goodwill; changes from *post-acquisition events* — hitting an earnings target, a share price, an R&D milestone — go to profit or loss (or equity for 58(a))
  - **Contingent payments to employees or selling shareholders (IFRS 3.B55).** An arrangement in which payments are **automatically forfeited on termination of employment** is **remuneration for post-combination services**, not consideration. Arrangements unaffected by termination may indicate additional consideration. Other B55 indicators: duration of continuing employment, level of remuneration, incremental payments to other employees, number of shares owned, linkage to the valuation, the consideration formula, and other agreements. The **March 2024** IFRIC agenda decision *Payments Contingent on Continued Employment during Handover Periods* confirms the position: sellers required to stay on to hand over to new management, paid at a level comparable to other executives, with additional payments contingent on both business performance **and** continued employment, receive **compensation for post-combination services — unless the service condition is not substantive** (following the January 2013 *Continuing employment* decision). The Committee found no significant diversity and no widespread effect.
  - **Replacement share-based payment awards (IFRS 3.B56–B62):** accounted for as a **modification** under IFRS 2; only part of the market-based measure of the replacement awards forms consideration transferred. Where acquiree awards would have expired on the combination and the acquirer replaces them voluntarily, the **whole** market-based measure is post-combination remuneration.
- **Previously held interest (step acquisitions) — IFRS 3.41–42A:**
  - **42:** remeasured to **acquisition-date fair value**, with the gain or loss in profit or loss **or OCI, as appropriate**. Where the acquirer had recognised value changes in OCI in prior periods, that OCI amount is recognised **on the same basis as would be required if the acquirer had disposed directly of the previously held interest** — reclassified to profit or loss only where the item is a recycling one; an FVOCI equity designation is **not** recycled
  - **42A:** a joint operator that obtains control of a business that is a joint operation, and had rights to the assets and obligations for the liabilities immediately beforehand, has a **step acquisition** and remeasures its **entire** previously held interest in the joint operation
- **Transaction costs:** Expensed as incurred (not added to goodwill)
- **Measurement period (IFRS 3.45–50):**
  - **45:** provisional amounts are adjusted **retrospectively** for new information about facts and circumstances that **existed at the acquisition date** which, if known, would have affected the measurement. The period ends when the acquirer receives the information it was seeking **or learns that more information is not obtainable**, and in any event **shall not exceed one year from the acquisition date**. The 12 months is a ceiling, not an entitlement
  - **47:** information obtained shortly after acquisition is more likely to reflect acquisition-date circumstances; a sale to a third party shortly after the acquisition date at a materially different price is likely to indicate an error in the provisional fair value, absent an identifiable intervening event
  - **48:** an increase (decrease) in a provisional asset (liability) is recognised via a decrease (increase) in **goodwill**; a single new fact may adjust more than one item, and the goodwill effects may partly offset
  - **49:** adjustments are made **as if the accounting had been completed at the acquisition date**, so **comparative information for prior periods is revised**, including depreciation, amortisation and other income effects
  - **50:** after the measurement period ends, the accounting is revised **only to correct an error** under IAS 8. It is not a free re-estimation window
  - **B67(a):** where the initial accounting is incomplete, disclose the reasons, which items are provisional, and the nature and amount of measurement-period adjustments recognised in the period
- **Contingent liabilities (IFRS 3.21A–21C, 22, 23, 23A, 56):** the May 2020 amendments direct the acquirer to apply **IAS 37.15–22** (or IFRIC 21 for levies) to determine whether a **present obligation** exists at the acquisition date. If a present obligation is identified and it falls in IAS 37.22(b), IFRS 3.23 requires recognition at fair value **even if an outflow is not probable** — contrary to IAS 37.14(b), 23, 27, 29 and 30. **23A: a contingent asset is never recognised** at the acquisition date. **Subsequent measurement (IFRS 3.56):** the higher of the IAS 37 amount and the amount initially recognised less cumulative income recognised under IFRS 15 principles — **this does not apply to contracts accounted for under IFRS 9**.
- **Reacquired rights (IFRS 3.55):** amortised over the **remaining contractual period of the contract in which the right was granted**, ignoring renewal options; on a later sale to a third party, the carrying amount is included in the gain or loss.
- **Indemnification assets (IFRS 3.57):** measured on the **same basis as the indemnified item**, subject to contractual limits and, where not measured at fair value, management's assessment of collectibility. Derecognised only on collection, sale or loss of the right.
- **Separate transactions (IFRS 3.51–52, B50):** a transaction entered into by or on behalf of the acquirer, or primarily for the benefit of the acquirer or the combined entity rather than the acquiree or its former owners, is **likely a separate transaction** — settlement of pre-existing relationships, remuneration for future services, and reimbursement of acquiree-borne acquisition costs are the named examples. B50 gives three factors: the **reasons for** the transaction, **who initiated** it, and its **timing**.
- **Common control transactions:** Excluded from IFRS 3 by **IFRS 3.2(c)**, with application guidance at **B1–B4**; entities typically apply a predecessor value method or a pooling-of-interests approach by analogy under IAS 8. Three IFRIC agenda decisions signpost the area: *"Transitory" common control* (March 2006), *Business combinations involving newly formed entities: business combinations under common control* (September 2011), and *IAS 27 — Presentation of comparatives when applying the "pooling of interests" method* (January 2010).

**Disclosure requirements:**
- Name and description of acquiree, acquisition date, percentage of voting equity acquired
- Primary reasons for the combination and description of how control was obtained
- Fair values of consideration transferred (each class), NCI, previously held equity interests
- Amounts recognised for each major class of assets and liabilities at acquisition date
- Contingent consideration: description, basis for measurement, range of outcomes
- Goodwill amount and reasons why the acquisition resulted in goodwill (or bargain purchase explanation)
- Revenue and profit/loss of the combined entity for the current period as if acquisition date had been the beginning of the annual reporting period (pro-forma information)
- Subsequent adjustments to provisional amounts during the measurement period

**Common pitfalls:**
- Failing to identify and separately value intangible assets (particularly customer relationships and technology)
- Expensing acquisition-related costs but then capitalising post-acquisition integration costs that should also be expensed
- Incorrect treatment of contingent consideration — reclassification between liability and equity after initial recognition is not permitted
- Using the wrong NCI measurement method inconsistently (note: choice is per transaction)
- Misidentifying whether a transaction is a business combination or an asset acquisition (significant impact: no goodwill, no deferred tax gross-up in asset acquisitions)
- Overlooking the 12-month measurement period discipline — adjustments after the period close are taken to P&L
- Step acquisitions: forgetting to remeasure previously held interests to fair value

- Running the concentration test on **net** assets rather than on gross assets computed per IFRS 3.B7B(b), or forgetting to exclude cash, deferred tax assets and DTL-generated goodwill under B7B(a)
- Treating the concentration test as a screen that must be applied. It is elective, transaction by transaction, and a failed test proves nothing — it simply sends you to B8–B12D
- Concluding "business" because revenue continues post-acquisition (B8A) or because the seller ran it as a business (B11)
- Classifying a non-IFRS 9 contingent consideration liability under IAS 37 rather than at fair value through profit or loss (IFRS 3.58(b)(ii))
- Recognising post-acquisition earn-out movements as goodwill adjustments — only facts-existing-at-acquisition-date changes within the measurement period qualify (IFRS 3.45, 58)
- Missing that an earn-out forfeited on termination of employment is **remuneration**, not consideration (IFRS 3.B55(a); IFRIC, March 2024)
- Applying the NCI fair-value/proportionate election to NCI components that are not present ownership interests (IFRS 3.19)
- Not revising comparatives when a measurement-period adjustment is made in the following year (IFRS 3.49), and continuing to adjust goodwill after 12 months (IFRS 3.45, 50)
- In an **asset** acquisition, allocating cost without settling on one of the two acceptable approaches and applying it consistently (IFRIC, November 2017), or expecting a day-one gain where IAS 12.15(b) blocks the deferred tax liability (IFRIC, March 2017)
- Applying the March 2024 Exposure Draft proposals on goodwill and impairment as if they were requirements — no amendments have been issued

**Related standards:** IFRS 2 (replacement awards — IFRS 3.B56–B62), IFRS 10 (control definition), IFRS 11 (joint arrangements — excluded; but IFRS 11.21A applies IFRS 3 principles to acquiring an interest in a joint operation that is a business), IFRS 13 (fair value measurement), IFRS 16 (lease accounting in acquisitions), IAS 12 (deferred tax on acquisition; the IAS 12.15(b) block in asset acquisitions), IAS 32 (classification of contingent consideration — IFRS 3.40), IAS 36 (goodwill impairment), IAS 37 (contingent liabilities — modified criteria under IFRS 3.21A–23A), IAS 38 (intangible assets recognition in acquisitions), IFRIC 21 (levies, via IFRS 3.21B)

---

## IFRS 5 — Non-current Assets Held for Sale and Discontinued Operations

**Scope:** Applies to accounting for non-current assets (or disposal groups) held for sale and to the presentation and disclosure of discontinued operations. A **disposal group** is a group of assets to be disposed of together (and directly associated liabilities). Excludes from the measurement requirements (but not presentation): deferred tax assets (IAS 12), employee benefit assets (IAS 19), financial assets within scope of IFRS 9, investment property measured at fair value (IAS 40), biological assets at fair value less costs to sell (IAS 41), and contractual rights under insurance contracts (IFRS 17).

**Status and amendments:** Issued March 2004 (replacing IAS 35); effective for annual periods beginning on or after 1 January 2005. The material pending change is **IFRS 18** (issued 9 April 2024; effective for annual periods beginning on or after **1 January 2027**, earlier application permitted; EU-endorsed 13 February 2026, OJ 16 February 2026), which amended IFRS 5 paragraphs **2, 3, 5A, 5B, 13, 17, 26A, 28, 33–36A, 38, 39 and 41** and the headings before paragraphs 31 and 38. IFRS 19 (issued 9 May 2024, effective 1 January 2027) also made consequential amendments. **No active IASB project targets IFRS 5's recognition or measurement requirements**, although in January 2016 the Interpretations Committee catalogued a set of unresolved IFRS 5 questions, declined to address them piecemeal, and concluded a broad-scope project might be warranted.

**Scope split (IFRS 5.2) — usually stated too narrowly.** The **classification, presentation and disclosure** requirements apply to **all** recognised non-current assets and to **all** disposal groups. Only the **measurement** requirements carve out the paragraph 5 list (deferred tax assets, employee benefit assets, IFRS 9 financial assets, IAS 40 fair-value investment property, IAS 41 biological assets at FVLCTS, insurance contract rights). A disposal group made up entirely of scoped-out assets is still classified, presented and disclosed under IFRS 5.

**Core principle:** Non-current assets (or disposal groups) that are classified as held for sale are measured at the **lower of carrying amount and fair value less costs to sell**, and are no longer depreciated. They are presented separately in the statement of financial position. Results of discontinued operations are presented separately in the income statement.

**Key rules:**
- **Classification as held for sale — ALL of the following criteria must be met:**
  1. The asset must be available for immediate sale in its present condition (subject only to terms that are usual and customary for sales of such assets)
  2. The sale must be highly probable:
     - Management (appropriate level) is committed to a plan to sell
     - Active programme to locate a buyer has been initiated
     - Asset is actively marketed at a price reasonable in relation to its current fair value
     - Sale expected to be completed within **12 months** from classification date
     - It is unlikely that the plan will be significantly changed or withdrawn
  - Extension beyond 12 months is permitted only in limited circumstances beyond the entity's control (e.g., buyer requires regulatory approval, unusual market conditions), provided the entity remains committed
- **Held for distribution to owners (IFRS 5.5A, 12A):** a parallel but distinct set of criteria — committed to distribute, available for immediate distribution in its present condition, distribution highly probable, actions initiated and expected to complete **within one year**. IFRS 5.5A applies the classification, presentation, measurement and disclosure requirements of IFRS 5 to these.
- **Assets acquired exclusively with a view to resale (IFRS 5.11):** held-for-sale classification at the acquisition date requires the one-year test in paragraph 8 to be met, and any other criteria in 7–8 not met at that date must be highly probable of being met **within a short period, usually three months**.
- **Loss of control of a subsidiary (IFRS 5.8A):** a plan involving loss of control requires **all** of that subsidiary's assets and liabilities to be classified as held for sale, **regardless of any retained non-controlling interest** after the sale.
- **Assets to be abandoned are never held for sale (IFRS 5.13).** Their carrying amount is recovered through continuing use. If the disposal group to be abandoned meets the IFRS 5.32(a)–(c) definition of a discontinued operation, its results and cash flows are presented or disclosed as a **discontinued operation from the date it ceases to be used**. **IFRS 5.14:** an asset temporarily taken out of use is not abandoned. Closures are more common than sales, and this is the rule that governs them.
- **Criteria met after the reporting period (IFRS 5.12):** a **non-adjusting** event — no reclassification, but disclose IFRS 5.41(a), (b) and (d).
- **Appendix B is a single paragraph, B1, and it is a closed list of three situations** in which the one-year exception in paragraph 9 applies — not a general reasonableness test: (a) at the commitment date the entity reasonably expects that **others (not a buyer)** will impose transfer conditions extending the period, actions to respond cannot begin until a firm purchase commitment is obtained, **and** such a commitment is highly probable within one year; (b) a firm purchase commitment is obtained and a buyer or others then **unexpectedly** impose conditions, timely responsive action has been taken **and** favourable resolution is expected; (c) during the initial year, **previously unlikely** circumstances arise and the item is unsold at year end, but the entity took the necessary action during that year, the item is **actively marketed at a price reasonable given the changed circumstances**, and paragraphs 7 and 8 are met. Note that only (c) permits a **repriced** marketing level.
- **Classification in conjunction with a planned IPO (IFRIC agenda decision, September 2013)** splits IFRS 5.8 into two kinds of condition, and this split is the most useful practical tool in the standard. **Events that must already have occurred:** management commitment to a plan; an active programme to locate a buyer initiated; and active marketing at a price reasonable relative to current fair value. **Matters assessed on expectations of the future**, whose probability feeds the "highly probable" judgement: completion within one year; that significant changes to or withdrawal of the plan are unlikely; and the probability of shareholder approval where required. Regulatory approval of a prospectus therefore goes into the probability assessment rather than acting as a bright-line bar.
- **Measurement:**
  - Reclassify to held for sale at lower of: (a) carrying amount immediately before reclassification (apply applicable IFRS up to that point) and (b) fair value less costs to sell (FVLCTS)
  - Any write-down to FVLCTS is an impairment loss recognised in P&L
  - Subsequent increases in FVLCTS are recognised as gains (not exceeding cumulative impairment losses)
  - **No depreciation or amortisation** from the date of held-for-sale classification — but **interest and other expenses attributable to the liabilities of the disposal group continue to be recognised** (IFRS 5.25)
  - **Sequencing (IFRS 5.19) — getting the order wrong changes the allocation.** On subsequent remeasurement of a disposal group, the items **outside** IFRS 5's measurement scope (deferred tax, employee benefit assets, IFRS 9 financial assets, IAS 40 fair-value investment property, IAS 41 biological assets at FVLCTS, insurance contract rights) are remeasured **under their own standards first**, before the group's fair value less costs to sell is remeasured
  - **Allocation (IFRS 5.23):** the loss (or gain) is allocated to the non-current assets **within** IFRS 5's measurement scope in the **IAS 36.104(a)–(b) and 122** order — goodwill first, then pro rata to the remaining non-current assets in scope
  - **The counterintuitive consequence (IFRIC agenda decision, January 2016):** because **IFRS 5.23 cross-refers to IAS 36.104 and 122 but not to IAS 36.105**, the IAS 36 floor that prevents writing an individual asset below the higher of its fair value less costs of disposal, its value in use and zero **does not apply here**. An individual non-current asset in a disposal group **can** be written below its own recoverable amount. (The Committee considered only the case where the loss does not exceed the carrying amount of those assets.)
  - **On acquisition (IFRS 5.16):** a newly acquired asset or disposal group meeting the criteria on acquisition is measured on initial recognition at the lower of the carrying amount had it not been so classified and FVLCTS — so an asset acquired **in a business combination** is measured at **fair value less costs to sell**
  - **Costs to sell beyond one year (IFRS 5.17):** measured at **present value**, with the unwind through profit or loss, classified applying the IFRS 18 requirements on remeasurement of held-for-sale items from 2027
  - **Cap on subsequent gains (IFRS 5.20–21):** a gain on a subsequent increase in FVLCTS is **capped at the cumulative impairment recognised under IFRS 5 or previously under IAS 36**
  - **Direct reclassification between held for sale and held for distribution to owners (IFRS 5.26A)** is a **continuation of the original plan of disposal** — the entity does **not** apply the cessation-of-classification accounting in paragraphs 27–29
- **Discontinued operation:** A component of an entity that:
  - Has been disposed of or classified as held for sale, AND
  - Represents either a separate major line of business or geographical area, is part of a single co-ordinated plan to dispose of such a line/area, OR is a subsidiary acquired exclusively with a view to resale
  - A component is operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity
- **Presentation:**
  - **IFRS 5.38:** non-current assets classified as held for sale are presented **separately from other assets** in the statement of financial position, and the liabilities of a disposal group **separately from other liabilities**, with **no offsetting**. Major classes are either presented separately or disclosed in the notes (with a carve-out at IFRS 5.39 for a subsidiary acquired and classified as held for sale on acquisition). Cumulative income or expense recognised in **O

