SOCPA IFRS Transition Project

SOCPA IFRS
Transition Project
Muhammad Asif Iqbal
Director Accounting Standards SOCPA
1
Agenda
IFRS Transition in KSA

Modifications in IFRS as suggested by SOCPA
Key differences between SOCPA GAAP and IFRSs
IFRS 1 First time adoption of IFRS

SOCPA Board, in its meeting held on February 18, 2012, approved the project of implementation of IFRSs. IFRSs
in KSA will be similar to the standards issued by the IASB with possible modification in the following manners:
Adding more disclosure requirements;
Removing optional treatments;
Amending the requirements that contradict Shariah or local law, taking in consideration level of technical
and professional preparedness in the KSA.
The earliest date for application shall be on financial statements of listed entities prepared for financial periods
starting on or after January 1, 2017. For other entities the earliest date for application shall be on financial
statements prepared for financial periods starting on or after January 1, 2018.
SOCPA decided to review converged standards in phases according to certain priorities including categorization
of standards into groups of correlated topics.
It was decided that the convergence would be completed within five years. Standards would be addressed in
correlated groups [14 groups] which are as follows:
4

Presentation of financial
statements
Employee benefits
Non-current assets
I
Group accounts
Non-current
assets II
IAS 1 Presentation of Financial

Statements
IAS 19 Employee Benefits
IAS 2 Inventories
IAS 27 Separate
Financial Statements
(revised)
IAS 40 Investment
Property
IAS 7 Statement of Cash Flows
IAS 26 Accounting and

Reporting by Retirement
Benefit Plans
IAS 16 Property, Plant

and Equipment
IAS 28 Investments
in Associates
(revised)
IAS 36 Impairment of
Assets
IAS 8 Accounting Policies,

Changes in Accounting
Estimates and Errors
IFRS 2 Share-based
Payment
IAS 23 Borrowing
Costs
IFRS 10
Consolidated
IAS 41 Agriculture
IAS 10 Events After the

Reporting Period
IFRIC 14 - IAS 19 The

Limit on a Defined
Benefit Asset, Minimum
Funding Requirements
and their Interaction
SIC 32 - Intangible
Assets-Web Site Costs
IFRS 11 Joint
Arrangements
IFRS 5 Non-current
Assets Held for Sale
and Discontinued
Operations
IAS 24 Related Party

Disclosures
IFRS 12 Disclosure
of Interests in Other
Entities
IFRS 13 Fair Value

Measurement
IAS 33 Earnings Per Share
IFRS 3 Business
Combinations
IAS 34 Interim Financial

Reporting
IFRIC 10 - Interim Financial
Reporting and Impairment
IFRS 8 Operating Segments

Financial
Instruments
Foreign Currency
Income Taxes
IAS 17 Leases
IAS 32 Financial
Instruments:
Presentation
IAS 21 The Effects of

Changes in Foreign
Exchange Rates
IAS 12 Income Taxes
IFRIC 4 - Determining
whether an
Arrangement contains
a Lease
IFRS 7 Financial
Instruments:
Disclosures
IAS 29 Financial
Reporting in
Hyperinflationary
Economies
SIC 25 - Income
Taxes-Changes in the
Tax Status of an
Entity or its
Shareholders
IFRIC 12 - Service
Concession
Arrangements
IFRS 9 Financial
Instruments
IFRIC 7 - Approach
under IAS 29
Financial Reporting in
Hyperinflationary
Economies
SIC 15 - Operating
Leases-Incentives
IFRIC 2 - Members
Shares in Cooperative Entities and
Similar Instruments
SIC 27 - Evaluating
the Substance of
Transactions
Involving the Legal
Form of a Lease
IFRIC 19 Extinguishing
Financial Liabilities
with Equity
Instruments
SIC 29 - DisclosureService Concession
IFRIC 16 - Hedges of
a Net Investment in a
Revenue recognition
Leasing
IFRS 15 Revenue
IAS 20 Accounting for

Government Grants
and Disclosure of
Government
Assistance

Provisions
Insurance
Mineral Assets
First-time Adoption
IAS 37 Provisions, Contingent

