Page 231 - SBR Integrated Workbook STUDENT S18-J19

Adoption of International Financial Reporting Standards

Example 1

Adopting IFRS Standards

Gale is a company that used to prepare financial statements under local
national standards. Their first financial statements produced in accordance
with IFRS Standards are for the year ended December 20X5 and these will
include comparative information for the previous financial year. Its previous
GAAP financial statements are for the years ended 31 December 20X3 and
20X4.

In accordance with local GAAP, Gale recognised a provision of $1 million in its
statement of financial position as at 31 December 20X3. The provision related
to the estimated costs of repairing a faulty machine.

In accordance with IFRS 1 First Time Adoption of IFRS, how should the
above transaction be dealt with?

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