Concerns had been raised that retrospectively determining cost in accordance with International Accounting Standard (IAS) 27, Consolidated and Separate Financial Statements, on first-time adoption of IFRS could not, in some circumstances, be achieved without undue cost or effort. In response to these concerns, the International Accounting Standards Board has amended International Financial Reporting Standard (IFRS) 1, First-time Adoption of International Financial Reporting Standards, and IAS 27 to revise certain aspects of determining the cost of an investment in separate financial statements. Among other provisions, these amendments:
- Allow first-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements;
- Require that when a new parent is formed in a reorganization, the new parent must measure the cost of its investment in the previous parent at the carrying amount of its share of the equity items of the previous parent at the date of the reorganization; and
- Remove the definition of the cost method from IAS 27 and replace it with a requirement to present dividends as income in the separate financial statements of the investor.
The amendments are effective for annual periods beginning on or after January 1, 2009, with earlier application permitted. |