Liabilities and Contingent
Assets
IFRS 4 Insurance Contracts
IFRS 6 Exploration for and

Evaluation of Mineral Assets
IFRS 1 First-time Adoption of

IFRSs
IFRIC 1 - Changes in Existing

Decommissioning, Restoration
and Similar Liabilities
IFRIC 5 - Rights to Interests
arising from Decommissioning,
Restoration and Environmental
Rehabilitation Funds
IFRIC 6 - Liabilities arising from
Participating in a Specific
MarketWaste Electrical and
Electronic Equipment
SOCPA will develop a separate standard on Zakat besides IAS 12.

SOCPA would develop two sets of accounting standards;
the first one represents converged IFRS standards other than SME standard - applied to
publicly accountable entities (such as listed companies, financial institutions etc).
the second set, representing topics covered by accounting standards for small and
medium size entities (SMEs) - would be applied to other entities.
IFRS Transition timelines for

Listed companies in KSA
Opening balance sheet
Current GAAP
Previous GAAP
reporting
Comparative period
Interim reporting
under IFRS
31 Dec 2014
Date of transition
31 Dec 2015 / 1 Jan
2016
31 Dec 2016 /
1 Jan 2017
First Interim
Reporting date
31 Mar 2017
First Annual Reporting date
31 Dec 2017
So far 37 standards have been reviewed by SOCPA, and 14 standards have been endorsed
for issuance in the local environment with modifications. Details are as follows:
Stage 1
Endorsed without modification
Endorsed with few modifications
IAS 8 - Accounting Policies, Changes in Accounting

Estimates and Errors
Conceptual Framework for Financial Reporting
IFRIC 10 - Interim Financial Reporting and

Impairment
IAS 1 - Presentation of Financial Statements
IFRIC 17 - Distributions of Non-cash Assets to

owners
IAS 7 - Statement of Cash Flows
IAS 10 - Events After the Reporting Period

IAS 34 - Interim Financial Reporting
IAS - 24 Related Party Disclosures
IFRS 8 - Operating Segments

Stage 2
IFRIC 14 - The limit on a defined benefit asset,

minimum funding requirements and their interaction
IAS 19 - Employee Benefits
IAS 2 Inventories
IAS 26 - Accounting and Reporting by Retirement Benefit

Plans
IFRS 3 - Business Combinations
IFRS 2 - Share-based payment
SIC 32 - Intangible Assets- Web Site Costs
IAS 16 - Property, Plant and Equipment
IAS 27 - Separate Financial Statements
IAS 23 - Borrowing Costs
IAS 28 - Investments in Associates
IAS 38 - Intangible Assets
IFRS 10 - Consolidated Financial Statements
IFRS 12 - Disclosure of interests in Other Entities
IFRS11 Joint arrangements
10

Stage 3
IAS 36 Impairment of Assets
IAS 40 Investment Property
IFRS 5 - Non-current Assets Held for Sale and

Discontinued Operations
IAS 41 - Agriculture
IFRS 13 Fair Value Measurement
IAS 32 - Financial Instruments
IFRS 9 - Financial Instruments
IFRS 7 - Financial Instruments: Disclosure
IFRIC 2 - Members Shares in Co-operative Entities and

Similar Instruments
IFRS 1 First time adoption of IFRS
IFRIC 16 - Hedges of Net Investment in a Foreign

Operation
IFRIC 19 - Extinguishing Financial Liabilities with
Equity Instruments
11
Statement of Compliance
These consolidated financial statements have been
prepared in accordance with the International
Financial Reporting Standards (IFRS) as endorsed
by SOCPA / adopted in KSA and other standards and
pronouncements endorsed by SOCPA.
12
Modifications in IFRS as
suggested by SOCPA
13

IFRS
Modifications
IAS 1 Presentation of
Inclusion of requirement to present liabilities for Zakat payable
Inclusion of requirement to present revenue in three categories: revenue from

operations, finance revenue (if it is not its main operations) and other revenues.
Inclusion of requirement for additional disclosure about finance cost. Finance cost or
interest expense must be sub-classified into different types, such as those arise from
finance lease, borrowing, installment purchases, Murabaha, and application of time
value of money etc.
IAS 7 - Statement of Cash

