Corporation Tax

First time adoption of IFRS

Produced by Tolley in association with Malcolm Greenbaum
  • 14 Oct 2021 17:44

The following Corporation Tax guidance note Produced by Tolley in association with Malcolm Greenbaum provides comprehensive and up to date tax information covering:

  • First time adoption of IFRS
  • Background ― developments in UK GAAP and IFRS
  • Comparative disclosures when converting to IFRS
  • First time adoption of IFRS
  • Specific issues on adoption of IFRS
  • Initial recognition exemption
  • Use of hindsight

First time adoption of IFRS

EU-listed groups have been required to apply EU-endorsed IFRS for their consolidated accounts since 2005, and UK company law has allowed any UK company the option of applying EU IFRS if they choose to do so. From 1 January 2021, UK companies wishing to use IFRS have to use UK-endorsed IFRS ― this was identical to EU IFRS on that date, but the UK may decide not to endorse parts of IFRS subsequently.

In practice, relatively few companies have adopted IFRS because there has been little practical benefit in doing so for small private companies. For the subsidiaries of larger groups there have been concerns around potential tax implications of conversion and also a reduction in distributable reserves under IFRS.

Background ― developments in UK GAAP and IFRS

In November 2012, the Accounting Council issued FRS 100 (Application of Financial Reporting Standards) and FRS 101 (Reduced Disclosure Framework – Disclosure exemptions from EU-adopted IFRS) for qualifying entities as final standards. FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland was issued in 2013.

These standards replaced previous UK GAAP with effect for accounting periods beginning on or after 1 January 2015. although early adoption was permitted.

The option to use full UK-IFRS remains unchanged under UK company law. However, UK companies and groups that are not required or do not chose to issue full IFRS financial statements have a choice between the adoptio

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