Question

What are the steps to be completed in preparing the opening IFRS statement of financial position?

Short answer

The steps to be completed in preparing the opening IFRS statement of financial position are:

• Identification of the variation between existingGAAP and IFRS.
• Selection of accounting policiesthat is as per IFRS.
• Selection of choices available considering theoptional and required application of policy.

Step-by-step solution

Meaning of Opening IFRS Statement

The opening IFRS statement is the organization’s statement, mainly the balance sheet prepared at the transition date to IFRS shows the financial position.

Identification of the variation between existing GAAP and IFRS

Even though GAAP and IFRS norms are set up extensively on the same methods and usually result in the same accounting results, there are differences in the particular accounting needs. Thus, precisely comparing financial statements made under these various standards can be challenging. Therefore, accountants must be careful of GAAP and IFRS standards variations when preparing, comparing, and interpreting the financial information comprising both accounting standards.

Selection of accounting policies that are by IFRS

An organization must use that standard when IFRS rules and guidelines mainly apply to a transaction or other events. Without IFRS norms that specifically apply to transactions and events, the firm uses its finding to enhance and apply an accounting policy that provides relevant information and is reliable. Accounting policies are defined as policies in which sometimes a company makes changes to maintain profit rates. Hence, the choice of accounting standards alters with the variation in the needs of the firm.

Selection of choices available considering the optional and required application of policy

An organization shall opt for and use its accounting norms uniformly for transactions and events unless an interpretation or standard particularly needs or allows the grouping of items for which various standards may be correct. If a Standard needs or allows such grouping, the appropriate accounting policy shall be chosen and applied uniformly to each group.