Transition to IFRS: First-Time Adoption (IFRS 1)

IFRS 1: what the standard requires

• a full set of financial statements for the first IFRS period and the previous year;
• a single accounting policy for all periods presented, complying with the standards in force at the end of the first period;
• limited exemptions from restating prior periods where the cost exceeds the benefit;
• a prohibition on retrospective application where it would require hindsight judgements;
• disclosures of how the transition affected financial position, performance and cash flows.

Timing for organisations in Uzbekistan

If a company is entered in the Register of public interest entities in 2026, it keeps IFRS accounts from January 1, 2027 (Presidential Resolution PP-282). The first financial statements for 2027 require comparative data for 2026 and an opening balance sheet at January 1, 2026 — these need to be gathered in advance.

What first-time adoption means

The company states for the first time that its financial statements comply with the international standards in full. That statement carries obligations: all standards in force at the reporting date are applied consistently to all periods presented.

Hence the key consequence: the work starts not with the current year but at an earlier date — with preparing the opening statement of financial position.

The opening statement of financial position

This is the starting point of the transition. At the transition date, all assets and liabilities that the standards require to be recognised are recognised, and items the standards do not permit are removed.

Items are then reclassified in line with the international requirements and measured according to the standards. All adjustments go directly to equity.

• recognising required assets and liabilities
• removing items not recognised by the standards
• reclassifying line items
• remeasuring according to the standards
• recording adjustments in equity

A single accounting policy

The accounting policy under the international standards is chosen once and applied in the same way to all periods presented. You cannot use different approaches for different years to get a more convenient result.

Developing the policy is the most substantive part of the transition: this is where the company makes decisions that will shape its financial statements for years to come.

Exemptions and exceptions

The first-time adoption standard provides a number of optional exemptions so that retrospective restatement does not become an impossible task. They concern, for example, the measurement of fixed assets and past business combinations.

There are also mandatory exceptions where retrospective application is prohibited — above all so that the company does not revise past estimates using information it now has.

Disclosing the transition

First-time adoption financial statements contain reconciliations of equity and profit or loss calculated under the previous rules and under the international standards. Users must understand where the differences come from.

A formal reconciliation without an explanation of the substance of the adjustments is a typical auditor objection to the first set of financial statements.

• reconciliation of equity at the transition date
• reconciliation of equity at the end of the comparative period
• reconciliation of profit or loss
• explanation of material adjustments

Practical difficulties

The first is a lack of data for prior periods: measurement under international rules needs information that national accounting did not collect. The second is asset valuation, which requires bringing in valuers.

The third is organisational: the transition affects not only accounting but also the units responsible for contracts, the warehouse, staff and investments. Without their involvement there simply will not be enough data.

How we support the transition

Leader Audit runs the first-time adoption project from diagnostic to a complete set of statements: we assess the gaps between national accounting and the standards, develop the accounting policy, build the conversion model and prepare the disclosures.

For companies raising foreign financing, this is usually the first step towards auditable financial statements of international quality.