# GAAP-to-IFRS Transition Guide

This guide provides framework-agnostic guidance for entities transitioning from local GAAP to IFRS. It focuses on IFRS requirements and flags common difference areas rather than mapping from any specific national framework. For detailed IFRS 1 first-time adoption steps, see the IFRS 1 workflow in `workflows.md`. For the gap analysis template, see `compliance-templates.md`.

---

## 1. Overview

### What Is an IFRS Transition?

An IFRS transition is the process of converting an entity's financial reporting from a local (national) GAAP to International Financial Reporting Standards. The governing standard is **IFRS 1 — First-time Adoption of International Financial Reporting Standards**, which:

- Requires full retrospective application of all IFRS standards effective at the first IFRS reporting date, subject to specific mandatory exceptions and optional exemptions.
- Mandates an opening IFRS balance sheet at the **date of transition** (the beginning of the earliest comparative period).
- Requires at least one year of comparative information prepared under IFRS.
- Provides a structured set of exemptions to reduce the cost of transition where full retrospective application would be impracticable or excessively burdensome.

> **Cross-reference:** For the complete step-by-step IFRS 1 adoption procedure, see the IFRS 1 First-Time Adoption workflow in `workflows.md`.

### Governing Principles

1. **Retrospective application** — Apply each IFRS standard as if it had always been applied, unless an exemption is elected.
2. **Consistency** — Use the same accounting policies throughout all periods presented in the first IFRS financial statements.
3. **Transparency** — Provide reconciliations from previous GAAP to IFRS so users can understand the impact of the transition.

---

## 2. Key Dates

### Date Framework

| Date | Definition | Example (FY2026 Adoption, 1-Year Comparatives) |
|---|---|---|
| **Date of transition** | Beginning of the earliest comparative period presented under IFRS | 1 January 2025 |
| **Comparative period end** | End of the comparative period | 31 December 2025 |
| **First IFRS reporting date** | End of the first annual reporting period under IFRS | 31 December 2026 |

### Timeline Illustration (FY2026 Adoption)

```
1 Jan 2025              31 Dec 2025             31 Dec 2026
    |                       |                       |
    |--- Comparative -------|--- First IFRS Year ---|
    |                       |                       |
 Opening IFRS          Comparative             First IFRS
 balance sheet         financial              financial
 (date of             statements              statements
  transition)          (restated)             (published)
```

### What Happens at Each Date

- **1 January 2025 (date of transition):** Prepare an opening IFRS balance sheet. Recognise all assets and liabilities required by IFRS, derecognise items not permitted, reclassify as needed, and measure everything under IFRS. Adjustments go to retained earnings (or another equity category if appropriate). This opening statement of financial position is **presented** in the first IFRS financial statements as the third statement of financial position: IFRS 1 paragraph **21** requires at least three statements of financial position, two statements of profit or loss and other comprehensive income, two separate statements of profit or loss if presented, two statements of cash flows and two statements of changes in equity, together with related notes and comparative information for all statements presented.
- **31 December 2025 (comparative period end):** Present a full set of IFRS-compliant comparative financial statements for this period.
- **31 December 2026 (first IFRS reporting date):** Publish the first complete set of IFRS financial statements, including the IFRS 1 reconciliations and disclosures.

---

## 2A. Comparative Period Mechanics

### What must be presented (IFRS 1.21)

The first IFRS financial statements shall include **at least**:

- **three** statements of financial position;
- **two** statements of profit or loss and other comprehensive income;
- **two** separate statements of profit or loss, if presented;
- **two** statements of cash flows;
- **two** statements of changes in equity;

**and related notes, including comparative information for all statements presented.**

The third statement of financial position is the **opening IFRS statement of financial position at the date of transition**. This is why the date of transition is defined as the **beginning** of the earliest comparative period and not its end.

### Presenting more than one comparative year

The date of transition moves with the number of comparative periods presented. Where a securities regulator requires two comparative years — the SEC's three-year income statement requirement for domestic registrants is the common case — the date of transition moves **back a further year**, and so does every exemption measured "at the date of transition": deemed cost, the lease liability under D9B, the CTD reset, and the FVTPL/FVOCI designations under D19–D19C.

**Decide the number of comparative periods before electing any exemption.** Changing it afterwards invalidates every transition-date measurement.

### Non-IFRS comparatives and historical summaries (IFRS 1.22)

Historical summaries of selected data for periods **before** the earliest full IFRS comparative period **need not** comply with IFRS recognition and measurement. Previous-GAAP comparative information may also be presented alongside the IFRS comparatives. In either case the entity **shall**:

- (a) **label the previous GAAP information prominently** as not prepared in accordance with IFRS; and
- (b) **disclose the nature of the main adjustments** that would make it comply. **Quantification is not required.**

This is the mechanism for the five-year summary in an annual report or a listing document, and it is materially cheaper than restating those years.

### Interaction with IAS 34 in the year of adoption (IFRS 1.32–33)

Where the entity presents an IAS 34 interim financial report for **part of the period covered by its first IFRS financial statements**, IFRS 1 applies to that interim report as well (para 2(b)), and the entity must satisfy IAS 34 **plus** the following:

| Requirement | Ref | Detail |
|---|---|---|
| **IFRS 18 headings and subtotals in condensed interims** | 32(za) | The entity shall present **each heading it expects to use in applying IFRS 18** and the subtotals required by **IFRS 18.69–74**, **notwithstanding IAS 34.10**. The normal IAS 34.10 condensed-presentation relief applies **only after** the first IFRS annual financial statements prepared under IFRS 18 have been issued. |
| **Interim equity reconciliation** | 32(a)(i) | Where an interim report was presented for the **comparable interim period of the immediately preceding year**, reconcile previous-GAAP equity at the end of that comparable interim period to IFRS equity at that date. |
| **Interim total comprehensive income reconciliation** | 32(a)(ii) | Reconcile to IFRS total comprehensive income for that comparable interim period, **both current-period and year-to-date**. The starting point is previous-GAAP total comprehensive income for the same period, or previous-GAAP profit or loss if no such total was reported. |
| **Annual reconciliations in the first interim report** | 32(b) | The **first** IAS 34 interim report within the first IFRS reporting period must **also** include the full IFRS 1.24(a) and (b) reconciliations, supplemented per paragraphs 25 and 26 — **or a cross-reference to another published document containing them**. |
| **Changes to policies or exemption use** | 32(c), 27A | If the entity changes its accounting policies or its use of the IFRS 1 exemptions during the first IFRS reporting period, it shall explain the change in **each** such interim report and **update** the reconciliations. Paragraph 27A requires the same explanation between the first IFRS interim report and the first IFRS annual financial statements. |
| **Information material to the interim period** | 33 | IAS 34's minimum disclosures assume users have the most recent **annual** financial statements. Where the entity's most recent previous-GAAP annual financial statements did **not** disclose information material to understanding the current interim period, the interim report must disclose it or cross-refer to a document that does. |

**Practical consequences.** Three points follow that reshape the transition timetable:

1. The **first interim report is the first public IFRS deliverable**, not the annual financial statements. The equity and TCI reconciliations, the exemption schedule and the IFRS 18 heading structure must all be finished by the first interim reporting date — typically **six months earlier** than most project plans assume.
2. Interim results **re-phase** on transition even where the annual result does not, because IAS 34 takes the **discrete** view of an interim period while several national frameworks (and US GAAP) take the **integral** view — see §3A row 74. Model the quarterly or half-yearly phasing and brief analysts **before** publication.
3. Comparative interim reconciliations are only required where a comparable interim report was actually presented in the prior year. An entity that did not report interim results under previous GAAP has a lighter obligation — but paragraph 32(b) still applies.

### Where the comparative period may be shorter than 12 months

One case only: **severe hyperinflation**. Under paragraph **D30**, where the functional currency normalisation date falls within a 12-month comparative period, the comparative period **may be shorter than 12 months**, provided a complete set of financial statements as required by **IFRS 18.10** is presented for that shorter period.

---

## 3. Common Difference Areas

The following ten areas represent the most frequent sources of adjustment when transitioning from local GAAP to IFRS. Each entry describes the IFRS requirement and flags typical differences found under common national frameworks.

### 3.1 Revenue Recognition — IFRS 15

| Aspect | IFRS Requirement | Common Local GAAP Difference |
|---|---|---|
| **Model** | Five-step model based on transfer of control | Risks-and-rewards model; revenue recognised at a single point (e.g., delivery) |
| **Multiple performance obligations** | Allocate transaction price to each distinct performance obligation using standalone selling prices | Bundled arrangements often recognised as a single unit |
| **Variable consideration** | Estimate and constrain variable consideration at contract inception | Variable amounts recognised only when finalised or when uncertainty resolved |
| **Contract costs** | Capitalise incremental costs of obtaining a contract (IFRS 15.91-94) | Sales commissions and bid costs typically expensed as incurred |
| **Timing** | Recognise over time if criteria in IFRS 15.35 are met; otherwise at a point in time | Percentage-of-completion may apply under different criteria or not at all |

**Transition action:** Restate open contracts at the date of transition. Consider the IFRS 1 optional exemption for completed contracts (D35 — contracts completed before the earliest period presented need not be restated).

### 3.2 Leases — IFRS 16

| Aspect | IFRS Requirement | Common Local GAAP Difference |
|---|---|---|
| **Lessee model** | Single on-balance-sheet model: recognise right-of-use asset and lease liability for virtually all leases | Operating leases kept off balance sheet; only finance/capital leases on balance sheet |
| **Measurement** | Initial measurement at present value of lease payments; subsequent depreciation of ROU asset and interest on liability | Operating lease expense recognised on straight-line basis with no balance sheet impact |
| **Short-term / low-value** | Optional exemptions for leases under 12 months or of low-value underlying assets | No equivalent distinction needed when operating leases are off balance sheet |
| **Sale and leaseback** | Apply IFRS 15 to determine whether transfer is a sale; if so, measure ROU asset proportionally | May recognise full gain on sale; leaseback treated as new operating lease |

**Transition action:** Inventory all lease contracts. Quantify the balance sheet gross-up. IFRS 1 permits measuring the lease liability at transition date (rather than at lease inception) as a practical expedient (D9B), together with the five D9D expedients — see §7.

### 3.3 Financial Instruments — IFRS 9

| Aspect | IFRS Requirement | Common Local GAAP Difference |
|---|---|---|
| **Classification** | Three categories based on business model and contractual cash flow characteristics: amortised cost, FVOCI, FVTPL | Four or more categories (held-to-maturity, available-for-sale, loans and receivables, FVTPL) |
| **Impairment** | Expected credit loss (ECL) model — forward-looking, three-stage approach | Incurred loss model — impairment recognised only after a loss event occurs |
| **Hedge accounting** | Simplified qualifying criteria; more hedging strategies eligible; risk components of non-financial items hedgeable | More restrictive bright-line effectiveness tests (e.g., 80-125% corridor) |
| **Equity investments** | Irrevocable FVOCI election (no recycling to P&L); otherwise FVTPL | May permit cost method for unquoted equities or recycling of AFS gains |

**Transition action:** Reclassify financial assets based on IFRS 9 criteria. Calculate ECL allowances at the date of transition. Review hedge documentation for IFRS 9 compliance — **hedge relationships must be designated and documented on or before the date of transition**; mandatory exception B4–B6 prohibits retrospective designation and there is no cure.

### 3.4 Employee Benefits — IAS 19

| Aspect | IFRS Requirement | Common Local GAAP Difference |
|---|---|---|
| **Defined benefit measurement** | Project unit credit method; remeasurements (actuarial gains/losses) in OCI with no recycling | Corridor approach permitted (defer and amortise actuarial gains/losses); or immediate P&L recognition |
| **Discount rate** | High-quality corporate bonds (or government bonds where no deep market exists) | May use different benchmark rates |
| **Past service cost** | Recognise immediately in P&L when plan amendment occurs | Amortise over remaining service period |
| **Multi-employer plans** | Account as defined contribution unless sufficient information for defined benefit accounting | Treatment varies; some frameworks allow defined contribution accounting in all cases |

**Transition action:** Obtain actuarial valuations at the date of transition. Recognise the full net defined benefit liability or asset measured under the projected unit credit method. **There is no IFRS 1 exemption** — paragraphs D10–D11 were deleted, so any previous-GAAP corridor or deferred actuarial balance is recognised in full against opening retained earnings. Obtain the valuation early: it is a long-lead-time deliverable and one of the largest single transition adjustments for a mature defined benefit sponsor. See "Exemptions that no longer exist" in §7.