Flows
Requirement to present Zakat paid with cash flows arising from taxes on income
and shall be classified as cash flows from operating activities unless it can be
specifically identified with financing and investing activities.
IAS 24 - Related Party

Disclosures
Definition of close members of the family of a person has been modified as:
(a) that persons children and spouse or domestic partner;
(b) children of that persons spouses or domestic partner; and
(c) parents, grandparents, brothers and sisters, grand children and
other dependants of that person or that persons spouse or
domestic partner.
IAS 19 - Employee Benefits
Requirement to provide disclosure about components of the assets of the employee

defined benefit plan.
14

IFRS
Modifications
IAS 16 - Property, Plant and

Equipment
Requirement to use the service of an independent person to perform the valuation

when the entity chooses the revaluation model for an entire class of the property,
plant and equipment. The person (valuer) should be a certified valuer who is
independent of the entity and holds a recognized, relevant professional qualification
and has recent experience in the location and category of property, plant and
equipment being valued.
The name and qualification of the valuer is to be disclosed.
Requirement to disclose about the cost of testing and trial operation of the entitys
assets.
IAS 23 - Borrowing Costs
Requirement to disclose separately the finance costs according to their sources such
as conventional borrowing, Tawarruq etc.
IAS 38 - Intangible Assets
For fair value model, requirement to use of a valuer who is independent of the entity
and holds a recognized and relevant professional qualification and has recent
experience in the location and category of the intangible assets being valued.
Name and qualification of valuer need to be disclosed.
Requirement to disclose name of other entities in which the entity has interest.
Requirement to provide disclosures about the investees if they are not listed in Saudi
stock market.
IFRS 12 - Disclosure of
Interests in Other Entities
15

IFRS
Modifications

The name and qualification of the valuer is to be disclosed.
Replacing all non shariah compliant examples like pigs, wine etc.

IAS 32 / IFRS 7 Financial

Instruments
Requirement to disclose additional details about nature of financing and

investments e.g. Morabaha, Ijarah, conventional mode etc.
IFRS 1 First time adoption

of IFRS
Revaluation surplus of property, plant and equipment shall be recognized in the

revaluation surplus account in the equity, and then treated according to IAS 16
requirements.
IAS 40 Investment Property
IAS 41 - Agriculture
16
Key differences between

SOCPA GAAP and IFRSs
17

Area
SOCPA
IAS 16
Challenges
IAS 16 allows entities to

carry assets at cost less
accumulated depreciation
and impairment losses if
any or at their fair values
(changes in fair values are
recognised in a separate
revaluation reserve under
equity of the entity).
Revaluation may result in

strengthening of financial
position (improve ratios).
Component accounting not covered

under SOCPA
Under IFRS, fixed assets

are required to be
componentized and
depreciated based on each
components useful life.
Need to consider
capabilities of current
accounting systems to
perform component
accounting.
Treatment of site restoration costs

not covered under SOCPA
Provision for siterestoration and

dismantling cost is
required under IAS 37. To
the extent it relates to the
fixed asset, the changes are
added/deducted (after
discounting) from the asset
Development of models
to calculate restoration
costs and discounting of
such costs on periodic
basis.
Carried at cost less accumulated

depreciation and impairment
losses.
Revaluation is prohibited under
SOCPA
Property, plant
and equipment
Consider cost and efforts

involved in revaluation.
18

Area
SOCPA
Depreciation is not calculated on
the fixed assets that were
determined to be disposed of
immediately upon taking that
decision. However, there is no
mention of idle assets.
Property, plant
and equipment
IAS 16
Challenges
Should be depreciated
even it is idle, but not if it
is held for sale (covered
under IFRS 5)
Opinion issued by SOCPA - assets

that were permanently idle and
still in the entitys possession if
material should be separated
from other assets and their
depreciation should be suspended
Reassessment of useful life,
residual values and depreciation
methods performed only when
events or circumstances indicate.
Estimates of useful lives

would need to be
revisited at the end of
every year;
Residual values maybe

significant for plant but
insignificant for other
assets.
Residual values of fixed

assets need to be assessed
and revised at the end of
each reporting period and
on adoption
Management would
require a review of
historical trends and
assistance from
operations management
to estimate the residual 19
values of assets.

