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		Preface Preface to The Interpretations of Financial Reporting Standards
		INT FRS 1 Consistency - Different Cost Formulas for Inventories
		INT FRS 2 Consistency - Capitalisation of Borrowing Costs
		INT FRS 3 Elimination of Unrealised Profits and Losses on Transactions with Associates
		INT FRS 5 Classification of Financial Instruments - Contingent Settlement Provisions
		INT FRS 6 Costs of Modifying Existing Software
		INT FRS 7 Introduction of the Euro
		INT FRS 8 First-Time Application of FRSs as the Primary Basis of Accounting
		INT FRS 9 Business Combinations - Classification either as Acquisitions or Unitings of Interests
		INT FRS 10 Government Assistance - No Specific Relation to Operating Activities
		INT FRS 11 Foreign Exchange - Capitalisation of Losses Resulting from Severe Currency Devaluations
		INT FRS 12 Consolidation - Special Purpose Entities
		INT FRS 13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers
		INT FRS 14 Property, Plant and Equipment - Compensation for the Impairment or Loss of Items
		INT FRS 15 Operating Leases - Incentives
		INT FRS 16 Share Capital - Reacquired Own Equity Instruments (Treasury Shares)
		INT FRS 17 Equity - Costs of an Equity Transaction
		INT FRS 18 Consistency - Alternative Methods
		INT FRS 19 Reporting Currency - Measurement and Presentation of Financial Statements under FRS 21 and FRS 29
		INT FRS 20 Equity Accounting Method - Recognition of Losses
		INT FRS 21 Income Taxes - Recovery of Revalued Non-Depreciable Assets
		INT FRS 22 Business Combinations - Subsequent Adjustment of Fair Values and Goodwill Initially Reported
		INT FRS 23 Property, Plant and Equipment - Major Inspection or Overhaul Costs
		INT FRS 24 Earnings Per Share - Financial Instruments and Other Contracts that May Be Settled in Shares
		INT FRS 25 Income Taxes - Changes in the Tax Status of an Enterprise or its Shareholders
		INT FRS 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease
		INT FRS 28 Business Combinations - "Date of Exchange" and Fair Value of Equity Instruments
		INT FRS 29 Disclosure - Service Concession Arrangements
		INT FRS 30 Reporting Currency - Translation from Measurement Currency to Presentation Currency
		INT FRS 31 Revenue - Barter Transactions Involving Advertising Services
		INT FRS 32 Intangible Assets - Web Site Costs
		INT FRS 33 Consolidation and Equity Method - Potential Voting Rights and Allocation of Ownership Interests

Home > Accounting Standards > Interpretations of Financial Reporting Standards 2003 > INT FRS 8

Interpretation of Financial Reporting Standard

INT FRS 8

Introduction of the Euro

Paragraph 11 of FRS 1, Presentation of Financial Statements, requires that financial statements should not be described as complying with Financial Reporting Standards unless they comply with all the requirements of each applicable Standard and each applicable Interpretation of the Financial Reporting Standard. INT FRSs are not intended to apply to immaterial items.

Reference: FRS 1, Presentation of Financial Statements

ISSUE

An enterprise wishes to describe its financial statements for the first time as complying in full with Financial Reporting Standards ("FRSs"). It may, for example, previously have presented its financial statements using only national accounting requirements ("national GAAP") as the primary basis of accounting. It may also have presented its financial statements based in part on national GAAP and in part on FRSs, in which case national GAAP would be considered as the previous primary accounting basis. FRS 1 and FRS 8 do not give explicit guidance on how to account for the transition from national GAAP to FRSs as the primary accounting basis.

The issues are:
1. how the financial statements of an enterprise should be prepared and presented in the period when FRSs are first applied in full as the primary accounting basis; and
2. when FRSs are first applied in full as the primary accounting basis, how specific transitional provisions set out in individual Standards and Interpretations should be applied to balances of items that existed already at the effective date of those Standards and Interpretations.

CONSENSUS

In the period when FRSs are applied in full for the first time as the primary accounting basis, the financial statements of an enterprise should be prepared and presented as if the financial statements had always been prepared in accordance with the Standards and Interpretations effective for the period of first-time application. Therefore, the Standards and Interpretations effective for the period of first-time application should be applied retrospectively, except when:

individual Standards or Interpretations require or permit a different transitional treatment; or
the amount of the adjustment relating to prior periods cannot be reasonably determined.

Comparative information should be prepared and presented in accordance with FRSs.

Any adjustment resulting from the transition to FRSs should be treated as an adjustment to the opening balance of retained earnings of the earliest period presented in accordance with FRSs.

When FRSs are applied in full as the primary accounting basis for the first time, an enterprise should apply the transitional provisions of the effective Standards and Interpretations only for periods ending on the date prescribed in the respective Standards and Interpretations.

DISCLOSURE

In the period when FRSs are applied in full for the first time as the primary accounting basis, an enterprise should disclose:

where the amount of the adjustment to the opening balance of retained earnings cannot be reasonably determined, that fact;
where it is impracticable to provide comparative information, that fact; and
for each FRS that permits a choice of transitional accounting policies, the policy selected.

Enterprises are encouraged to disclose, in connection with the disclosures required by FRS 1.11, the fact that FRSs are being applied in full for the first time.

BASIS FOR CONCLUSIONS

FRS 1.11 requires that financial statements should not be described as complying with FRSs, unless they comply with all the requirements of each applicable Standard and Interpretation. Therefore, in the period of first-time application of FRSs as the primary accounting basis, the current Standards and Interpretations should be applied retrospectively, unless transitional provisions permit or require another treatment or the amount of the adjustment relating to prior periods cannot be reasonably determined.

10.

FRS 1.38 requires that comparative information be disclosed in respect of the previous period for all numerical information in the financial statements, unless a Standard permits or requires otherwise. As required in FRS 8.43 for changes in accounting policies, comparative information is prepared and presented in accordance with FRSs, unless it is impracticable to do so.

11.

It is not appropriate to recognise the cumulative effect of changes resulting from the transition from national GAAP to FRSs in the income statement (i.e., the Allowed Alternative Treatment set out in FRS 8.48 is not applicable to the first-time application of FRSs as the primary accounting basis). Such a "catchup adjustment" resulting from the change from a different set of accounting standards to FRSs would not result in useful information about the enterprise's performance in the transition period.

12.

The transitional treatment of any balances of items that existed prior to the effective date of current Standards and Interpretations is strictly limited to the periods ending on the date prescribed in those Standards and Interpretations. Financial statements of enterprises applying FRSs for the first time as the primary accounting basis are prepared under the assumption that the current Standards had always been applied. In addition, all enterprises applying FRSs should be treated equally, regardless of whether or not they applied FRSs in previous periods. Therefore, enterprises applying FRSs for the first time may, for example, either write off balances of goodwill that arose in periods beginning prior to 1 October 2000 directly against equity or capitalise and amortise them (FRS 22.79), regardless of the previous treatment under national GAAP. This transitional treatment, however, is not appropriate for goodwill purchased in periods beginning on or after 1 October 2000.

13.

Financial statements may still be described as complying with FRSs (FRS 1.11) if the amount of the adjustment of the opening balance of retained earnings relating to prior periods cannot be reasonably determined or if restatement of comparative information is impracticable, provided that the appropriate disclosure is made (applying FRS 8.47 by analogy).

Effective Date: INT FRS 8 comes into effect on 1 February 2003.

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Last reviewed on 11 December 2007
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