### 3.5 Impairment of Non-Financial Assets — IAS 36

| Aspect | IFRS Requirement | Common Local GAAP Difference |
|---|---|---|
| **Trigger** | Impairment test when indicators exist; annual for goodwill and indefinite-life intangibles | Some frameworks require annual testing for all long-lived assets or have different trigger indicators |
| **Recoverable amount** | Higher of fair value less costs of disposal and value in use (discounted cash flows) | Undiscounted cash flow test as a first screen; impairment measured differently |
| **Cash-generating units** | Test at CGU level (smallest group generating independent cash inflows) | May test at a different level of aggregation (e.g., reporting unit, asset group) |
| **Reversal** | Reversal required when conditions change (except for goodwill impairment — never reversed) | Some frameworks prohibit reversal of any impairment |

**Transition action:** Identify CGUs. Test goodwill and indefinite-life intangibles at the date of transition. Consider the IFRS 1 deemed cost exemption for assets where historical IFRS cost would be difficult to reconstruct. Note that several exemption elections trigger a **mandatory** transition-date IAS 36 test regardless of indicators — see §5A step 10.

### 3.6 Property, Plant and Equipment — IAS 16

| Aspect | IFRS Requirement | Common Local GAAP Difference |
|---|---|---|
| **Component depreciation** | Each significant component of an asset depreciated separately | Single useful life for the whole asset; no component accounting |
| **Revaluation model** | Permitted as an accounting policy (class-by-class election) | Revaluation prohibited in some frameworks; or permitted but with different mechanics |
| **Residual value** | Review at least annually; based on current prices | Set at acquisition and rarely updated |
| **Borrowing costs** | IAS 23 requires capitalisation for qualifying assets | May be expensed or capitalised at entity's option |
| **Decommissioning** | Include in cost with corresponding provision (IAS 37 / IFRIC 1) | Often not recognised until expenditure incurred |

**Transition action:** Componentise major assets. Reassess useful lives and residual values. Elect fair value or previous-GAAP revaluation as deemed cost under IFRS 1 (D5–D8B) if full retrospective cost data is unavailable.

### 3.7 Intangible Assets — IAS 38

| Aspect | IFRS Requirement | Common Local GAAP Difference |
|---|---|---|
| **Development costs** | Capitalise when all six IAS 38.57 criteria are met | Expense all R&D as incurred; or capitalise under different criteria |
| **Useful life** | Indefinite life permitted (no amortisation; annual impairment test instead) | All intangibles amortised over a maximum period (e.g., 10 or 20 years) |
| **Internally generated** | Internally generated brands, mastheads, customer lists — not recognised | Some frameworks permit recognition of certain internally generated intangibles |
| **Revaluation** | Permitted only if active market exists (rare in practice) | Revaluation typically prohibited |

**Transition action:** Review capitalised development costs against IAS 38.57 criteria. Derecognise any internally generated intangibles not meeting IFRS recognition criteria. Assess useful lives (finite vs indefinite).

### 3.8 Provisions and Contingencies — IAS 37

| Aspect | IFRS Requirement | Common Local GAAP Difference |
|---|---|---|
| **Recognition threshold** | "Probable" means more likely than not (>50%) | "Probable" may mean a materially higher threshold |
| **Measurement** | Best estimate; discount to present value if time value of money is material | Undiscounted amounts; or range-based measurement (e.g., low end of range) |
| **Restructuring** | Recognise only when detailed formal plan exists and valid expectation raised | Earlier recognition permitted based on board approval alone |
| **Contingent liabilities** | Disclose but do not recognise (unless acquired in a business combination) | Treatment varies; some frameworks require accrual at lower probability thresholds |

**Transition action:** Reassess all existing provisions against IAS 37 criteria. Discount long-term provisions. Review contingent liabilities for disclosure adequacy.

### 3.9 Consolidation and Group Accounting — IFRS 10

| Aspect | IFRS Requirement | Common Local GAAP Difference |
|---|---|---|
| **Control model** | Consolidate when investor has power, exposure to variable returns, and ability to use power to affect returns | Voting-interest model (majority of voting rights triggers consolidation); or risks-and-rewards model |
| **Structured entities** | Assessed under same control model; consolidate if controlled | Separate evaluation framework (e.g., variable interest entity model) with different criteria |
| **Investment entities** | Exception from consolidation; measure subsidiaries at FVTPL (IFRS 10.31-33) | No equivalent exception; all subsidiaries consolidated |
| **Non-controlling interests** | Measured at fair value or proportionate share of net assets (election per combination) | Typically measured at book value of proportionate net assets |

**Transition action:** Reassess control conclusions for all investees. Identify structured entities. Consider the IFRS 1 exemption for business combinations that occurred before the date of transition (C1–C5), remembering the C1 ratchet described in §7.

### 3.10 Presentation and Disclosure — IAS 1 / IFRS 18

> **Which standard applies:** **IFRS 18** supersedes IAS 1 for annual reporting periods beginning on or after **1 January 2027** (IFRS 18.C1, C8); earlier application is permitted. Because IFRS 1 paragraph 8 requires the IFRSs effective at the **end of the first IFRS reporting period** to be applied to the opening statement of financial position and all periods presented, an entity whose first IFRS reporting date is **31 December 2027 or later must build to IFRS 18 from the outset**. IFRS 1 has already been conformed — paragraph 32(za) requires IFRS 18 headings and subtotals in condensed interim reports, and paragraphs 21, 22, 24(a)(ii), 33 and D30 cross-refer to IFRS 18. See §10. The IAS 1 content below remains correct for first IFRS reporting dates before 1 January 2027.

| Aspect | IFRS Requirement | Common Local GAAP Difference |
|---|---|---|
| **Complete set of statements** | Statement of financial position, profit or loss and OCI, changes in equity, cash flows, and notes | Some frameworks do not require a statement of changes in equity or OCI as a separate statement |
| **OCI classification** | Items that will and will not be reclassified to P&L must be presented separately | OCI may not be required or may have different classification rules |
| **Current/non-current distinction** | Required unless a liquidity-based presentation is more relevant | Some frameworks mandate a different ordering or do not require the distinction |
| **Significant judgements and estimates** | Disclose critical judgements and key sources of estimation uncertainty — IAS 1.122 and IAS 1.125–133 for periods before 1 January 2027; **IAS 8.27G and IAS 8.31A–31I** from 1 January 2027, when IFRS 18 supersedes IAS 1 and this content moves to IAS 8. A first-time adopter whose date of transition falls on or after that date applies the IAS 8 requirements and never applies IAS 1. | Disclosure requirements may be less specific |
| **Comparative information** | Minimum one year of comparative information; three balance sheets if retrospective restatement | One year typical but specific requirements vary |

**Transition action:** Redesign the chart of accounts and financial statement templates. Map local GAAP line items to IAS 1 presentation requirements — or, where the first IFRS reporting date is 31 December 2027 or later, directly to IFRS 18, avoiding two redesigns. Prepare IFRS-compliant note disclosures.

---

## 3A. US GAAP → IFRS Difference Matrix

Applies where previous GAAP is **US GAAP** — most commonly a US-domiciled group listing or being acquired abroad, a foreign private issuer moving off a US GAAP reporting package, or a US subsidiary preparing an IFRS group reporting pack. US GAAP and IFRS are **converged in more areas than not** — business combinations, revenue, fair value measurement, segment reporting and share-based payment are all substantially aligned — so the matrix below is deliberately restricted to differences that **change a number**.

> **Source and verification status of the US GAAP column — read before relying on any ASC reference.** The US GAAP column follows **EY, *US GAAP versus IFRS Accounting Standards — The basics*, January 2026** (analysis reflecting guidance finalised as at 30 June 2025), except the government-grants row, which follows **FASB ASU 2025-10** directly. The FASB Codification itself (`asc.fasb.org`) is registration-gated and could not be opened, so every **ASC reference in this matrix is source-verified through EY, not primary-verified against the Codification**. Treat ASC references as pointers to be confirmed against the Codification before they are relied on in a filing or a memo. The IFRS column carries its own citations, verified against the standards' own text.

> **Researched but not merged — deliberate gaps in this matrix.** Four points were researched and could not be verified to this file's evidence standard. They are flagged inline rather than stated, because an absent row is less useful to a preparer than a note saying where the gap is:
> - **US federal tax consequences of abandoning LIFO** (row 1) — a US tax-law question (LIFO conformity and any resulting change-of-method catch-up), not an accounting one. Not stated here; obtain a US tax specialist's opinion. This is the most consequential omission in the matrix.
> - **The ASC topic governing agriculture / biological assets** (row 13) — the substance (US GAAP has no fair-value model equivalent to IAS 41) follows from the EY comparison's silence; the topic number could not be verified and is not given.
> - **The ASC topic governing rate-regulated operations** (row 78) — same position; the IFRS side of that row is fully verified.
> - **The numeric probability convention behind US GAAP's "probable"** (row 30) — the *definition* and the fact that it is a higher threshold than IFRS are sourced; the percentage ranges quoted in US practice are convention, not standard text, and are not stated.

### Assets

| # | Topic | US GAAP treatment | IFRS treatment | Transition impact |
|---|---|---|---|---|
| 1 | **Inventory — cost formula** | LIFO is permitted (ASC 330). A consistent formula across inventories similar in nature or use is not explicitly required. | **LIFO is prohibited.** FIFO or weighted average only, and the **same** formula must be used for all inventories of similar nature and use (**IAS 2.25**). | For a LIFO entity this is the single largest first-day adjustment. Releasing the LIFO reserve increases inventory and opening retained earnings. **The US federal tax consequences of abandoning LIFO for book purposes are a tax-law question and are deliberately not stated in this guide** (see the gap note above) — they can exceed the accounting benefit, so obtain a US tax specialist's assessment **before** committing to a transition date. |
| 2 | **Inventory — measurement** | Inventory other than LIFO/RIM at **lower of cost and NRV**. LIFO and RIM at **lower of cost or market**, where market is current replacement cost, capped at NRV and floored at NRV less a normal profit margin. | **Lower of cost and NRV under all permitted methods.** NRV = estimated selling price less estimated costs of completion and costs to make the sale (IAS 2 [para-unconfirmed]). | Eliminates the replacement-cost ceiling/floor mechanic. Recompute every LIFO/RIM pool on an NRV basis at the date of transition. |
| 3 | **Inventory — reversal of write-downs** | Write-downs create a **new cost basis** and cannot be reversed, except a recovery within the **same fiscal year**. | Reversal is **required**, limited to the original write-down, when the reasons for it no longer exist (**IAS 2.34**), with disclosure of the amount and the circumstances. | Pre-transition write-downs whose cause has reversed must be **reversed in the opening balance sheet**. Requires the write-down history and the current NRV — data many entities do not retain. |
| 4 | **Inventory — RIM permanent markdowns** | Permanent markdowns do **not** affect the gross margin used in RIM; they reduce carrying cost to NRV less a normal profit margin, which may be below both cost and NRV. | Permanent markdowns **do** affect the average gross margin used in RIM; carrying amount is reduced to the lower of cost and NRV. | Retailers only, but material for them. Rebuild the RIM calculation. |
| 5 | **Development costs** | **Expensed as incurred** unless another Topic applies. External-use software capitalised from technological feasibility (ASC 985-20); internal-use software capitalised in the application development stage (ASC 350-40). | **Capitalisation is mandatory** once the IAS 38 criteria are met (technical feasibility, intent and ability to complete and use or sell, probable future benefits, adequate resources, reliable measurement of cost). **No separate software guidance.** | Two-way. R&D-intensive entities must build a **project-level cost capture** capability retrospectively, then defend the date each project crossed the criteria. Conversely, US software capitalisation thresholds do not map cleanly onto IAS 38 and some capitalised balances will fail. |
| 6 | **Cloud computing implementation costs** | A customer in a hosting arrangement that is a service contract applies **ASC 350-40** to decide whether to capitalise implementation costs. | **IFRS does not address** customer accounting for cloud arrangements or their implementation costs; judgement, applying several standards. | Expect a **write-off** of US-capitalised SaaS implementation costs. Sizeable for entities mid-ERP programme. See also the IFRIC agenda decisions in this area. |
| 7 | **Advertising costs** | Expensed as incurred **or** when the advertising first takes place — a **policy choice** — with limited exceptions. | **Expensed as incurred.** A prepayment is an asset only where payment precedes access to the goods or receipt of the services. | Small, but it removes an accounting policy and affects interim phasing. |
| 8 | **Revaluation of PP&E** | **Not permitted.** | **Permitted** as a policy election for an **entire class**, requiring regular revaluation to fair value (IAS 16 [para-unconfirmed]). | Not a required change — but the **IFRS 1 D5/D6 deemed cost election** is the practical equivalent for a US GAAP adopter and is normally where the value is. See §7. |
| 9 | **Component depreciation** | **Permitted but uncommon.** | **Required** where components of an asset have differing patterns of benefit (IAS 16 [para-unconfirmed]). | A genuine fixed-asset-register rebuild. Componentise before the date of transition; retrofitting it later means restating the comparative depreciation charge. Pairs badly with a large historic asset base — consider deemed cost. |
| 10 | **Major overhauls and inspections** | No general guidance outside **ASC 908** (airlines); repair and maintenance costs generally **expensed as incurred**. | Costs replacing a previously identified component, or a **major inspection**, are **capitalised** where use over more than one period is expected, benefits are probable and cost is reliably measurable; the carrying amount of the replaced part or prior inspection is **written off**. | Heavy for shipping, aviation, rail, energy and process manufacturing. Requires a component register that isolates inspection/overhaul cost — data rarely captured under US GAAP. |
| 11 | **Borrowing costs — measurement** | Eligible costs **exclude exchange rate differences**. For asset-specific borrowings, capitalise **average accumulated expenditures × borrowing rate**; interest earned on borrowed funds generally **cannot** offset interest cost. | Eligible costs **include** FX differences from foreign currency borrowings to the extent they are an adjustment to interest cost. For asset-specific borrowings, capitalise **actual** borrowing costs **less investment income earned on those borrowings** (**IAS 23.8**). | Recompute capitalised interest on every open qualifying asset. The investment-income offset reduces the capitalised amount for entities that draw down debt ahead of spend — common in project finance. The **IFRS 1 D23** exemption removes the historical recomputation but **not** the requirement to apply IAS 23 to assets already under construction. |
| 12 | **Investment property** | **Not separately defined**; accounted for as held-and-used or held-for-sale like other PP&E. | **IAS 40** defines it as property held to earn rent or for capital appreciation, and may include a lessee's ROU assets. Policy election of **cost or fair value model**, applied to all investment property (**IAS 40.30**). Under the fair value model there is **no depreciation** and fair value changes go to **profit or loss**. IFRS 16 requires a lessee to apply the IAS 40 fair value model to a leased property meeting the definition where that model is elected. | A structural decision, not a mechanical one. The fair value model puts property valuation movements **through P&L**, which changes earnings volatility and covenant behaviour. Decide the policy before the date of transition; the IFRS 1 D7(a) deemed cost extension is available **only if the cost model is chosen**. |
| 13 | **Biological assets** | No general model; agricultural assets generally at **cost** subject to industry guidance `[ASC-para-unconfirmed]` (the governing ASC topic could not be verified — see the gap note above). | **IAS 41**: biological assets at **fair value less costs to sell**, with gains and losses on initial recognition and on remeasurement in **profit or loss** (**IAS 41.26**). Agricultural produce at fair value less costs to sell **at the point of harvest**, which becomes its IAS 2 cost (**IAS 41.13**). Rebuttable presumption that fair value is reliably measurable, rebuttable **only on initial recognition** (**IAS 41.30**). Bearer plants are within IAS 16, not IAS 41. | Agriculture, forestry, aquaculture and plantation entities only, but transformative for them: a recurring, unrealised, non-cash fair value movement in operating results, plus an annual valuation obligation. |

