IFRS 1 sets the rules for a company's first IFRS financial statements. It requires the IFRSs effective at the end of the first IFRS reporting period to be applied retrospectively, starting from an opening IFRS statement of financial position at the date of transition, subject to defined exemptions and exceptions.
This guide is written for the accountants and finance directors who will run a conversion, and for founders who need to know what it will do to the balance sheet. In the UK, the usual triggers are a Main Market listing, a later move up from AIM, a sale into an IFRS-reporting group, or a voluntary decision to adopt. AIM itself has allowed IFRS or FRS 102 since August 2026, so an AIM admission does not by itself force the move.
A first-time adopter is an entity presenting its first IFRS financial statements. IFRS 1 defines those as the first annual financial statements in which the entity adopts IFRS through an explicit and unreserved statement of compliance with IFRS. The test turns on that statement, not on how closely the company's previous accounts resembled IFRS.
For the UK companies this guide addresses, the previous GAAP is usually FRS 102. The conversion is often prompted by a transaction or a listing, so its timing matters as much as its mechanics.
| Event | Effect on the reporting framework |
|---|---|
| Main Market listing | Requires UK-adopted IFRS |
| A later move up from AIM to the Main Market | Requires UK-adopted IFRS at that point |
| Sale into an IFRS-reporting group | Brings the company's figures into the group's IFRS reporting |
| Voluntary adoption | The company chooses to adopt IFRS |
| AIM admission | Does not by itself force the conversion: AIM has allowed IFRS or FRS 102 since August 2026 |
AIM does not require IFRS. Since August 2026, UK-incorporated AIM companies may report under FRS 102 or IFRS. The Main Market requires UK-adopted IFRS. Our guide to FRS 102 for AIM companies covers the AIM position in more detail.
The date of transition is the beginning of the earliest period for which the entity presents full comparative information under IFRS. It is where the company's IFRS record begins, and it is usually earlier than people expect.
A company whose first IFRS financial statements cover the year to 31 December 2028, with one comparative year, has a date of transition of 1 January 2027. Its first IFRS financial statements present at least three statements of financial position and at least two of each of the other primary statements.
| Date | What it is | What is prepared under IFRS |
|---|---|---|
| 1 January 2027 | Date of transition | Opening IFRS statement of financial position |
| 31 December 2027 | End of the comparative year | Comparative statement of financial position and the comparative year's other primary statements |
| 31 December 2028 | Reporting date: end of the first IFRS reporting period | Statement of financial position and the current year's other primary statements |
The basic requirement is full retrospective application. The company applies the IFRSs effective at the end of its first IFRS reporting period, and applies them consistently across every period presented, including the opening position. It does not apply the standards that were in force at each earlier date.
Because policies are those effective at the end of the first IFRS reporting period, a company whose first IFRS period starts on or after 1 January 2027 applies IFRS 18, which replaces IAS 1 for periods beginning on or after that date, throughout. The 2028 example above falls into that group, so its comparatives are presented under IFRS 18 too (IFRS 18 for companies moving to IFRS covers what that means for intangibles).
The opening IFRS statement of financial position is prepared at the date of transition. It is the earliest of the statements of financial position presented in the first IFRS financial statements, and the foundation for everything reported afterwards. Preparing it involves four steps.
Recognise all assets and liabilities whose recognition IFRS requires, including items the previous GAAP left off the balance sheet.
Remove items that the previous GAAP recognised but IFRS does not permit to be recognised as assets or liabilities.
Reclassify items that the previous GAAP classified differently, for example as a different type of asset, liability or component of equity.
Measure all recognised assets and liabilities under IFRS, subject to the exemptions the company elects and the exceptions it must apply.
The adjustments that arise go directly to retained earnings, or to another category of equity where appropriate, at the date of transition. A change made at transition moves equity once; its consequences, such as an amortisation charge that stops, run through every later income statement.
Appendix B of IFRS 1 sets out mandatory exceptions, which prohibit retrospective application in specified areas. The one that touches every conversion concerns estimates.
Estimates made under IFRS at the date of transition must be consistent with the estimates made under the previous GAAP at the same date, unless there is evidence that those estimates were in error. Information that arrived later cannot be used to improve them. The other mandatory exceptions mostly concern financial instruments (derecognition, hedge accounting and classification) and non-controlling interests.
