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As part of the Canadian adoption of IFRSs, the AcSB is evaluating IFRS 1, First-time Adoption of International Financial Reporting Standards, to assess whether to
ask the International Accounting Standards Board (IASB) to consider some modifications to that standard to
assist enterprises adopting IFRSs for the first time. IFRS 1 generally requires retrospective application of
IFRSs on first-time adoption, but provides a number of exceptions to, and exemptions from, that general
requirement. IFRS 1 applies only when an entity first complies with IFRSs and contains all of the transition
relief available at that time. Accordingly, transition relief needed by Canadian enterprises on adopting
IFRSs needs to be included in IFRS 1.
In some cases, the exceptions or exemptions in IFRS 1 were useful for enterprises adopting IFRSs in 2005 or
2006, but are less useful for enterprises in later years. For example, IFRS 1 provides for an exemption from
full retrospective application of IFRS 2, Share-based Payment, for equity
instruments granted on or before November 7, 2002. IFRS 1 also provides an exception from applying the
derecognition requirements of IAS 39, Financial Instruments: Recognition and
Measurement, for transactions occurring on or after January 1, 2004. These dates, while helpful to
those adopting IFRSs in 2005 or 2006, provide less significant relief for enterprises adopting IFRSs at later
dates, as will be the case in Canada.
Other aspects of the IFRS adoption might result in considerable costs and effort to gather information for
retrospective application that exceed the benefits, or might require retrospective determination of fair
values. This might be the case, for example, for oil and gas companies using full cost accounting. We think
that a case might be made to alleviate transition by use of simplified transitional procedures in some
circumstances, but do not expect that the IASB would look favourably on proposals for “grand-fathering” of
past accounting.
Taking into account the necessary due process that would have to be undertaken by the IASB, the AcSB needs to
evaluate possible issues and develop acceptable proposed solutions for consideration by the IASB as soon as
possible. Accordingly, we would very much appreciate receiving information about any issues you might have
identified, together with analysis of possible resolutions, no later than January 9,
2008.
Please send any such information to grace.lang@cica.ca.
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