### Impairment

| # | Topic | US GAAP treatment | IFRS treatment | Transition impact |
|---|---|---|---|---|
| 14 | **Impairment of long-lived assets — method** | **Two-step.** A recoverability test first: carrying amount compared with the sum of **undiscounted** future cash flows using entity-specific assumptions. Only if it fails is a loss computed. | **One-step.** Where an indicator exists, compute the impairment directly (IAS 36 [para-unconfirmed]). | The undiscounted screen is a substantial cushion. Removing it means assets that never failed the US test may be impaired at the date of transition. **Model this early** — it is the difference most likely to produce an unexpected opening equity hit. |
| 15 | **Impairment of long-lived assets — measurement** | Loss = carrying amount less **fair value** using market-participant assumptions (ASC 820). | Loss = carrying amount less **recoverable amount**, being the **higher of** fair value less costs of disposal and **value in use** (entity-specific discounted cash flows) (IAS 36 [para-unconfirmed]). | IFRS gives the entity a **second chance** through value in use. Requires a VIU model, a pre-tax discount rate and a documented cash flow projection — new infrastructure for most US GAAP preparers. |
| 16 | **Goodwill — unit of account** | Assigned to a **reporting unit**: an operating segment (ASC 280) **or one level below** (a component). | Allocated to a **CGU or group of CGUs** at the **lowest level at which goodwill is monitored internally**, and **no larger than an operating segment before aggregation** (IFRS 8). | The IFRS ceiling and the US floor are different constraints. Re-map goodwill at the date of transition; a finer allocation removes the cross-subsidy that shielded weak units under US GAAP. |
| 17 | **Goodwill — test method** | **Qualitative ("Step 0") assessment permitted.** Quantitative test compares the reporting unit's **carrying amount with its fair value**; loss capped at goodwill allocated. | **Qualitative assessment is not permitted.** Annual quantitative one-step test comparing the CGU's carrying amount **including goodwill** with its **recoverable amount**; loss allocated first to goodwill, then **pro rata** to other assets of the CGU subject to limits. | An annual quantitative impairment model becomes **mandatory**, every year, for every CGU carrying goodwill. Budget the valuation effort as a permanent run cost, not a transition cost. Note the pro rata write-down of other CGU assets has no US GAAP analogue. |
| 18 | **Indefinite-lived intangibles — test** | Qualitative assessment permitted; quantitative test compares **fair value** with carrying amount; assets tested individually unless essentially inseparable, and **may not** be combined with finite-lived intangibles or goodwill. | Qualitative assessment **not permitted**. Tested individually **or as part of the CGU** where the asset does not generate largely independent cash inflows. | The CGU-level fallback pulls indefinite-lived intangibles into the goodwill test population. Re-scope the impairment model. |
| 19 | **Reversal of impairment** | **Prohibited** (except assets held for sale). | **Prohibited for goodwill.** For other assets, reversal indicators must be **reviewed at each reporting date** and the loss reversed up to the newly estimated recoverable amount, capped at the carrying amount that would have existed net of depreciation had no impairment been recognised. | A **new recurring control**. Every pre-transition impairment (other than goodwill) must be revisited at the date of transition and at every reporting date thereafter. Retain the original impairment models — you now need them permanently. |

### Financial instruments

| # | Topic | US GAAP treatment | IFRS treatment | Transition impact |
|---|---|---|---|---|
| 20 | **Classification — debt instruments** | Driven largely by **legal form** (security vs loan) and **management intent**: HTM at amortised cost; Trading at FV-NI; AFS at FV-OCI. Loans and receivables held-for-investment at amortised cost or, if held for sale, at lower of amortised cost or fair value. | Legal form is irrelevant. Classification is driven by the **business model** and the **SPPI** contractual cash flow characteristics test: amortised cost, FVOCI, or FVTPL. Assets failing SPPI go to **FVTPL** regardless of intent (IFRS 9 [para-unconfirmed]). | Full reclassification exercise. The **AFS category disappears**. SPPI failures — contractually linked instruments, non-recourse features, leverage, non-genuine terms, and now ESG-linked features under the 2024 amendments — force FVTPL and introduce P&L volatility that did not exist. Mandatory exception **B8** fixes the assessment date at the date of transition. |
| 21 | **Classification — equity investments** | **FV-NI**, with a **measurement alternative** (cost less impairment, adjusted for observable price changes) for investments without readily determinable fair values. | **FVTPL** by default. An **irrevocable FVOCI election** is available for non-derivative equity instruments not held for trading; gains and losses in OCI are **never recycled** to P&L, though the cumulative amount may be transferred within equity. **No measurement alternative.** | Every cost-basis holding must be **fair valued** at the date of transition — often requiring valuations of private holdings that have never been valued. The **D19B** exemption gives a one-time window to make the FVOCI election on transition-date facts; miss it and the election is unavailable for existing holdings. |
| 22 | **Impairment of financial assets — model** | **CECL** (ASC 326): a **lifetime** expected credit loss recognised on **initial recognition** for assets in scope. Pool-based; a zero-loss estimate is appropriate only in limited circumstances. Write-offs when all or part is deemed **uncollectible**; the allowance **incorporates expected recoveries**. | **Three-stage ECL**. Stage 1: **12-month** ECL, applying while there has been no significant increase in credit risk. Stages 2 and 3: **lifetime** ECL. In Stage 2 interest income is on the **gross** carrying amount; in Stage 3, after a credit event, on the **amortised cost** (net of allowance). Write-offs when there is **no reasonable expectation of recovery**; IFRS gives **no guidance on subsequent recoveries**. | This is a **model rebuild, not a remeasurement**. CECL has no staging concept and no 12-month bucket; IFRS 9 has no expected-recovery component and shifts interest recognition in Stage 3. Neither model's output can be mapped to the other. Requires SICR criteria, stage-transfer logic, a Stage 3 interest engine, and forward-looking scenario weights. Mandatory exception **B8D–B8G** applies, including the **penalty default at B8G**: where determining SICR at the date of transition would require undue cost or effort, **lifetime ECL applies for the life of the instrument**. |
| 23 | **Impairment — FVOCI debt instruments** | Credit-related impairment recognised as an **allowance** capped at the excess of amortised cost over fair value; non-credit impairment stays in OCI. Intent-to-sell triggers full write-down to fair value through earnings. | Single ECL model. ECLs **do not reduce the carrying amount** — which remains fair value — but are recognised as an **accumulated impairment amount within OCI** with a corresponding **charge to profit or loss**. Cumulative OCI is **recycled** to P&L on derecognition. | Changes both the P&L charge and the OCI mechanics. Note the asymmetry with equity FVOCI (row 21), where nothing recycles. |
| 24 | **Impairment — equity instruments** | Generally not tested (measured at FV-NI); the measurement alternative is **qualitatively assessed** each period and written down to fair value if impaired. | **No impairment model for equity instruments at all** — they are at FVTPL or FVOCI. | Removes an assessment. Any US impairment loss on a cost-basis holding is subsumed into the transition-date fair value. |
| 25 | **Compound (hybrid) instruments** | Convertible debt is generally **not split** into debt and equity unless specific requirements are met; may be bifurcated into debt and derivative components. | **Split accounting is required**: liability and equity components, or a derivative component measured at fair value (IAS 32 [para-unconfirmed]). | Convertible bond issuers must **re-split every instrument at inception** and rebuild the effective interest amortisation. The **IFRS 1 D18** exemption applies **only** where the liability component is no longer outstanding at the date of transition — for live convertibles there is **no relief**. |
| 26 | **Derecognition of financial assets** | Control-based: **legal isolation**, transferee's right to pledge or exchange, and no effective control retained. Partial derecognition only for a **participating interest**. | **Mixed model**: risks and rewards first; control assessed **only if** that test is inconclusive. Control is surrendered if the transferee has the **practical ability to unilaterally sell** without restriction. **No legal isolation test.** Partial derecognition permitted for specifically identified or pro rata cash flows. | Securitisations, factoring and receivables-purchase programmes can flip on or off balance sheet. Mandatory exception **B2** makes this **prospective** — pre-transition derecognitions stand — which is a substantial relief. The **B3** retrospective option requires contemporaneous data and is rarely available. |
| 27 | **Hedge effectiveness** | Relationship must be **"highly effective"**; prospective **and retrospective** assessments at least quarterly. No requirement to separately measure and recognise ineffectiveness for highly effective cash flow and net investment hedges. **Shortcut method permitted** for interest rate swaps hedging recognised debt. | Requires an **economic relationship**, that value changes are **not dominated by credit risk**, and a **hedge ratio** consistent with actual risk management. **Prospective assessment only**, at each annual/interim reporting date or on a significant change. **Ineffectiveness is measured and recognised in P&L each period** (for cash flow and net investment hedges, limited to overhedges). **No shortcut method.** | The shortcut method's removal forces full measurement and P&L recognition of ineffectiveness on swap portfolios that previously reported none. Mandatory exception **B4–B6**: **no retrospective designation**. Every hedge relationship must be **documented afresh on or before the date of transition** — this is a hard deadline with no cure, and it is the single most common transition failure in treasury. |
| 28 | **Hedging risk components** | Permitted for financial and non-financial items, but hedgeable interest components are confined to **defined benchmark rates** (fixed-rate) and **contractually specified rates** (variable-rate). For forecast purchases/sales of a non-financial asset: FX risk, the entire price, or a **contractually specified** component. | Permitted for financial and non-financial items where the component is **separately identifiable and reliably measurable** — a broader test that does **not** require contractual specification. | IFRS **widens** eligibility. Commodity and energy hedgers can designate market-observable components (e.g. a benchmark crude leg within a refined product price) that ASC 815 would not accept. A rare case where transition improves the accounting — but only if designated in time. |
| 29 | **Excluded hedge components** | Initial value of an excluded component recognised in earnings on a **systematic and rational** basis; differences deferred in AOCI. **Policy election** to recognise fair value changes immediately in earnings. | Fair value changes of excluded components are **deferred in OCI** and reclassified based on the nature of the hedged item (transaction-related or time-period-related). **No immediate-earnings election.** | Removes a policy choice and changes the phasing of option time value and FX basis spread. |