Area
Inventories
SOCPA
Weighted average method is

recommended for valuation.
First in First out (FIFO) or

Last in First Out method
(LIFO) available as allowed
alternative methods,
disclosure required for
differences between
weighted average method
and allowed alternative
method.
IAS 2
Choice available between

FIFO or weighted average cost
method. LIFO is prohibited.
Reversal of inventory writedowns is not covered under

SOCPA
NRV estimates are made at

each reporting period end
and increase in NRV from
previous reporting period
may result in reversal of
write-down that is allowed
under IFRS.
Capitalisation of borrowing
costs not covered under
SOCPA
Entities may capitalize

borrowing cost in cost of
inventories manufactured that
take substantial period of time
to get ready.
Challenges
Might have substantial
impact on entities using
LIFO and would require
system changes and staff
training
20

Area
SOCPA
IAS 36
SOCPA lists factors that

should be considered to
assess impairment,
however initially the
impairment is assessed by
comparing the gross
undiscounted cash flows
from the assets with its
carrying value.
Certain assets require

impairment test at least
annually
If gross cash flows are

higher than carrying
amount = no impairment
IAS 36 has a list of external

and internal indicators of
impairment.
If gross cash flows are

lower than carrying
amount = impairment is
recognized based on
discounted cash flows.
If there is an indication that

an asset may be impaired,
then the asset's recoverable
amount is calculated
which is higher of fair value
less costs of disposal or
value in use.
The difference between

recoverable amount and
carrying value is
Impairment of
assets
Entities are required to

assess at the end of each
reporting period whether
there is any indication of
impairment.
Challenges
Entities need to built in

impairment assessment in
their financial reporting
close process to ensure
impairment assessments/
reviews are performed at
each reporting date.
21

Area
Intangible
assets
SOCPA
IAS 38
Certain incorporation
costs are capitalized
Intangibles are carried

at historical cost less
amortization.
Can be held at cost less

impairment or at fair
value
Investment properties
are measured at cost
under SOCPA
IFRS 13 guidance
Investment property is
initially measured at cost
applies for fair
valuation.
IFRS allows accounting
Entities may choose to
policy choice for
fair value investment
subsequent
measurement to carry
properties that may
investment property at
result in better financial
either cost or fair value.
position but need to
consider the
requirement of fair
value exercise at each
reporting period.
22
Investment
properties
Challenges
SOCPA allows
disclosure of the fair
value information in
the explanatory notes
to the financial
statements
Entities may consider

Incorporation costs are
not to capitalise future
not allowed for
capitalisation under IFRS
incorporation costs

SOCPA
Area
Zakat and Taxation
Zakat is charged to the income

statement if the Company is
wholly owned by Saudi
shareholders otherwise it is
charged to the equity
IAS 12
Income tax is charged to the

income statement if the
Company is wholly owned by
non-local shareholders otherwise
it is charged to the equity
Deferred tax requirements are

similar to IFRS however limited
compliance noted to date.
Current and deferred tax are

recognized as income or expense in
profit and loss except to the extent
that the tax arises from:
A transaction or event that is

recognized outside profit or
loss (whether in other
comprehensive income or in
equity)
A business combination
Under IAS 12, the Company needs to

recognize deferred tax on all
temporary differences
Currently banks and insurance

companies that report under IFRS in
KSA do not account for deferred
Zakat and this may not be possible
23
due to Sharia requirements.