IFRS 1 asks what the company knew and recorded at the time, not what it can show today. A project that later succeeded, or a customer relationship that later proved durable, does not change the estimates that the evidence supported at the date of transition.
Appendices C and D of IFRS 1 set out optional exemptions: areas where the company may elect not to apply IFRS retrospectively in full. Three matter most for intangible assets and goodwill.
Appendix C covers business combinations that took place before the date of transition. The company may restate past combinations under IFRS 3, or it may choose not to restate them.
Restatement can start from a chosen date, but every combination after that date must then be restated too. Restating means rebuilding each acquisition's purchase price allocation under IFRS 3, so it depends on the records from each deal.
| Item | Treatment in the opening IFRS position |
|---|---|
| Goodwill | Carried forward at its previous-GAAP carrying amount |
| Goodwill amortisation | Stops at the date of transition; amortisation already charged under the previous GAAP is not reversed |
| Impairment | Goodwill is tested for impairment at the date of transition, whether or not there is any indicator of impairment |
| Intangibles subsumed in goodwill | Recognised separately only if they would qualify for recognition in the acquiree's own IFRS statement of financial position, so internally generated brands and customer lists stay in goodwill |
The impairment test at transition applies to goodwill carried forward under the exemption whether or not anything suggests impairment, so it cannot be left until a problem appears. It follows goodwill impairment testing under IAS 36.
Appendix D allows fair value, or a revaluation under the previous GAAP, to be used as deemed cost at the date of transition. The election is available for property, plant and equipment, for investment property, and for intangible assets that meet the IAS 38 recognition criteria and the criteria for revaluation, including the existence of an active market.
That last condition is decisive. Few intangible assets trade in an active market, so the deemed cost route is rarely available for them, and a conversion does not put an internally built brand on the balance sheet at fair value. Separately, an event-driven fair value, measured at an event such as a privatisation or an IPO, may also be used as deemed cost.
Appendix D also contains rules for subsidiaries, associates and parents that adopt IFRS at different dates. A subsidiary that adopts IFRS later or earlier than its parent has specific options, and the choice should be agreed with the group's reporting team before the opening position is drafted.
Most of the judgement in an IFRS 1 conversion for a UK company with intangible assets sits in four places. Each one is decided largely by records that already exist, or do not.
| Pressure point | What decides it | Opening balance sheet | Later earnings |
|---|---|---|---|
| Development costs | A documented assessment and a cost-tracking system, both in place at the time (IFRS 1 implementation guidance, IG46–IG47) | Costs are recognised only from the date both conditions were met, measured as though IAS 38 had always applied, with the adjustment in retained earnings | The recognised asset is amortised once available for use |
| Past acquisitions | The business combinations election: restate under IFRS 3 from a chosen date, or not | Restated deals are remeasured under IFRS 3; unrestated deals keep goodwill at its previous-GAAP carrying amount, adjusted as set out above | Intangibles identified on restatement are amortised over their useful lives; goodwill is not amortised but tested for impairment annually |
| Goodwill | The previous-GAAP carrying amount and the impairment test at the date of transition | Carried forward at the previous-GAAP amount, less any impairment identified at transition | Goodwill amortisation stops; an impairment test at least annually replaces it |
| Deemed cost | Whether an intangible meets the IAS 38 revaluation criteria, including an active market, or an event-driven fair value exists | Fair value or a previous-GAAP revaluation is used as deemed cost, where available | Later charges are based on the deemed cost |
Development costs need the most preparation. Under the IFRS 1 implementation guidance (IG46–IG47), costs reach the opening position only from the date the company had both a documented assessment, made at the time, that future economic benefits were probable, and a reliable system accumulating the costs as they arose. Reconstruction later does not count. Our guide to IFRS 1 and development costs works through both conditions and a full opening balance.
A development project approved by the board with a documented assessment, but tracked through general payroll for its first months, is capitalised only from the date a project code started. An acquisition made under FRS 102 and not restated keeps its goodwill, and a customer list subsumed in that goodwill stays inside it, because it would not qualify in the acquiree's own IFRS statement of financial position. That goodwill stops amortising at the date of transition and is tested for impairment at that date. A brand built in-house stays off the balance sheet, because there is no active market to support deemed cost.