### Liabilities, provisions and income taxes

| # | Topic | US GAAP treatment | IFRS treatment | Transition impact |
|---|---|---|---|---|
| 30 | **Provisions — recognition threshold** | A loss must be **"probable"**, defined as *"the future event or events are **likely** to occur"* — in practice a threshold materially higher than more-likely-than-not. (The percentage conventions quoted in US practice are not standard text and are not stated here.) | **"Probable"** for IAS 37 purposes means **"more likely than not"** — i.e. **>50%**. Explicitly **a lower threshold than US GAAP**. | Systematically **more provisions** under IFRS. Re-run the entire litigation, warranty, environmental and regulatory contingency population against the 50% threshold at the date of transition. Frequently produces a material opening equity charge and requires fresh legal confirmations. |
| 31 | **Provisions — discounting** | Discounting permitted only where amount and timing are **fixed or reliably determinable** (e.g. ASC 410-30 environmental) or the obligation is measured at fair value (e.g. ASC 410-20 AROs). | Provisions are recorded at the amount to settle or transfer, **taking account of the time value of money if material**, using a **pre-tax rate reflecting current market assessments** and risks specific to the liability not already in the cash flows. Unwinding is **interest expense**. | Long-dated decommissioning, restoration, environmental and self-insurance provisions must be **discounted**, reducing the liability at transition but creating a **recurring finance charge** that shifts cost below the operating line. |
| 32 | **Provisions — range of outcomes** | Where no amount in a range is a better estimate, accrue the **minimum**. | **Best estimate.** For a large population (e.g. warranties), typically the **expected value**; the **midpoint** where any point in a continuous range is equally likely; for a single obligation, often the most likely outcome, but other outcomes must still be considered. | Systematically **higher** provisions where US practice defaulted to the low end of a range. |
| 33 | **Onerous contracts** | Losses on executory contracts generally **not permitted** except in a restructuring/exit activity, a business combination, or other specified transactions. | **IAS 37 requires** a provision when a contract is onerous — unavoidable costs exceed expected economic benefits — measured at the **least net cost of exiting**: the lower of the cost of fulfilling and any penalty for failure to fulfil. | A **new liability class** with no US GAAP equivalent. Sweep the contract population — long-term supply, take-or-pay, outsourcing, IT, property (outside IFRS 16) — at the date of transition. Watch the November 2024 IASB ED *Provisions — Targeted Improvements* for change. |
| 34 | **Exit or disposal cost obligations** | Under **ASC 420**, each cost type is assessed separately. One-time involuntary termination benefits recognised **over the future service period** (or immediately if no service is required after communication). Contract termination costs at **fair value** when incurred. | Once there is a legal or **constructive** obligation for a detailed exit plan, the general IAS 37 requirements apply. Costs are typically recognised **earlier** because IAS 37 focuses on the **plan as a whole** rather than its component costs. | Restructurings recognised earlier and in larger single amounts. Restructurings announced but not fully accrued before the date of transition need reassessment. |
| 35 | **Income taxes — DTA recognition** | DTAs recognised **in full**, then reduced by a separately recognised **valuation allowance** to the amount more likely than not to be realised. | DTAs recognised **only to the extent recovery is probable** (more likely than not). **No separate valuation allowance** is presented (**IAS 12.24**). | Same economic threshold, different presentation and disclosure. Gross DTA and valuation allowance disclosures disappear; the tax note is rebuilt. Note also the **B14** override forcing deferred tax on ROU assets, lease liabilities and decommissioning items. |
| 36 | **Income taxes — measurement rate** | **Enacted** rates at the balance sheet date only. | Enacted **or "substantively enacted"** rates at the balance sheet date (**IAS 12.46** for current tax, **IAS 12.47** for deferred tax). | Timing difference for jurisdictions where legislation is passed but not formally enacted at year end — notably the UK. Can move a rate change one reporting period earlier. |
| 37 | **Income taxes — intra-entity transfers of assets** | Tax paid on intercompany **inventory** profits is **deferred in consolidation** (a prepaid asset), and recognising deferred tax on the resulting step-up in tax basis is **prohibited**; the effect is recognised on sale outside the group. For assets **other than inventory**, both current and deferred effects are recognised **in the period of transfer** (ASC 740). | **IAS 12 requires** tax paid on intercompany profits to be recognised as **tax expense as incurred**, and requires **deferred tax on temporary differences between the tax bases of assets transferred** between entities or tax jurisdictions that remain within the group. | A real difference for groups with active IP or inventory migration. IFRS recognises deferred tax on the **buyer's** stepped-up basis, which US GAAP forbids for inventory. Requires transfer-level data by legal entity and jurisdiction — often not held centrally. |
| 38 | **Income taxes — uncertain tax positions** | **ASC 740-10-25** two-step: recognise when **more likely than not** to be sustained on technical merits, then measure at the **largest amount >50% likely** of being realised on settlement. Unit of account based on how the return position is prepared and supported. Detection risk **not** considered. | **IFRIC 23**: if it is **probable** the authority will accept the treatment, follow the treatment used or planned in the filing. If not probable, reflect the uncertainty using **either the expected value or the most likely amount**, whichever better predicts resolution. Treatments may be assessed separately or together on the same "better predicts" basis. Detection risk **not** considered. | Same recognition threshold, **different measurement**. The US "largest amount >50% likely" is a cumulative-probability construct with no IFRIC 23 equivalent; the expected-value option can produce a materially different liability. Rebuild the UTP inventory position by position. |
| 39 | **Income taxes — initial recognition exemption** | Generally **no** initial recognition exemption. Deferred tax is recognised on temporary differences arising on initial recognition of an acquired asset or liability; where consideration differs from tax basis outside a business combination, a **simultaneous equation** allocates between asset and deferred tax. | **Initial recognition exemption**: no deferred tax where (1) the item did not arise from a business combination, (2) at the time of the transaction it affects **neither accounting nor taxable profit**, and (3) it does not give rise to **equal** taxable and deductible temporary differences. | IFRS **removes** deferred tax the US model records — but note the (3) condition and the **B14** carve-out mean the exemption does **not** shelter leases or decommissioning. Do not assume the exemption applies broadly. |
| 40 | **Income taxes — outside basis differences** | No recognition for an investment in a **foreign** subsidiary or foreign corporate joint venture that is **essentially permanent in duration**, unless reversal becomes apparent. A DTL **is** recognised for a **domestic** subsidiary unless recovery can be tax-free and that means is expected. | No recognition where the reporting entity **controls the timing** of reversal **and** it is **probable** the difference will **not** reverse in the foreseeable future — with **no domestic/foreign distinction**. | The IFRS test is control-plus-intention rather than permanence-plus-domicile. Groups relying on the US domestic/foreign split must re-evidence control over distribution timing, subsidiary by subsidiary, including through shareholder agreements and local law constraints. |
| 41 | **Government grants** | Historically **no guidance** for business entities; entities analogised to **IAS 20**, ASC 450 or ASC 958-605. **ASU 2025-10, *Government Grants (Topic 832)*** (December 2025) creates guidance **based on IAS 20** with targeted improvements — effective for PBEs for annual periods beginning after **15 December 2028** (others: after 15 December 2029), early adoption permitted. | **IAS 20**: no recognition until there is **reasonable assurance** that conditions will be complied with and the grant will be received (**IAS 20.7**); recognition in profit or loss **on a systematic basis over the periods in which the related costs are expensed** (**IAS 20.12**); asset-related grants presented **either as deferred income or as a deduction from the asset's carrying amount** (**IAS 20.24**). | Until Topic 832 is adopted, US practice is **diverse** — establish what the entity actually did before mapping. Where it already analogised to IAS 20, the difference is presentational. Note the two IAS 20 presentation options materially change gross PP&E and the depreciation line. |
| 42 | **Hyperinflation** | **ASC 830**: local functional currency financial statements are **remeasured as if the functional currency were the reporting currency** (the US dollar for a US parent), with exchange differences **in income**. | **IAS 29**: the functional currency is **maintained**; amounts not already at the current period-end rate (**current and prior period**) are **indexed using a general price index**, with the resulting effect in income, and are then translated at the **closing rate**. | Fundamentally different mechanics for the same economics. Requires a general price index series for the whole comparative period and a restatement engine. Also note **Amendments to IAS 21: Translation to a Hyperinflationary Presentation Currency** — issued 13 November 2025, effective 1 January 2027, **not yet EU- or UK-adopted at 28 August 2026** — which sits alongside this. |

### Group accounting and business combinations

| # | Topic | US GAAP treatment | IFRS treatment | Transition impact |
|---|---|---|---|---|
| 43 | **Consolidation model** | **Two models.** All entities are first tested as potential **VIEs** (power and benefits); if not a VIE, the **Voting Model** applies. Potential voting rights generally **not** included in either. **De facto control is not considered.** | **A single control model** for all entities including structured entities: power, exposure to variable returns, and the ability to use power to affect returns. **Potential voting rights are considered.** **De facto control is considered.** | Two-way, and the highest-risk judgement area. **De facto control** can pull in investees held below 50% where remaining holdings are dispersed — a concept with **no US GAAP analogue**. Conversely, VIEs consolidated on a benefits analysis may fall out. Re-perform the control assessment for **every** investee, not just the marginal ones. |
| 44 | **Uniform accounting policies** | **Not required** between parent and subsidiaries; not required between equity-method investor and investee provided the investee reports under US GAAP. | **Required** both for consolidated subsidiaries and for equity-method investees. | A group-wide policy alignment project, not an accounting entry. Affects every subsidiary ledger and every equity-accounted investee — and you can rarely compel an associate to change its policies, so an **adjustment layer** is needed. |
| 45 | **Reporting date alignment** | Differences of **up to three months** permitted; significant intervening events disclosed. | Same date **required**. Where impracticable, the subsidiary prepares **additional financial information** at the parent's date; if that is impracticable and the gap is **three months or less**, the subsidiary's statements are **adjusted** for significant transactions and events. | Subsidiaries on off-cycle year ends need either a close-date change or an adjustment process. A systems and calendar issue, not a measurement one. |
| 46 | **Investment company / investment entity parent** | A **non-investment-company parent retains** the investment company subsidiary's fair value accounting in the consolidated financial statements. | A parent of an investment entity **consolidates all entities it controls**, including those controlled through an investment entity subsidiary — it does **not** retain fair value accounting — unless the parent is itself an investment entity. | Directly opposite outcomes. Asset managers and holding structures with regulated fund subsidiaries face a **full consolidation build** where US GAAP required none. |
| 47 | **Joint arrangements** | Joint ventures generally equity-accounted, with a **fair value election** available. **Proportionate consolidation permitted** for unincorporated entities in certain construction and extractive industries and certain undivided interests. **ASC 805-60** requires newly formed joint ventures to apply a **new basis of accounting** at formation (fair value). | **Proportionate consolidation is prohibited, regardless of industry.** Joint arrangements are classified as **joint operations** (recognise the entity's share of assets, liabilities, revenues and expenses) or **joint ventures** (equity method). **IFRS does not address a joint venture's accounting on formation.** | Construction, oil and gas and mining entities using proportionate consolidation face a **material gross-up reversal** of revenue, assets and liabilities. Note the **IFRS 1 D31(b)** rider: moving from proportionate consolidation to the equity method requires a **mandatory IAS 36 impairment test

# IFRS Workflows — Step-by-Step Procedures

This file provides detailed, practitioner-level workflows for seventeen core IFRS process areas. Each workflow includes substeps, decision points, key judgments, and example journal entries.

---

## 1. Revenue Recognition (IFRS 15) — 5-Step Model

### Step 1: Identify the Contract

A contract exists when **all five** criteria in IFRS 15.9 are met:

1. **Approval and commitment** — all parties have approved the contract (written, oral, or implied by customary business practices) and are committed to performing their obligations.
2. **Rights identifiable** — the entity can identify each party's rights regarding the goods or services to be transferred.
3. **Payment terms identifiable** — the entity can identify the payment terms for the goods or services to be transferred.
4. **Commercial substance** — the contract has commercial substance (i.e., the risk, timing, or amount of the entity's future cash flows is expected to change).
5. **Collectability probable** — it is probable that the entity will collect the consideration to which it will be entitled in exchange for the goods or services (assess the customer's ability and intention to pay).

**Decision point — Are all five criteria met?**
- **Yes** -> proceed to Step 2.
- **No** -> do not recognise a contract. Recognise consideration received only when: (a) no remaining obligations and all or substantially all consideration received and non-refundable; or (b) the contract has been terminated and consideration received is non-refundable.

#### Contract Combinations (IFRS 15.17)

Combine two or more contracts entered into at or near the same time with the same customer if **any** of the following apply:

- Contracts are negotiated as a package with a single commercial objective.
- Consideration in one contract depends on the price or performance of the other.
- Goods or services promised across the contracts are a single performance obligation.

#### Contract Modifications (IFRS 15.18-21)

A modification is any change in scope, price, or both. Treatment depends on two tests:

| Condition | Treatment |
|---|---|
| Additional goods/services are **distinct** AND price reflects standalone selling price of the additions | Treat as a **separate contract** (prospective) |
| Additional goods/services are **not distinct** from those already transferred | Treat as part of the **existing contract** — cumulative catch-up adjustment |
| Additional goods/services are **distinct** but price does NOT reflect SSP | Terminate old contract, create **new combined contract** (prospective with reallocation) |

**Key judgment:** Determining whether modification pricing reflects standalone selling price requires market evidence or estimation.

---

### Step 2: Identify Performance Obligations

A performance obligation is a promise to transfer a **distinct** good or service (or a bundle/series). A good or service is distinct if **both** conditions are met (IFRS 15.27):

1. **Capable of being distinct** — the customer can benefit from the good or service on its own or together with other readily available resources.
2. **Distinct within the context of the contract** — the promise to transfer the good or service is separately identifiable from other promises in the contract.

#### Indicators that a good or service is NOT separately identifiable (IFRS 15.29):

- The entity provides a significant service of integrating goods/services into a combined output.
- One or more goods/services significantly modify or customise another good/service in the contract.
- Goods/services are highly interdependent or highly interrelated.

#### Series Guidance (IFRS 15.22(b)):

A series of distinct goods or services that are substantially the same and have the same pattern of transfer is treated as a **single performance obligation** if both criteria for over-time recognition are met and the same method is used to measure progress.

**Decision point — How many performance obligations?**
- List each distinct good or service (or distinct bundle).
- If goods/services fail the distinct test, combine them into a single performance obligation.

---

### Step 3: Determine the Transaction Price

The transaction price is the amount of consideration to which the entity expects to be entitled. Consider the following components:

#### 3a. Variable Consideration (IFRS 15.50-59)

Estimate using either:
- **Expected value** — probability-weighted sum of possible amounts (appropriate when many possible outcomes).
- **Most likely amount** — single most likely outcome (appropriate for binary outcomes).

**Variable consideration constraint (IFRS 15.56):** Include variable consideration in the transaction price only to the extent that it is **highly probable** that a significant reversal in the cumulative amount of revenue recognised will not occur when the uncertainty is resolved.

Factors increasing the likelihood of a revenue reversal:
- Amount is highly susceptible to factors outside the entity's influence.
- Uncertainty not expected to be resolved for a long period.
- Entity's experience with similar contracts is limited.
- Entity has a practice of offering price concessions or changing payment terms.
- Contract has a large number and broad range of possible consideration amounts.

#### 3b. Significant Financing Component (IFRS 15.60-65)

Adjust the transaction price if the timing of payments provides the customer or entity with a significant financing benefit. Use the discount rate that would be reflected in a separate financing transaction at contract inception.

**Practical expedient:** No adjustment required if the period between payment and transfer is **one year or less**.

#### 3c. Non-Cash Consideration (IFRS 15.66-69)

Measure at **fair value**. If fair value cannot be reasonably estimated, measure by reference to the standalone selling price of the goods or services promised.

#### 3d. Consideration Payable to a Customer (IFRS 15.70-72)

Consideration payable to a customer (cash, credits, vouchers) is accounted for as a **reduction of the transaction price** unless the payment is in exchange for a distinct good or service from the customer.

**Key judgment:** Determining whether consideration payable is for a distinct good or service requires assessment of whether the entity would purchase that good or service from a third party.

---

### Step 4: Allocate the Transaction Price

Allocate the transaction price to each performance obligation on a **relative standalone selling price (SSP)** basis (IFRS 15.73-80).

#### Methods for Determining SSP (IFRS 15.79):

| Method | When to Use |
|---|---|
| **Adjusted market assessment** | Evaluate the market and estimate the price customers would pay; reference competitor pricing |
| **Expected cost plus margin** | Forecast expected costs to satisfy the performance obligation and add an appropriate margin |
| **Residual approach** | Only when SSP is highly variable or uncertain; total transaction price minus observable SSPs of other obligations |

#### Discount Allocation (IFRS 15.81-83)

Allocate a discount entirely to one or more (but not all) performance obligations only if **all** of the following are met:
- Entity regularly sells each distinct good or service on a standalone basis.
- Entity regularly sells on a standalone basis a bundle of some of those goods or services at a discount.
- The discount is substantially the same as the discount in the bundle, and analysis of the goods or services in each bundle provides observable evidence of the performance obligation(s) to which the entire discount belongs.

#### Variable Consideration Allocation (IFRS 15.84-86)

Allocate variable consideration entirely to a specific performance obligation (or a distinct good or service in a series) if **both** conditions are met:
- The terms of the variable payment relate specifically to the entity's efforts to satisfy that performance obligation (or transfer that distinct good or service).
- Allocating the variable amount entirely to that performance obligation is consistent with the overall allocation objective.

---

### Step 5: Recognise Revenue

#### Over-Time Recognition (IFRS 15.35-37)

Revenue is recognised over time if **any one** of the following three criteria is met:

1. **Simultaneous receipt and consumption** — the customer simultaneously receives and consumes the benefits as the entity performs (e.g., routine or recurring services).
2. **Customer controls the asset as it is created or enhanced** — the entity's performance creates or enhances an asset that the customer controls as the asset is created or enhanced (e.g., construction on customer's land).
3. **No alternative use + enforceable right to payment** — the entity's performance does not create an asset with an alternative use to the entity, AND the entity has an enforceable right to payment for performance completed to date (including a reasonable profit margin).

**Decision point — Does the obligation meet any of the three over-time criteria?**
- **Yes** -> recognise revenue over time; select a progress measurement method.
- **No** -> recognise revenue at a point in time.

