Restructuring provision
Background
Entity C”s first IFRS financial statements are for a period that ends on 31 December 2013 and include comparative information for 2012 only. It chooses not to restate previous business combinations under IFRSs. On 1 July 2011, Entity C acquired 100 per cent of Entity D. Under its previous GAAP, Entity C recognised an (undiscounted) restructuring provision of ¥100 that would not have qualified as an identifiable liability under IFRSs. The recognition of this restructuring provision increased goodwill by ¥100. At 31 December 2011 (date of transition to IFRSs), Entity C:
(a) had paid restructuring costs of ¥60; and
(b) estimated that it would pay further costs of ¥40 in 2012 and that the effects of discounting were immaterial. At 31 December 2011, those further costs did not qualify for recognition as a provision under IAS 37.
Application of requirements
In its opening IFRS statement of financial position, Entity C:
(a) does not recognise a restructuring provision.
(b) does not adjust the amount assigned to goodwill. However, Entity C tests the goodwill for impairment under IAS 36 – Impairment of Assets – and recognises any resulting impairment loss.
(c) as a result of (a) and (b), reports retained earnings in its opening IFRS statement of financial position that are higher by ¥40 (before income taxes and before recognising any impairment loss) than in the balance sheet at the same date under previous GAAP.