SOCPA
Area
Employee
benefits
Limited guidance
available on employment
benefits, however the
standards do require
discounting of long term
obligations to reflect the
current costs.
IAS 19
Practically, companies
are accounting for the
End of Service Benefits
(EOSB) obligations based
actual payments that the
Company would require
to make few companies
are using the actuarial
valuations also.
Challenges
Employee benefits need to Entities with

be reviewed to evaluate if
significant number
they are defined benefit
of employees (i.e.
or defined contribution
construction
schemes.
companies) may
have significant
Liability for defined
EOSB recognised in
benefit schemes (like
their balance sheet.
termination benefits /
This would need to
end of service benefits)
would need be
be valued in
determined through an
accordance with IAS
actuarial valuation
19 and will require
actuarial assistance.
Employee benefits would
There may be
also be need to
segregated as long term /
limited expertise
short term benefits and
available to
long term employee
determine liability
benefits would need to be
of defined benefit
discounted.
plan under actuarial24

SOCPA
Area
Financial
Instruments
IAS 39, IFRS 9
Challenges
There may be limited

expertise available for
valuation of complex
instruments such as
embedded derivatives
and accounting
treatment of hedge
transactions, so the
entities will need to plan
this ahead.
SOCPA has issued a

separate standard
dealing with
investment in securities
however the guidance
is limited and detailed
aspects are not covered.
Separate standards for

accounting and
disclosure of Financial
instruments has been
issued which contains
extensive guidance.
Practically companies
are applying IFRS
where guidance in
SOCPA is not available.
The standards are being

further enhanced and
looks into all aspects of
financial instruments like
classification, recognition
and measurement, derecognition, impairment
etc.
25

SOCPA
Area
Financial
Instruments
No guidance available
regarding accounting
of derivatives.
Limited guidance on
hedge accounting
Financial instruments
can be classified as :
Trade securities
Available for sale
Held to Maturity
IAS 39, IFRS 9
Challenges
Detailed guidance
available for accounting
for derivatives and
hedges
Financial instruments can

be classified as:
At fair value through
profit or loss (which
includes trading and
designated
instruments)
Available for sale
Held-to-maturity
Loan and receivables
26

SOCPA
Area
Standard is prescriptive
should satisfy one of the
following four conditions to
be classified as finance lease
90% of the value of the

assets
75% of the life of the assets
Bargain purchase option
Transfer of ownership at the
end of the lease term
IAS 17 & IFRIC 4
Leases
Challenges
Principle based - substance over

form requirement transfer of
substantially all risks and
rewards incident to ownership is
to be considered while deciding
the classification of the lease
IFRIC 4 requires identification of
arrangements which do not take
the legal form of a lease but
which convey rights to use assets
in return for a series of
payments. Such arrangements
should be accounted for in
accordance with IAS 17
Need to review existing

contracts to consider
whether they fall under
IFRIC 4 to account for as
finance leases.
Future agreements
would need to be
evaluated and
consideration to be
given to IFRIC 4 while
drafting the terms and
conditions;
Accounting processes
and methods need to be
updated to ensure leases
for lands and buildings
are separately accounted
for.
Land and building are not

separately accounted for as
operating and finance leases,
but are considered in
conjunction.
Where a lease of the land and

buildings has been treated as an
operating lease under SOCPA, it
may be that the buildings
element, when considered
separately, will be classified as a
finance lease under IFRS.
Lease rentals are recognised

in the income statement on
straight line basis but future
escalations are not
Lease rentals should be

recognized in the income
statement on a straight line basis
(factoring future escalations)
27

SOCPA
Area
Minimum contents
Interim Financial
Reporting
IFRS
Balance sheet
Income statement
Cash flows statement
Selected explanatory notes
Minimum contents
Condensed statement of
financial position
Condensed comprehensive
income
Condensed statement of
changes in equity
Condensed cash flow statement
Selected explanatory not
A statement that results for the

interim period may not give an
accurate indicator of the annual
operating results is required to be
included
No such statement is required
The comparative balance sheet

reflects the balances as at the end
of the corresponding period.
The comparative balance sheet

reflects the balances as at the end
of the last financial year.
28

SOCPA
Area
IFRS
Disclosures for critical accounting

judgments are not required.
Disclosures for critical accounting

judgments are required.
Disclosures for extra ordinary items is

required.
IAS 1 prohibits any items to be

disclosed as extraordinary items.
Required to present expenses based

on function (for example, cost of
sales, administrative).
Entities may present expenses based