#### Progress Measurement Methods:

| Method | Type | Examples |
|---|---|---|
| **Output methods** | Based on value transferred to customer | Units delivered, milestones reached, surveys of work performed, time elapsed |
| **Input methods** | Based on entity's efforts or inputs | Costs incurred, labour hours, machine hours, time elapsed |

**Key judgment:** The selected method must faithfully depict the entity's progress toward complete satisfaction. Exclude from input methods any inputs that do not contribute proportionately (e.g., wasted materials, unexpected cost overruns).

#### Point-in-Time Indicators (IFRS 15.38):

When none of the over-time criteria are met, consider the following indicators of when control transfers:

- Entity has a present right to payment for the asset.
- Customer has legal title.
- Entity has transferred physical possession.
- Customer has the significant risks and rewards of ownership.
- Customer has accepted the asset.

#### Licensing (IFRS 15.B52-B63):

| Licence Type | Nature | Revenue Recognition |
|---|---|---|
| **Right to access** (entity's IP as it exists throughout the licence period) | Entity continues to be involved with the IP; updates significantly affect the IP the customer is using | Over time |
| **Right to use** (entity's IP as it exists at the point in time the licence is granted) | IP has significant standalone functionality; entity's ongoing activities do not significantly affect the utility | Point in time |

A licence provides a right to access if **all three** of the following are met:
1. The contract requires, or the customer reasonably expects, that the entity will undertake activities that significantly affect the IP.
2. The rights granted by the licence directly expose the customer to positive or negative effects of the entity's activities.
3. Those activities do not result in the transfer of a good or service to the customer as those activities occur.

---

### Example Journal Entries — Revenue Recognition

#### Point-in-Time Recognition (sale of goods, control transfers on delivery)

**Facts:** Entity sells equipment for CU 100,000. Cost of goods is CU 60,000. Delivery occurs on 15 March.

```
On delivery date (15 March):

Dr  Trade Receivables                     100,000
    Cr  Revenue                                       100,000
To recognise revenue upon transfer of control of equipment.

Dr  Cost of Sales                          60,000
    Cr  Inventory                                      60,000
To recognise cost of goods sold.
```

#### Over-Time Recognition (construction contract, input method — cost-to-cost)

**Facts:** Entity enters a CU 500,000 fixed-price construction contract. Total estimated costs are CU 350,000. At the end of Period 1, costs incurred to date are CU 140,000 (40% complete). The customer is billed CU 200,000.

```
Period 1 — Recognise costs incurred:

Dr  Contract Costs (WIP)                  140,000
    Cr  Cash / Payables                               140,000
To recognise construction costs incurred.

Period 1 — Recognise revenue (40% x CU 500,000 = CU 200,000):

Dr  Contract Asset                        200,000
    Cr  Revenue                                       200,000
To recognise revenue over time based on percentage of completion.

Period 1 — Transfer costs to cost of sales:

Dr  Cost of Sales                         140,000
    Cr  Contract Costs (WIP)                          140,000
To recognise cost of sales for the period.

Period 1 — Billing:

Dr  Trade Receivables                     200,000
    Cr  Contract Asset                                200,000
To record billing to customer.
```

#### Advance Payment (contract liability)

**Facts:** On 1 December the entity receives CU 120,000 in advance for a 12-month service contract beginning 1 January. Revenue is recognised evenly over the service period.

```
On receipt (1 December):

Dr  Cash                                  120,000
    Cr  Contract Liability                            120,000
To recognise the obligation to transfer services for consideration already received.

Each month from 1 January (120,000 / 12 = 10,000):

Dr  Contract Liability                     10,000
    Cr  Revenue                                         10,000
To recognise revenue as the performance obligation is satisfied over time.

After 12 months the contract liability is nil: 120,000 - (12 x 10,000) = 0.
```

---

### Appendix: Special Topics — Revenue Recognition

#### Principal vs Agent (IFRS 15.B34-B38)

When another party is involved in providing goods or services to a customer, the entity must determine whether it is a **principal** (controls the good or service before transfer) or an **agent** (arranges for another party to provide the good or service).

- **Principal** -> recognise revenue at the **gross** amount of consideration.
- **Agent** -> recognise revenue at the **net** amount (commission or fee).

**Indicators that an entity is a principal:**
- The entity has **primary responsibility** for fulfilling the promise to provide the good or service.
- The entity has **inventory risk** before or after the good or service is transferred to the customer (or after transfer, e.g., return rights).
- The entity has **discretion in establishing the price** for the good or service.

**Key judgment:** No single indicator is determinative. The overall assessment focuses on whether the entity controls the specified good or service before it is transferred to the customer.

#### Bill-and-Hold Arrangements (IFRS 15.B79-B82)

A bill-and-hold arrangement is one in which an entity bills a customer for a product but retains physical possession until a future date. Revenue is recognised when the customer obtains control, even without physical delivery, if **all four** of the following criteria are met:

1. The reason for the bill-and-hold arrangement is **substantive** (e.g., the customer requested the arrangement).
2. The product has been **identified separately as belonging to the customer**.
3. The product is currently **ready for physical transfer** to the customer.
4. The entity **cannot use the product** or direct it to another customer.

If these criteria are met, the entity recognises revenue at the point control transfers (which may be before physical delivery). The entity must also consider whether it has a separate performance obligation for custodial services.

#### Consignment Arrangements (IFRS 15.B77-B78)

When a product is delivered to another party (e.g., a dealer or distributor) for sale to end customers, the entity must assess whether the arrangement is a **consignment**. If so, control has NOT transferred and revenue is not recognised until the product is sold to the end customer (or the consignment period expires).

**Indicators that an arrangement is consignment:**
- The product is **controlled by the entity** until a specified event occurs (e.g., sale to an end customer).
- The entity is able to **require the return** of the product or **transfer the product to a third party**.
- The dealer/distributor does **not have an unconditional obligation** to pay for the product (although a deposit may be required).

**Related workflows:** IFRS 16 (determining whether an arrangement is a lease vs. a service — Step 1), IFRS 9 (significant financing component may affect financial instrument accounting), IFRS 3 (revenue from contracts acquired in a business combination), IFRS 1 (completed contracts exemption on transition).

---

## 2. Lease Accounting (IFRS 16)

### Step 1: Identify Whether the Arrangement Contains a Lease

A contract contains a lease if it conveys the **right to control the use** of an **identified asset** for a period of time in exchange for consideration (IFRS 16.9).

#### Identified Asset (IFRS 16.B13-B20):

- An asset is typically identified by being explicitly or implicitly specified in the contract.
- A capacity portion of an asset is an identified asset if it is physically distinct (e.g., a floor of a building).
- **Substantive substitution right:** If the supplier has a practical ability to substitute alternative assets throughout the period of use AND would benefit economically from exercising that right, the asset is NOT identified.

#### Right to Control Use (IFRS 16.B21-B30):

The customer controls the use if, throughout the period of use, the customer has **both**:

1. **Right to obtain substantially all the economic benefits** from use of the asset (directly or indirectly — use, hold, sub-lease, etc.).
2. **Right to direct the use** of the asset. This is satisfied if either:
   - The customer has the right to direct **how and for what purpose** the asset is used throughout the period of use; OR
   - The relevant decisions about how and for what purpose the asset is used are **predetermined** and the customer has the right to **operate** the asset or the customer **designed** the asset.

**Decision point — Is there a lease?**
- **Yes** -> proceed to Step 2.
- **No** -> account for as a service arrangement.

---

### Step 2: Separate Lease and Non-Lease Components

If the contract contains both lease and non-lease components (e.g., maintenance services bundled with equipment lease), the lessee must either:

1. **Separate** the components and allocate the consideration based on relative standalone prices; OR
2. **Elect the practical expedient** (by class of underlying asset) to account for the entire contract as a single lease — this increases the ROU asset and lease liability.

**Lessor** must always separate lease and non-lease components, applying IFRS 15 to the non-lease components.

---

### Step 3: Determine the Lease Term

The lease term is the **non-cancellable period** plus:
- Periods covered by an **option to extend** if the lessee is reasonably certain to exercise that option; and
- Periods covered by an **option to terminate** if the lessee is reasonably certain NOT to exercise that option.

#### Factors in Assessing "Reasonably Certain" (IFRS 16.B37-B40):

- Significant leasehold improvements that are expected to have significant economic benefit remaining at the option exercise date.
- Costs relating to termination (e.g., negotiation costs, relocation costs, loss of a suitable replacement).
- Importance of the underlying asset to the lessee's operations (e.g., specialised asset, location-specific).
- Conditionality associated with exercising the option (e.g., performance-based thresholds).
- Past practice and economic incentives.

**Key judgment:** The assessment of "reasonably certain" should be revisited if there is a significant event or change in circumstances within the lessee's control.

---

### Step 4: Lessee Initial Measurement

#### Lease Liability — Components (IFRS 16.26):

The lease liability is measured at the **present value** of the following payments not yet paid at the commencement date:

| Component | Description |
|---|---|
| Fixed payments | Less any lease incentives receivable |
| Variable payments based on an index/rate | Using the index or rate at the commencement date |
| Amounts expected under residual value guarantees | Lessee's expected payment to the lessor |
| Exercise price of purchase option | If the lessee is reasonably certain to exercise |
| Penalties for terminating the lease | If the lease term reflects the lessee exercising a termination option |

**Variable payments NOT included in the liability** (recognised in profit or loss as incurred):
- Variable payments based on usage or performance (e.g., per-unit, revenue-based).

#### Discount Rate:

- Use the **interest rate implicit in the lease** if readily determinable.
- If not readily determinable, use the **lessee's incremental borrowing rate** (the rate the lessee would have to pay to borrow over a similar term, with similar security, the funds necessary to obtain an asset of similar value in a similar economic environment).

#### Right-of-Use (ROU) Asset — Components (IFRS 16.24):

| Component | Description |
|---|---|
| Lease liability | Initial measurement amount |
| Payments made at or before commencement | Less any lease incentives received |
| Initial direct costs | Costs directly attributable to negotiating and arranging the lease |
| Restoration/dismantling costs | Estimate of costs to dismantle/restore per IAS 37 |

---

### Step 5: Lessee Subsequent Measurement

#### Interest Accretion on Lease Liability (IFRS 16.36):

- Interest expense = carrying amount of lease liability at the start of the period x discount rate.
- Lease payment reduces the lease liability (split between interest and principal).

#### Depreciation of ROU Asset (IFRS 16.31-33):

- Depreciate from commencement date to the **earlier of** the end of the useful life or the end of the lease term.
- Exception: if ownership transfers or a purchase option is reasonably certain to be exercised, depreciate over the useful life of the underlying asset.
- Apply IAS 36 impairment testing to the ROU asset.

#### Lease Remeasurement vs Modification (IFRS 16.39-46):

**Decision point — has the contract itself changed?**
- **No** (the lease term assessment has changed, or a payment linked to an index or rate has reset) -> this is a **remeasurement**, not a modification. Adjust the ROU asset against the lease liability; recognise in profit or loss only any amount by which the remeasurement would reduce the ROU asset below zero (IFRS 16.39).
- **Yes** (scope or consideration has changed by agreement) -> apply the modification table below (IFRS 16.44-46).

| Remeasurement trigger | Discount rate |
|---|---|
| Change in future payments from a **change in an index or rate** used to determine them (e.g., CPI-linked rent review) | **Unchanged** discount rate (IFRS 16.43) — unless the change is a change in floating interest rates, in which case use a revised rate |
| Change in the **lease term**, or in the assessment of a **purchase option** | **Revised** discount rate (IFRS 16.40-41) — the rate implicit in the lease for the remainder of the term if readily determinable, otherwise the lessee's incremental borrowing rate at the date of reassessment |
| Change in the amount expected to be payable under a **residual value guarantee** | **Unchanged** discount rate (IFRS 16.42-43) |

| Modification Type | Treatment |
|---|---|
| Increase in scope + consideration commensurate with standalone price | Account for as a **separate lease** |
| Decrease in scope | Remeasure the lease liability using a revised discount rate; reduce ROU asset proportionately; recognise gain or loss for partial/full termination |
| No change in scope (e.g., change in consideration or lease term) | Remeasure the lease liability using a revised discount rate; adjust the ROU asset |

#### Recognition Exemptions (IFRS 16.5-8):

Lessees may elect NOT to apply IFRS 16 recognition requirements to:
- **Short-term leases** — lease term of 12 months or less (no purchase option); election is by class of underlying asset.
- **Low-value leases** — underlying asset has a low value when new (guidance suggests approximately USD 5,000); election is on a lease-by-lease basis.

For exempt leases, recognise lease payments as an expense on a straight-line basis (or another systematic basis).

---

### Step 6: Lessor Classification

The lessor classifies each lease as either a **finance lease** or an **operating lease** (IFRS 16.61-66).

#### Finance Lease Indicators (substantially all risks and rewards transferred):

- Transfers ownership by the end of the lease term.
- Lessee has a bargain purchase option.
- Lease term is for the **major part** of the economic life.
- Present value of lease payments is substantially equal to the **fair value** of the asset at inception.
- Underlying asset is of a **specialised nature** that only the lessee can use without major modifications.

Additional indicators:
- If the lessee can cancel, the lessor's losses are borne by the lessee.
- Gains or losses from fair value fluctuations accrue to the lessee.
- Lessee can continue the lease for a secondary period at below-market rent.

**Decision point — Is it a finance lease?**
- **Yes** -> derecognise the asset; recognise a net investment in the lease; recognise interest income using the effective interest method.
- **No** -> retain the asset; recognise lease income on a straight-line basis; continue to depreciate the asset.

---

### Example Journal Entries — Lease Accounting (Lessee)

**Facts:** Lessee enters into a 5-year lease for office space. Annual lease payments of CU 50,000 payable at year-end. Lessee's incremental borrowing rate is 5%. No initial direct costs or restoration obligations. Present value of lease payments = CU 216,474.

#### At Commencement:

```
Dr  Right-of-Use Asset                   216,474
    Cr  Lease Liability                               216,474
To recognise right-of-use asset and lease liability at present value of lease payments.
```

#### Year 1 — Interest Accretion and Payment:

```
Interest expense = CU 216,474 x 5% = CU 10,824

Dr  Interest Expense                      10,824
    Cr  Lease Liability                                10,824
To accrue interest on the lease liability.

Dr  Lease Liability                       50,000
    Cr  Cash                                           50,000
To record annual lease payment.

Closing lease liability = 216,474 + 10,824 - 50,000 = CU 177,298
```

#### Year 1 — Depreciation of ROU Asset:

```
Depreciation = CU 216,474 / 5 years = CU 43,295

Dr  Depreciation Expense                  43,295
    Cr  Accumulated Depreciation — ROU Asset           43,295
To recognise depreciation of right-of-use asset.
```

#### Full Lease Liability Schedule (PV of 5 payments of CU 50,000 at 5% = CU 216,473.83):

```
| Year | Opening | Interest @5% | Payment | Closing |
|---|---|---|---|---|
| 1 | 216,473.83 | 10,823.69 | 50,000.00 | 177,297.53 |
| 2 | 177,297.53 |  8,864.88 | 50,000.00 | 136,162.40 |
| 3 | 136,162.40 |  6,808.12 | 50,000.00 |  92,970.52 |
| 4 |  92,970.52 |  4,648.53 | 50,000.00 |  47,619.05 |
| 5 |  47,619.05 |  2,380.95 | 50,000.00 |       0.00 |
|   |            | **33,526.17** | **250,000.00** | |

Cross-cast: 216,473.83 + 33,526.17 total interest = 250,000.00 = 5 x 50,000. The liability
amortises exactly to nil.
```

The ROU asset is depreciated straight-line over the 5-year lease term at CU 43,294.77 per year (216,473.83 / 5), reaching nil at the end of year 5. Total expense is front-loaded: year 1 charges 10,823.69 interest + 43,294.77 depreciation = CU 54,118.46 against a cash payment of CU 50,000, while year 5 charges 2,380.95 + 43,294.77 = CU 45,675.72.

