IFRS 1 Deemed Cost

[Asnake E]

Greetings

IFRS 1 allows IFRS adopters to use the value of assets arrived through revaluation as deemed cost. However the revaluation should be on or before the transition date.

How do entities apply this option if the revaluation was not done at the date of transition to IFRS? I mean assume the entiy is adopting and producing it's first IFRS financial statements for the year ended 7 july 2019 (the transition date being 8 july 2017) how could the revaluation at the transition date be determined?

[Marek Muc]

Hi, IFRS 1 allows previous GAAP revaluation, see IFRS1.D6, IG8 , BC46-47

[Asnake E]

Thank you.

However in cases where the entity has no GAAP revaluations. Is there a possibility to perform the revaluation now and work back to the date of transition? Or where the entity don't have the GAAP revaluation at transition date does it mean that it can not use the deemed cost option?

[Marek Muc]

Is there a possibility to perform the revaluation now and work back to the date of transition?

sure, you can do the valuation now

Or where the entity don't have the GAAP revaluation at transition date does it mean that it can not use the deemed cost option?

you can also use 'cost or depreciated cost in accordance with IFRSs, adjusted to reflect, for example, changes in a general or specific price index' (IFRS 1.D6)

[Asnake E]

Thank you. Very helpful.

But doing the valuation now and using it as deemed cost at the date of transition, how can it be?

Does it mean that taking the valuation now and adjusting it for price index between the date of the transition and now?

I am asking this because there are two years between the date of transition (8 July 2017) and now

[Marek Muc]

You do the valuation now, but of course it is done as at the transition date. If it concerns real estate, for example, you need to base the valuation on real estate prices as at the transition date

[Asnake E]

Thank you.

This means you do the revaluation now and adjust it to apply for the transition date or use assumptions at the transition date to determine the valuation.