on either function or nature (for
example, salaries, depreciation).
General
However, if function is selected,

certain disclosures about the nature
of expenses must be included in the
notes.
Cash flow statement - only specifies

indirect method
Cash flow statement- specifies both

direct and indirect methods. Direct
method is preferred.
29

Area
General
SOCPA
IFRS
Capitalization of borrowing costs

for qualifying assets limited to
fixed assets that take substantial
period of time to get ready for its
intended use or sale.
IFRS also includes inventories that

require substantial period of time
to bring them in saleable condition,
in addition to fixed assets.
Related parties
Relatives [family members] up to

the 4th degree.
Comprehensive definition of close

family members.
Relationships between a parent

and its subsidiaries shall be
disclosed irrespective of whether
there have been transactions
between them.
Detailed disclosures required for

all types of management
compensation.
Measure biological
assets/producing cattle (noncurrent assets) at fair value.
Transaction oriented e.g.

disclosure to identify controlling
party not needed as long as there
were no transactions.
No mention of disclosure for

management compensation.
Agriculture
Does not allow that biological
assets/producing should be
30
IFRS 1 First time adoption

of IFRS
31
Overview
IFRS 1 applies when an entity first adopts IFRS in its annual
financial statements
Adopts an opening IFRS statement of financial position
approach.
Requires an unreserved, explicit statement of compliance
with IFRS.
Aims to ensure that the information in an entitys first IFRS
financial statements and interim reports is transparent and
comparable over all the periods presented.
General principle: A first-time adopter recognises and
measures all assets and liabilities in its first IFRS financial
statements as if it had always applied IFRS
32
Requirements
Indicative process for planning the transition:
1. Apply IFRS effective at the reporting date.
2. Prepare an opening statement of financial
position at date of transition
3. Recognise/derecognise assets and liabilities in
accordance with IFRS
4. Measure recognised assets and liabilities in the
opening IFRS statement of financial position in
accordance with IFRS
5. Determine estimates in accordance with IFRS
33
Requirements
6. The effect of changes in accounting policies is recognised
in equity in the opening statement of financial position
7. Presentation and disclosures shall be in accordance
with IFRS including reclassifications
8. Comparative information shall be in full accordance with
IFRS
9. Optional exemptions should be considered and
mandatory exceptions should be applied.
10. Equity and profit or loss reconciliations between
previous GAAP and IFRS are to be provided.
34
Mandatory Exemptions
1. Estimates
2. De-recognition of non-derivative financial
instruments
3. Hedge accounting
4. Non-controlling interests
5. Classification and measurement of financial
assets
6. Impairment of financial assets
7. Embedded derivatives
8. Government loans
35
Optional Exemptions
1.
2.
3.
4.
5.
6.
7.
Share-based payments
Insurance contracts
Deemed cost
Leases
Cumulative translation differences
Investments in subsidiaries, joint ventures and associates
Assets and liabilities of subsidiaries, associates and joint
ventures
8. Compound financial instruments
9. Designation of previously recognised financial
instruments
10.Fair value measurement of financial assets or financial
liabilities at initial recognition
36
Optional Exemptions
11.Decommissioning liabilities
12.Service concession arrangements
13.Borrowing costs
14.Transfer of assets from customers
15.Extinguishing financial liabilities with equity
instruments
16.Severe hyperinflation
17.Stripping costs in the production phase of a
surface mine
18.Designation of contracts to buy or sell a nonfinancial item
19.Revenue (IFRS 15)
20.Business Combinations
37
Disclosures
No exemption from the disclosure requirements in
other IFRSs
Disclosures form a link between previous GAAP
financial statements and the first IFRS financial
statements
38
Interim financial statements

A first-time adopter will also have to ensure that its
interim financial reports in the year of adoption of
IFRS contain sufficient information about events or
transactions that are material to an understanding
of the current interim period. Since a first-time
adopter has not previously issued a complete set of
annual IFRS financial statements, this means that
significantly more information may be required in
these IFRS interim reports than would normally be
included in an interim report prepared in
accordance with IAS 34.
39
Interim financial statements