---

### Lessor Accounting — Journal Entries and Subsequent Measurement

#### Finance Lease — Lessor

**Facts:** Lessor leases equipment with a fair value and carrying amount of CU 300,000 for 5 years. Annual lease payments of CU 70,000 payable at year-end. Unguaranteed residual value = CU 0. Initial direct costs = CU 0. The rate implicit in the lease is therefore the rate that discounts 5 payments of CU 70,000 to CU 300,000 = **5.3686%**. Net investment at commencement = CU 300,000.

```
At commencement — initial recognition:

Dr  Lease Receivable (Net Investment)    300,000
    Cr  Equipment (PP&E)                             300,000
To derecognise the underlying asset and recognise the net investment in the finance lease.

Net investment schedule (finance income at 5.3686%, rounded to the nearest CU):

| Year | Opening | Finance income | Payment | Closing |
|---|---|---|---|---|
| 1 | 300,000 | 16,106 | 70,000 | 246,106 |
| 2 | 246,106 | 13,212 | 70,000 | 189,318 |
| 3 | 189,318 | 10,164 | 70,000 | 129,482 |
| 4 | 129,482 |  6,951 | 70,000 |  66,433 |
| 5 |  66,433 |  3,567 | 70,000 |       0 |
|   |         | **50,000** | **350,000** | |

Cross-cast: 300,000 net investment + 50,000 total finance income = 350,000 = 5 x 70,000. The
net investment amortises exactly to nil.

Year 1 — finance income:

Dr  Lease Receivable                      16,106
    Cr  Finance Income (P&L)                          16,106
To recognise finance income on the net investment in the lease.

Year 1 — receipt of lease payment:

Dr  Cash                                  70,000
    Cr  Lease Receivable                              70,000
To record receipt of annual lease payment.

Closing net investment = 300,000 + 16,106 - 70,000 = CU 246,106
```

**Subsequent measurement:** The lessor recognises interest income over the lease term using the effective interest method applied to the net investment in the lease. The net investment is reduced by each lease payment received.

#### Operating Lease — Lessor

**Facts:** Lessor leases office space for 3 years. Annual lease payments of CU 120,000. The building has a carrying amount of CU 2,000,000 and a useful life of 40 years.

```
Annual income recognition (straight-line):

Dr  Cash / Lease Receivable              120,000
    Cr  Lease Income (P&L)                           120,000
To recognise operating lease income on a straight-line basis.

Annual depreciation of the underlying asset:

Dr  Depreciation Expense                  50,000
    Cr  Accumulated Depreciation — Building           50,000
To depreciate the underlying asset (CU 2,000,000 / 40 years).
```

**Subsequent measurement:** The lessor continues to recognise the underlying asset on its balance sheet, depreciating it per IAS 16. Lease income is recognised on a straight-line basis over the lease term (or another systematic basis if more representative of the pattern of benefit).

---

### Sale-and-Leaseback Transactions (IFRS 16.98-103)

A sale-and-leaseback transaction involves the transfer of an asset by the seller-lessee to the buyer-lessor, followed by the seller-lessee leasing that asset back.

#### The Transfer Test: Does the Transfer Satisfy IFRS 15 as a Sale?

Apply the requirements of IFRS 15 (specifically the criteria for transfer of control) to determine whether the transfer of the asset should be accounted for as a sale.

**Decision point — Is the transfer a sale under IFRS 15?**

#### If YES (the transfer IS a sale):

1. **Seller-lessee** derecognises the underlying asset and recognises a right-of-use (ROU) asset at the **proportion of the previous carrying amount** that relates to the right of use retained.
2. The seller-lessee recognises a **gain or loss only on the rights transferred** to the buyer-lessor (i.e., the portion of the gain or loss relating to the rights transferred).

Formulas:
- ROU asset = Previous carrying amount x (PV of lease payments / Fair value of asset)
- Gain/loss recognised = Total gain on disposal x (Fair value of asset - PV of lease payments) / Fair value of asset

**Journal entry — Sale-and-leaseback (qualifies as a sale):**

**Facts:** Seller-lessee sells a building with carrying amount CU 800,000 for fair value CU 1,000,000 and leases it back. PV of leaseback payments = CU 600,000 (i.e., 60% of fair value retained as right of use).

```
Dr  Cash                                1,000,000
Dr  Right-of-Use Asset                    480,000
    Cr  Building (carrying amount)                    800,000
    Cr  Lease Liability                               600,000
    Cr  Gain on Disposal (P&L)                         80,000
To recognise the sale-and-leaseback. ROU asset = 800,000 x (600,000/1,000,000) = 480,000.
Gain recognised only on rights transferred = (1,000,000 - 800,000) x (1,000,000 - 600,000)/1,000,000 = 80,000.
```

#### If NOT a Sale (transfer does NOT satisfy IFRS 15):

1. **Seller-lessee** continues to recognise the transferred asset on its balance sheet.
2. The seller-lessee recognises a **financial liability** equal to the transfer proceeds (accounted for under IFRS 9).
3. **Buyer-lessor** does not recognise the asset; recognises a financial asset equal to the transfer proceeds.

**Journal entry — Sale-and-leaseback (does NOT qualify as a sale):**

**Facts:** Seller-lessee transfers equipment with carrying amount CU 500,000 for CU 500,000 but the transfer does not satisfy IFRS 15 criteria for a sale.

```
Seller-lessee:

Dr  Cash                                  500,000
    Cr  Financial Liability                           500,000
To recognise proceeds as a financial liability (the asset remains on the balance sheet).

Subsequent payments:

Dr  Financial Liability                       XXX
Dr  Interest Expense (P&L)                    XXX
    Cr  Cash                                              XXX
To record payments, split between principal repayment and interest (effective interest method).
```

#### Sale-and-Leaseback with Variable Payments (2024 Amendment)

The September 2022 amendment (effective 1 January 2024) clarifies how a seller-lessee measures the leaseback ROU asset and determines gain/loss when the leaseback includes **variable lease payments** that do not depend on an index or rate.

Key requirements:
- Variable lease payments that do not depend on an index or rate are **excluded** from the measurement of the lease liability.
- At initial measurement, the seller-lessee determines the leaseback liability using only those payments included in the lease liability per IFRS 16.26 (fixed payments, index/rate-based variable payments, etc.).
- The proportion of the asset retained (and therefore the gain/loss recognised) is determined based on the right of use retained, which includes the economic effect of all leaseback payments (including variable payments not in the liability).
- This prevents a seller-lessee from recognising a gain on the right of use retained by structuring variable payments.

**Related workflows:** IFRS 15 (separating lease and non-lease components; sale-and-leaseback transfer test), IAS 36 (impairment testing of ROU assets), IAS 12 (temporary differences arising from ROU assets and lease liabilities), IFRS 1 (lease arrangements exemption on transition).

---

## 3. Impairment Testing (IAS 36)

### Step 1: Identify Indicators of Impairment

#### When to Test:

- **Goodwill and indefinite-life intangible assets:** Test **annually**, regardless of indicators, and whenever there is an indication of impairment.
- **All other assets:** Test only when there is an **indication** that the asset may be impaired.

#### External Indicators (IAS 36.12):

- Significant decline in the asset's market value beyond what would be expected from the passage of time or normal use.
- Significant adverse changes in the technological, market, economic, or legal environment.
- Increases in market interest rates or other market rates of return that are likely to affect the discount rate and materially decrease the recoverable amount.
- The carrying amount of the entity's net assets exceeds its market capitalisation.

#### Internal Indicators (IAS 36.12):

- Evidence of obsolescence or physical damage.
- Significant adverse changes in the extent to which, or manner in which, an asset is used or is expected to be used (e.g., asset becoming idle, plans to dispose, restructuring).
- Internal reporting indicates that the economic performance of an asset is, or will be, worse than expected.
- For investments in subsidiaries, joint ventures, or associates: carrying amount exceeds carrying amount of investee's net assets, or dividends exceed total comprehensive income of the investee.

**Decision point — Are indicators present (or is annual testing required)?**
- **Yes** -> proceed to Step 2.
- **No** -> no impairment test required (document the assessment).

---

### Step 2: Determine the Recoverable Amount

The recoverable amount is the **higher of**:

- **Fair Value Less Costs of Disposal (FVLCOD):** The amount obtainable from selling the asset in an orderly transaction between market participants, less costs of disposal. Apply IFRS 13 measurement hierarchy.
- **Value in Use (VIU):** The present value of future cash flows expected to be derived from the asset.

**Key judgment:** If either FVLCOD or VIU exceeds carrying amount, no need to estimate the other.

#### Value in Use — Cash Flow Projections (IAS 36.33-57):

- Based on the most recent financial budgets/forecasts approved by management.
- **Maximum forecast period: 5 years**, unless a longer period can be justified.
- Beyond the forecast period, extrapolate using a **steady or declining growth rate** (the rate must not exceed the long-term average growth rate for the products, industries, or country/countries in which the entity operates, unless a higher rate can be justified).
- Cash flows must reflect the asset **in its current condition** — do not include future restructuring, enhancements, or capital expenditure that will improve the asset beyond its current performance.

#### Discount Rate (IAS 36.55-57):

- Pre-tax rate reflecting the **time value of money** and **risks specific to the asset** for which the future cash flow estimates have not been adjusted.
- Often derived from the entity's WACC, adjusted for asset-specific risk.
- Must be a **pre-tax** rate (or post-tax rate adjusted to arrive at the same present value as a pre-tax rate applied to pre-tax cash flows).

---

### Step 3: Compare Carrying Amount to Recoverable Amount

| Result | Action |
|---|---|
| Carrying amount **<=** recoverable amount | No impairment; no entry required |
| Carrying amount **>** recoverable amount | Impairment loss = carrying amount minus recoverable amount; proceed to Step 4 |

---

### Step 4: Recognise Impairment Loss

#### Individual Asset:

- Reduce carrying amount to recoverable amount.
- Recognise the impairment loss in **profit or loss** (unless the asset is measured at revalued amount under IAS 16 or IAS 38 — in that case, first reduce the revaluation surplus in OCI, and any excess goes to profit or loss).
- Carrying amount after impairment must not be reduced below zero.

#### Cash-Generating Unit (CGU) — Allocation Order (IAS 36.104):

When an asset cannot be tested individually (e.g., it does not generate independent cash flows), test at the CGU level. Allocate the impairment loss in the following order:

1. **First** — reduce the carrying amount of any **goodwill** allocated to the CGU.
2. **Then** — reduce the carrying amount of the **other assets** in the CGU on a **pro-rata basis** based on the carrying amount of each asset.

**Constraint:** The carrying amount of an individual asset within the CGU must not be reduced below the highest of (IAS 36.105):
- Its FVLCOD (if determinable);
- Its VIU (if determinable);
- Zero.

Any impairment loss that cannot be allocated to a specific asset because of this constraint is allocated pro-rata to the other assets in the CGU.

#### Corporate Asset Allocation (IAS 36.100-103)

Corporate assets are assets (such as a head office building, centralised IT equipment, or a research centre) that do not generate cash inflows independently and whose carrying amount cannot be fully attributed to a single CGU.

**Key principle:** Because corporate assets do not generate independent cash flows, they cannot be tested for impairment on a standalone basis. The entity must allocate corporate assets to CGUs on a reasonable and consistent basis.

**Approach — Bottom-up / Top-down:**

1. **Bottom-up test:** Determine whether the carrying amount of the corporate asset can be allocated to the CGU under review on a reasonable and consistent basis.
   - If **yes**, allocate a portion of the corporate asset to the CGU and test the CGU (including the allocated portion) for impairment.
   - If **no**, proceed to the top-down test.

2. **Top-down test:** Identify the **smallest group of CGUs** that includes the CGU under review and to which a portion of the carrying amount of the corporate asset can be allocated on a reasonable and consistent basis. Test that group of CGUs (including the allocated corporate asset) for impairment.

**Common allocation bases:**
- Relative carrying amounts of the CGUs.
- Relative revenues or gross margins.
- Number of employees or floor space.

**Important considerations:**
- The allocation basis must be reasonable and consistent from period to period.
- If there is an indication that a corporate asset may be impaired, the recoverable amount is determined for the CGU or group of CGUs to which the corporate asset belongs.
- Any resulting impairment loss is allocated per the normal CGU allocation order (goodwill first, then other assets pro-rata).

#### Journal Entry — Impairment of a CGU:

**Facts:** CGU has a carrying amount of CU 1,000,000 (goodwill CU 200,000, equipment CU 500,000, other assets CU 300,000). Recoverable amount is CU 750,000. Impairment loss = CU 250,000.

```
Step 1 — Write down goodwill first (CU 200,000):

Dr  Impairment Loss (P&L)               200,000
    Cr  Goodwill                                      200,000

Step 2 — Remaining loss (CU 50,000) allocated pro-rata to other assets:
  Equipment: 500,000 / 800,000 x 50,000 = CU 31,250
  Other assets: 300,000 / 800,000 x 50,000 = CU 18,750

Dr  Impairment Loss (P&L)                50,000
    Cr  Accumulated Impairment — Equipment             31,250
    Cr  Accumulated Impairment — Other Assets          18,750
```

---

### Step 5: Assess Reversal of Impairment

#### Reversal Permitted (IAS 36.109-125):

- A previously recognised impairment loss **shall be reversed** if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised.
- The increased carrying amount shall **not exceed** the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior periods.

#### Reversal NOT Permitted:

- **Goodwill** — impairment losses recognised for goodwill shall **never** be reversed (IAS 36.124).

**Key judgment:** Reversal of an impairment loss for a CGU is allocated to the assets of the unit (excluding goodwill) on a pro-rata basis. The same individual asset ceiling applies in reverse — no asset's carrying amount can exceed the lower of its recoverable amount and its depreciated historical cost (without impairment).

**Related workflows:** IFRS 3 (goodwill from business combinations — annual impairment test), IFRS 16 (impairment of ROU assets), IAS 12 (changes in temporary differences when impairment is recognised or reversed), IFRS 9 (ECL impairment model for financial assets — separate from IAS 36).