IFRS 1 requires the first IFRS financial statements to explain how the change of framework moved the figures. Two reconciliations sit at the centre of that.
| Disclosure | What it shows |
|---|---|
| Reconciliation of equity | Equity under the previous GAAP reconciled to equity under IFRS, at the date of transition and at the end of the latest period presented under the previous GAAP |
| Reconciliation of total comprehensive income | Total comprehensive income under the previous GAAP reconciled to IFRS for that latest period |
| Explanations | The material adjustments, explained in enough detail for a reader to follow them |
| Interim reports | Interim reports within the first IFRS year carry reconciliations too |
For a company heading towards a listing, investors and analysts read these reconciliations first. They show which earnings movements come from the business and which come from the change of framework, such as goodwill amortisation that has stopped or development spend now capitalised.
A clear reconciliation supports the equity story; an unexplained adjustment invites questions during the listing process. Our IPO readiness checklist sets the conversion alongside the other intangibles and valuation workstreams that run before admission.
The items below make up the intangibles workstream of an IFRS 1 conversion. Most depend on records that must already exist, so start early.
| Item | Evidence | Owner |
|---|---|---|
| Date of transition fixed | Agreed first IFRS reporting period and number of comparative years | Finance director, with the auditor |
| Elections chosen | A paper recording the business combinations restatement date (or the decision not to restate) and any deemed cost election | Finance director, with the auditor |
| Development records per project | For each project carried into the opening position at the date of transition: the documented assessment and the cost-tracking records, with the date each began | Finance team and project leads |
| PPA history for each acquisition | Previous-GAAP purchase price allocations, completion accounts and the records behind each acquired intangible | Finance team |
| Goodwill impairment test at the date of transition | The impairment test of goodwill carried forward, with the forecasts and assumptions supporting it | Finance director, reviewed by the auditor |
| Reconciliation drafts | Draft reconciliations of equity and total comprehensive income, with explanations of each material adjustment | Finance team |
For a closer look at how the standards differ on intangibles, see the IAS 38 vs FRS 102 Section 18 comparison, our FAQ on how FRS 102 differs from full IFRS for intangible assets, and the IAS 38 capitalisation policy template. The glossary entry on development costs under IAS 38 lists the recognition criteria.
A Canadian private company reporting under ASPE that goes public applies IFRS 1, with the same mechanics: a date of transition, an opening IFRS statement of financial position, retrospective application, and no hindsight in estimates.
ASPE also makes capitalising development costs a policy choice. A Canadian company that has expensed its development spend therefore faces the same question on development costs as a UK company leaving FRS 102.
An IFRS 1 conversion is decided largely by evidence the company already holds: who owns each intangible asset, what records support it, and when those records were made. Opagio Intangibles gives that evidence a home.
The Opagio Value Drivers Register™ records each intangible asset with its owner and its evidence, and evidence can be uploaded against the asset with an evidence level. The company valuation workspace in Opagio Intangibles supports discounted cash flow, trading comparables and precedent transactions analysis, with comparables entered by the user. It helps a finance team think through the value-in-use assumptions behind a goodwill impairment review; it does not perform the impairment test.
Opagio does not perform IFRS conversion work or audit-grade impairment testing. Your auditor advises on the opening IFRS position, the elections and the impairment test at the date of transition.
Hold each intangible asset, its owner and its evidence in one register, ready for the questions an IFRS transition, a listing or a buyer will raise. Book a demo of Opagio Intangibles. Advisers can see how we support accountants and advisers, and founders can see how we support exit-ready companies.
It is the beginning of the earliest period for which the company presents full comparative information under IFRS in its first IFRS financial statements. A company whose first IFRS financial statements cover the year to 31 December 2028, with one comparative year, has a date of transition of 1 January 2027, and prepares its opening IFRS statement of financial position at that date.
Yes, where the company uses the business combinations exemption and does not restate past acquisitions. Goodwill carried forward at its previous-GAAP carrying amount is tested for impairment at the date of transition, whether or not there is any indicator of impairment. Amortisation stops from that date, and amortisation already charged is not reversed.
No. Since August 2026, UK-incorporated AIM companies may report under FRS 102 or IFRS, so an AIM admission does not by itself trigger IFRS 1. The Main Market requires UK-adopted IFRS.
Tony Hillier is Chairman of Opagio. He specialises in valuation, due diligence, accounting and structured finance, and previously worked at NM Rothschild and GEC Finance. Learn more about our team.
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