For interim reporting, entities should be aware that they are
not required to repeat all of the incremental IFRS information
for each interim period during that first IFRS reporting year
(IFRS 1.32-33). The opening statement of financial position
and accompanying reconciliations of equity and total
comprehensive income at the date of transition to IFRS is a
requirement for only the first interim and annual financial
reports; they are not required in the second and third interim
financial reports.
40
Implications
Examples of additional assets/liabilities that may need to be
recognised:
o
o
o
o
o
o
o
o
o
Pension assets and liabilities

Deferred tax assets and liabilities
Finance lease assets and liabilities
Legal/constructive provisions
Derivative financial instruments
Acquired intangible assets
Internal development costs
Share-based payments
Intangible assets in business combination not
recognisable under IAS 38 adjust goodwill
41
Implications
Examples of derecognition of previously recognised
assets/liabilities:
Provisions without legal/constructive obligation

General reserves
Deferred tax assets where recovery is not
probable
Intangible assets that fail the recognition criteria
42
Implications
Examples of assets/liabilities that might be reclassified:
Treasury shares as assets, moved to equity
Financial assets to one FV or amortised cost
Financial instruments split between equity and
liability components
Disclosure of gross assets/liabilities that were
previously offset
Analysis of assets/liabilities into current/non-current
Securities as cash equivalents in the Cash Flow
Statement
Non-current assets held for sale (IFRS 5)
43
Implications
Examples of assets/liabilities that might be measured
differently:
Revaluation of PPE, Investment property, biological

assets
Financial instruments to fair value or amortised cost
Employee benefit obligations
Best estimate provisions under IAS 37
Impairment of assets
Valuation of inventories
Assets held for sale (IFRS 5)
Share based payments Liability under IFRS 2
44
Frequently asked questions

1. Is an entity required to provide all of the relevant
disclosures necessary in annual IFRS financial statements
in its first interim IFRS financial statements?
No. While the first interim IFRS financial statements in the year of
adoption will be more extensive than previous interim financial
statements prepared in accordance with SOCPA GAAP, there is no
requirement that the first condensed interim financial statements
include all of the disclosures required in annual IFRS financial
statements. Judgment will be required in determining what
additional disclosures will be necessary in the first interim IFRS
financial statements in the year of adoption. The annual
disclosure requirements in the relevant IFRSs may be useful when
considering which additional disclosures should be provided.
45

2. What are the minimum requirements that must be complied with in the first interim IFRS
financial statements?
Required financial statements
a condensed balance sheet at March 31, 2017, December 31, 2016 and December 31, 2015;
a condensed statement of comprehensive income for the 3 months ended March 31, 2017 and
2016;
a condensed statement of changes in equity for the 3 months ended March 31, 2017 and
2016; and
a condensed statement of cash flows for the 3 months ended March 31, 2017 and 2016.
Reconciliations of equity under SOCPA GAAP to equity under IFRSs at:

the date of transition, being January 1, 2016;
the end of the comparative interim period, being March 31, 2016; and
the end of the comparative annual period, being December 31, 2016.
Reconciliations of total comprehensive income under SOCPA GAAP to total comprehensive income
under IFRSs for:
the comparative interim period, being the 3 months ended March 31, 2016; and
the comparative annual period ended December 31, 2016.
IFRS 1.33 explicitly requires a first-time adopter to disclose information material to an understanding of
the current interim period if that information has not been disclosed in the most recent annual financial
statements prepared in accordance with SOCPA GAAP. Significant judgment often will be necessary to
determine areas that may require additional disclosures.
46

3. Are all accounting policies required to be included in the
first interim IFRS financial statements?
Yes, when a first-time adopter prepares its first interim IFRS
financial statements that claim compliance with IAS 34, these
financial statements should include a complete set of significant
accounting policies.
47