---

## 4. Financial Instruments (IFRS 9)

### Step 1: Classification of Financial Assets

Follow this decision tree in order:

```
Is the instrument a derivative?
├─ YES -> FVTPL (mandatory)
│         Exception: designated as hedging instrument
└─ NO
   ├─ Is it an equity instrument?
   │   ├─ Held for trading? -> FVTPL (mandatory)
   │   └─ Not held for trading? -> FVTPL (default)
   │       └─ Irrevocable OCI election available (FVOCI — no recycling)
   └─ Is it a debt instrument?
       ├─ Does it pass the SPPI test?
       │   ├─ NO -> FVTPL (mandatory)
       │   └─ YES -> What is the business model?
       │       ├─ Hold to collect -> Amortised Cost
       │       ├─ Hold to collect AND sell -> FVOCI (with recycling)
       │       └─ Other (including trading) -> FVTPL
       └─ Fair value option: entity may irrevocably designate at FVTPL
           if it eliminates or significantly reduces an accounting mismatch
```

#### SPPI Test — Solely Payments of Principal and Interest (IFRS 9.4.1.2-4.1.3):

Cash flows must be consistent with a **basic lending arrangement**. Assess:
- **Principal** = fair value of the financial asset at initial recognition.
- **Interest** = consideration for the time value of money, credit risk, other basic lending risks, and a profit margin.

Features that may fail SPPI:
- Leverage features (e.g., returns linked to multiples of an index).
- Equity conversion features.
- Cash flows linked to non-financial variables (e.g., commodity prices, revenue of the borrower).
- Contractual terms that change the timing or amount of cash flows in ways unrelated to basic lending.

#### Business Model Assessment (IFRS 9.B4.1.1-B4.1.6):

The business model is determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. Consider:
- How the performance of the portfolio is evaluated and reported to key management personnel.
- The risks that affect performance and how those risks are managed.
- The frequency, volume, and timing of sales in prior periods, the reasons for those sales, and expectations about future sales activity.

**Key judgment:** Reclassification of financial assets is only permitted when the entity changes its business model for managing financial assets (expected to be very infrequent).

---

### Step 2: Classification of Financial Liabilities

| Category | Criteria |
|---|---|
| **Amortised cost** (default) | Most financial liabilities |
| **FVTPL — mandatory** | Derivatives (unless designated hedging instruments); held-for-trading liabilities; contingent consideration in a business combination |
| **FVTPL — designated (fair value option)** | Irrevocable designation at initial recognition if: (a) it eliminates or significantly reduces an accounting mismatch; or (b) a group of financial liabilities is managed and evaluated on a fair value basis per a documented risk management strategy |

**Important:** When a financial liability is designated at FVTPL, the portion of the fair value change attributable to **own credit risk** is presented in **OCI** (not recycled to profit or loss), unless this creates or enlarges an accounting mismatch (IFRS 9.5.7.7-5.7.9).

---

### Step 3: Expected Credit Loss (ECL) Impairment — 3-Stage Model

Applies to financial assets measured at amortised cost, debt instruments at FVOCI, lease receivables, contract assets, loan commitments, and financial guarantee contracts.

#### The Three Stages:

| Stage | Trigger | Loss Allowance | Interest Revenue Basis |
|---|---|---|---|
| **Stage 1** — Performing | Initial recognition (no significant increase in credit risk since initial recognition) | **12-month ECL** — expected credit losses from default events possible within 12 months | Gross carrying amount |
| **Stage 2** — Underperforming | **Significant increase in credit risk (SICR)** since initial recognition, but not credit-impaired | **Lifetime ECL** — expected credit losses from all possible default events over the expected life | Gross carrying amount |
| **Stage 3** — Non-performing | **Credit-impaired** (objective evidence of impairment) | **Lifetime ECL** | **Net carrying amount** (gross less loss allowance) |

#### Indicators of Significant Increase in Credit Risk (SICR) (IFRS 9.B5.5.17):

- Significant change in external/internal credit rating or credit score.
- Adverse changes in business, financial, or economic conditions that affect the borrower.
- Existing or forecast changes in operating results of the borrower.
- Significant increase in credit risk on other financial instruments of the same borrower.
- Significant change in the value of collateral or quality of guarantees.
- Actual or expected significant change in the quality of the borrower's credit enhancement.
- Payments are more than 30 days past due (rebuttable presumption — IFRS 9.5.5.11).

#### Credit-Impaired Indicators (IFRS 9.B5.5.37, Appendix A):

- Significant financial difficulty of the borrower.
- Breach of contract (e.g., default or past-due event).
- Lender has granted a concession that it would not otherwise consider.
- It is probable the borrower will enter bankruptcy or financial reorganisation.
- Disappearance of an active market for the financial asset because of financial difficulties.

#### Simplified Approach (IFRS 9.5.5.15):

For the following, entities **must** (trade receivables without a significant financing component) or **may elect** (trade receivables with a significant financing component, contract assets, lease receivables) to always measure the loss allowance at **lifetime ECL** — bypassing the staging model entirely.

#### Provision Matrix Example:

A common approach for trade receivables under the simplified approach:

| Days Past Due | 0-30 | 31-60 | 61-90 | 91-120 | >120 |
|---|---|---|---|---|---|
| **Historical loss rate** | 0.5% | 2.0% | 5.0% | 10.0% | 25.0% |
| **Forward-looking adjustment** | +0.1% | +0.3% | +0.5% | +1.0% | +2.0% |
| **Adjusted loss rate** | 0.6% | 2.3% | 5.5% | 11.0% | 27.0% |
| **Gross carrying amount** | 500,000 | 200,000 | 100,000 | 50,000 | 30,000 |
| **ECL** | 3,000 | 4,600 | 5,500 | 5,500 | 8,100 |
| **Total ECL** | | | | | **26,700** |

Forward-looking adjustments must incorporate reasonable and supportable information about past events, current conditions, and forecasts of future economic conditions (e.g., GDP growth, unemployment rates, industry outlook).

---

### Step 4: Hedge Accounting (IFRS 9 Chapter 6)

#### Types of Hedging Relationships:

| Type | Purpose | Accounting Treatment |
|---|---|---|
| **Fair value hedge** | Hedging exposure to changes in fair value of a recognised asset/liability or firm commitment | Changes in fair value of hedging instrument in P&L; adjustments to the hedged item's carrying amount also in P&L |
| **Cash flow hedge** | Hedging exposure to variability in cash flows attributable to a recognised asset/liability or a highly probable forecast transaction | Effective portion of gain/loss on hedging instrument in **OCI** (cash flow hedge reserve); ineffective portion in P&L; reclassified to P&L when hedged item affects P&L |
| **Hedge of a net investment in a foreign operation** | Hedging exposure to foreign currency risk on a net investment | Similar to cash flow hedge — effective portion in OCI; reclassified to P&L on disposal of the foreign operation |

#### Qualifying Criteria (IFRS 9.6.4.1):

All of the following must be met at inception and on an ongoing basis:

1. **Formal designation and documentation** at inception — including the hedging relationship, the entity's risk management objective and strategy, identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how effectiveness will be assessed.
2. **Economic relationship** — there is an economic relationship between the hedged item and the hedging instrument (i.e., the hedging instrument and the hedged item have values that generally move in opposite directions because of the same risk).
3. **Credit risk does not dominate** — the effect of credit risk does not dominate the value changes that result from the economic relationship.
4. **Hedge ratio** — the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument the entity actually uses to hedge that quantity (no deliberate over- or under-hedging).

#### Discontinuation of Hedge Accounting (IFRS 9.6.5.6-6.5.7):

- An entity must discontinue hedge accounting prospectively when the hedging relationship no longer meets the qualifying criteria (after taking into account any rebalancing).
- Voluntary discontinuation is **not permitted** under IFRS 9 (unlike IAS 39).
- Cash flow hedge amounts in OCI: remain in OCI and are reclassified to P&L when the hedged future cash flows affect P&L (or reclassified to P&L immediately if the hedged future cash flows are no longer expected to occur).

---

### ECL General Approach — Numerical Example (PD x LGD x EAD)

**Facts:** A bank holds a CU 1,000,000 corporate loan. The following credit risk parameters apply:

| Parameter | At Origination | At Reporting Date |
|---|---|---|
| **12-month PD** | 1.0% | 2.5% |
| **Lifetime PD** (cumulative over 5-year remaining term) | 6.0% | 15.0% |
| **LGD** | 40% | 40% |
| **EAD** | CU 1,000,000 | CU 1,000,000 |

**Step 1 — On initial recognition (Stage 1, 12-month ECL).** Use the 12-month PD at origination.

```
12-month ECL = 12-month PD at origination x LGD x EAD
             = 1.0% x 40% x 1,000,000
             = CU 4,000

Dr  Impairment Loss (P&L)                  4,000
    Cr  Loss Allowance                                 4,000
To recognise the 12-month expected credit loss on initial recognition of the loan.
```

**Step 2 — Assess whether credit risk has increased significantly since initial recognition.** The 12-month PD has risen from 1.0% to 2.5% — a 150% relative increase. Combined with the rise in lifetime PD from 6.0% to 15.0%, the entity concludes there has been a significant increase in credit risk. The loan migrates to Stage 2.

**Decision point — has credit risk increased significantly since initial recognition?**
- **No** -> remain in Stage 1; remeasure at 12-month ECL = 2.5% x 40% x 1,000,000 = CU 10,000 (an incremental charge of CU 6,000 over the CU 4,000 already held).
- **Yes** -> move to Stage 2; measure lifetime ECL.

**Step 3 — Stage 2, lifetime ECL.**

```
Lifetime ECL = Lifetime PD x LGD x EAD
             = 15.0% x 40% x 1,000,000
             = CU 60,000

Incremental charge = 60,000 - 4,000 = CU 56,000

Dr  Impairment Loss (P&L)                 56,000
    Cr  Loss Allowance                                56,000
To increase the loss allowance from the 12-month ECL recognised at initial recognition
(CU 4,000) to lifetime ECL on migration to Stage 2 (CU 60,000).

Loss allowance carried forward = 4,000 + 56,000 = CU 60,000.
```

**Impact of stage migration:**

| | On initial recognition (Stage 1) | At the reporting date (Stage 2) | Increase in Allowance |
|---|---|---|---|
| **Loss allowance** | CU 4,000 | CU 60,000 | CU 56,000 |

**Note:** In practice, lifetime ECL calculations are more complex, involving marginal PDs for each future period, discounting to present value, and weighting across multiple economic scenarios. The above is a simplified illustration of the core PD x LGD x EAD framework.

**Two further simplifications in the above.** (i) The ECL is not discounted. IFRS 9 requires expected credit losses to be measured as the present value of cash shortfalls, discounted at the original effective interest rate; a lifetime ECL on a 5-year loan would be materially lower once discounted. (ii) The PDs are single point estimates. IFRS 9.5.5.17 requires ECL to reflect (a) an unbiased and **probability-weighted** amount determined by evaluating a range of possible outcomes, (b) the **time value of money**, and (c) reasonable and supportable information available without undue cost or effort about past events, current conditions and forecasts of future economic conditions — so at least two and usually three economic scenarios are weighted.

---

### Example Journal Entries — Financial Instruments (IFRS 9)

#### ECL Provision — Initial Recognition and Stage Migration

**Stage 1 — 12-month ECL (initial recognition), using the 12-month PD at origination of 1.0%:**

```
Dr  Impairment Loss (P&L)                 4,000
    Cr  Loss Allowance                                 4,000
To recognise the 12-month expected credit loss on initial recognition of the loan.
```

**Migration to Stage 2 — Lifetime ECL (significant increase in credit risk):**

```
Dr  Impairment Loss (P&L)                56,000
    Cr  Loss Allowance                                56,000
To increase the loss allowance from the 12-month ECL recognised at initial recognition
(CU 4,000) to lifetime ECL on migration to Stage 2 (CU 60,000).
Incremental charge = 60,000 - 4,000 = CU 56,000.
```

#### Cash Flow Hedge — Journal Entries

**Facts:** An entity enters into an interest rate swap to hedge the variability of cash flows on a variable-rate borrowing. At period end, the swap has a fair value gain of CU 25,000, of which CU 23,000 is effective and CU 2,000 is ineffective.

**Effective portion — recognised in OCI:**

```
Dr  Hedging Instrument (Derivative Asset)  23,000
    Cr  OCI — Cash Flow Hedge Reserve                  23,000
To recognise the effective portion of the gain on the hedging instrument in OCI.
```

**Ineffective portion — recognised in P&L:**

```
Dr  Hedging Instrument (Derivative Asset)   2,000
    Cr  Gain on Hedging Ineffectiveness (P&L)           2,000
To recognise the ineffective portion of the gain on the hedging instrument in profit or loss.
```

**Reclassification when the hedged item affects P&L (e.g., interest payment date):**

```
Dr  OCI — Cash Flow Hedge Reserve         23,000
    Cr  Interest Expense (P&L)                         23,000
To reclassify the cash flow hedge reserve amount to profit or loss when the hedged
variable-rate interest payment affects profit or loss.
```

**Related workflows:** IFRS 15 (significant financing component in revenue contracts), IFRS 16 (lease liabilities as financial liabilities), IAS 36 (IAS 36 applies to non-financial assets; IFRS 9 ECL applies to financial assets), IAS 12 (deferred tax on ECL provisions and hedge reserves), IFRS 3 (contingent consideration remeasurement under IFRS 9).

---

## 5. First-Time Adoption (IFRS 1)

### Step 1: Identify Key Dates

| Date | Definition | Example (31 Dec 2026 first IFRS year-end) |
|---|---|---|
| **First IFRS reporting date** | End of the first annual IFRS reporting period | 31 December 2026 |
| **Date of transition to IFRS** | Beginning of the earliest comparative period presented | 1 January 2025 (if one year of comparatives) |
| **Comparative period(s)** | Period(s) between date of transition and first IFRS reporting date | Year ended 31 December 2025 |

**Key point:** The opening IFRS balance sheet is prepared as at the **date of transition** (1 January 2025 in the example above).

---

### Step 2: Prepare the Opening IFRS Balance Sheet

As at the date of transition (IFRS 1.10):

1. **Recognise** all assets and liabilities required by IFRS.
2. **Derecognise** assets and liabilities that IFRS does not permit (e.g., certain provisions, internally generated brands).
3. **Reclassify** items recognised under previous GAAP as one type of asset, liability, or equity but classified differently under IFRS.
4. **Measure** all recognised assets and liabilities in accordance with IFRS.
5. Record any resulting adjustments directly in **retained earnings** (or, if appropriate, another category of equity) at the date of transition.

---

### Step 3: Apply Mandatory Exceptions (IFRS 1.14-17, B1-B14)

The following exceptions to full retrospective application are **mandatory** (an entity may not apply previous GAAP instead):

1. **Estimates** — IFRS estimates at the date of transition must be consistent with estimates mad