Transition to IFRS vs IFRS 16

[Asnake E]

Hi,

Following adoption of IFRS, the accounting regulatory body in our country issued the following directive for entities applying IFRS for the first time

Offsetting assets and liabilities: If application of International
Financial Reporting Standards for leases, IFRS 16, at first time
adoption of IFRS resulted in recognition of right of use asset and
lease liability, the lease liability should be offset against the right of use asset and the excess asset amount net of tax, if any, should be credited to non-distributable account “IFRS Adoption
Remeasurement Reserve”

This is obviously against the requirements of IFRS 16. What will be the consequences on the application of this directive in the financial statements? Can the entities claim full compliance of IFRS given this departure?

[Leo]

Does the companies acts of your country allow the use of IFRS accounts or should the company establish its accounts in accordance of your local GAAP?

What's the context of the section you quoted? Is it a requirement from your local GAAP?

[Asnake E]

The companies are required by law to adopt IFRS. There is a proclamation for the adoption of IFRS.

[Leo]

I'm sorry, I don't know what this means and whether it makes sense. Putting the full ifrs compliance aside, what would be the subsequent accounting? Does it mean that you just record the rent expenses in the PL?

[Asnake E]

Yes, it does not make any sense but it is the law. The subsequent accounting will be recording the periodic lease payments as rent expense. As there is no right of use of asset, there will be no depreciation. And as there is no lease liabilty, there will be no liability to deduct for the periodic payments. Of course, there will also be no unwinding of the discount.

Given these departures, my question is still
In the case of requirements as per the law of a country, can the departure from IFRS doesn't breach the compliance with IFRS?

[Leo]

I would say that's not a full IFRS, so if your entity is within a consolidated group that need to apply ifrs then I think that some retreatment would be needed.

[Asnake E]

The requirement is for preparing single financial statements too.