4. What headings, sub-totals and line items are required in
the first interim IFRS financial statements?
If a first-time adopter publishes a set of condensed interim financial
statements in accordance with IFRSs, then these financial statements
contain, as a minimum, each of the headings and sub-totals that
were included in its most recent annual financial statements. A firsttime adopter applies this requirement by including at least all of the
headings and sub-totals that are expected to be included in its first
annual IFRS financial statements.
48

5. Can I restate amounts in the financial statements for
subsequent information which has come to light?
Generally no, the estimates used in preparing the balance sheet at
the date of transition to IFRSs (and in preparing the comparative
amounts to be included in the first IFRS financial statements) must be
consistent with those used under the previous GAAP, unless there is
objective evidence that those estimates were in error. This
requirement is consistent with the principles in IAS 10 Events after
the Reporting Period for determining whether events arising after the
balance sheet date are adjusting or non-adjusting.
49

Illustrative example: estimates
A company has a 31 December year end. Included in its financial
statements for the year ended 31 December 2015, prepared under
SOCPA GAAP, was an amount owing from X which, given the
information available at the balance sheet date, was considered to be
recoverable.
Late in 2016, X was declared insolvent and the amount was written
off in the financial statements for the year ended 31 December 2016.
The company is preparing its first IFRS financial statements for the
year ended 31 December 2017.
Although it is now known that the amount owing from X was not
recoverable it will still need to be included in the companys opening
IFRS balance sheet and the write off reported as a loss in the
comparative income statement in the 2017 financial statements.
50
Thank you
Questions & Comments
asifiqbal@socpa.org.sa
Disclaimer
The views expressed in this presentation are those of the
presenter. Official positions of the SOCPA are determined
only after extensive due process and deliberation.
51

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SOCPA IFRS

IFRS Transition in KSA

IFRS Transition in KSA

IFRS Transition in KSA

IFRS Transition in KSA

IAS 1 Presentation of Financial

IAS 19 Employee Benefits

IAS 7 Statement of Cash Flows

IAS 26 Accounting and

IAS 16 Property, Plant

IAS 8 Accounting Policies,

IAS 10 Events After the

IFRIC 14 - IAS 19 The

IAS 24 Related Party

IFRS 13 Fair Value

IAS 33 Earnings Per Share

IAS 34 Interim Financial

IFRS Transition in KSA

IAS 21 The Effects of

IAS 12 Income Taxes

SIC 29 - DisclosureService Concession

IAS 20 Accounting for

IFRS Transition in KSA

IAS 37 Provisions, Contingent

IFRS 4 Insurance Contracts

IFRS 6 Exploration for and

IFRS 1 First-time Adoption of

IFRIC 1 - Changes in Existing

SOCPA will develop a separate standard on Zakat besides IAS 12.

IFRS Transition timelines for

IFRS Transition in KSA

Endorsed with few modifications

IAS 8 - Accounting Policies, Changes in Accounting

Conceptual Framework for Financial Reporting

IFRIC 10 - Interim Financial Reporting and

IAS 1 - Presentation of Financial Statements

IFRIC 17 - Distributions of Non-cash Assets to

IAS 7 - Statement of Cash Flows

IAS 10 - Events After the Reporting Period

IAS - 24 Related Party Disclosures

IFRS 8 - Operating Segments

IFRS Transition in KSA

Endorsed with few modifications

IFRIC 14 - The limit on a defined benefit asset,

IAS 19 - Employee Benefits

IAS 26 - Accounting and Reporting by Retirement Benefit

IFRS 3 - Business Combinations

IFRS 2 - Share-based payment

SIC 32 - Intangible Assets- Web Site Costs

IAS 16 - Property, Plant and Equipment

IAS 27 - Separate Financial Statements

IAS 23 - Borrowing Costs

IAS 28 - Investments in Associates

IAS 38 - Intangible Assets

IFRS 10 - Consolidated Financial Statements

IFRS 12 - Disclosure of interests in Other Entities

IFRS11 Joint arrangements

IFRS Transition in KSA

Endorsed with few modifications

IAS 36 Impairment of Assets

IAS 40 Investment Property

IFRS 5 - Non-current Assets Held for Sale and

IFRS 13 Fair Value Measurement

IAS 32 - Financial Instruments