IFRS transformation from Ukrainian standards: step by step

Transformation is the process of converting records kept under Ukrainian national standards into financial statements that comply with IFRS. It is not a recalculation of every entry but a systematic review of measurement, classification and disclosure at the reporting date. Below is the seven step scheme we follow when performing a transformation, and the same scheme an auditor follows when checking one. Who is required to transform at all is covered separately: who must report under IFRS in Ukraine.

Step 1. Transition date and opening statement of financial position

The first IFRS financial statements contain at least one comparative period. The transition date is therefore the beginning of the earliest period presented. If the first IFRS statements are for 2026, the transition date is 1 January 2025, and an opening IFRS statement of financial position is required at that date.

IFRS 1, First-time Adoption, applies at the transition date: all assets and liabilities are recognised as if the company had always reported under IFRS, with a number of optional exemptions. The most widely used exemption concerns property, plant and equipment, which may be measured at fair value at the transition date and carried at that amount as deemed cost.

Step 2. Accounting policy

Before any calculation the company fixes how each material item will be measured: inventory, fixed assets, leases, revenue, financial instruments, provisions. The policy has to reflect the company’s actual transactions, not a template. During the audit every adjustment is checked against it.

A practical tip: prepare a table of differences between your current policy under national standards and the chosen IFRS policy, item by item. That table becomes the basis of the adjustment list in step four and saves the auditor a week.

Step 3. Reclassification

Some items under Ukrainian standards are simply named differently or sit on the wrong line. Typical reclassifications:

• long-term receivables and prepayments for fixed assets move to non-current assets;
• part of deferred expenses is recognised as an asset or written off;
• provisions and deferred tax are shown on separate lines;
• investment property is separated from property, plant and equipment.

Step 4. Measurement adjustments

This is the bulk of the work and the main source of differences. The most common areas:

• Revenue under IFRS 15. Recognition on satisfaction of performance obligations rather than on acceptance acts; variable consideration, discounts, returns, warranties.
• Leases under IFRS 16. Operating leases under national standards become right-of-use assets and lease liabilities discounted at the incremental borrowing rate.
• Financial instruments under IFRS 9. Expected credit losses on receivables instead of a doubtful debt allowance; amortised cost for borrowings.
• Impairment under IAS 36. Impairment testing of fixed and intangible assets where indicators exist.
• Inventory under IAS 2. Measurement at the lower of cost and net realisable value.
• Deferred tax under IAS 12. Every adjustment creates a temporary difference that has to be calculated.

Each adjustment is documented in a working table: the amount under national standards, the adjustment, the IFRS amount, the reference to the standard and the calculation. That table is the transformation model the auditor later reviews.

Step 5. Functional currency and exchange differences

The company determines its functional currency under IAS 21. For most Ukrainian entities it is the hryvnia, but for subsidiaries that settle mainly in euro or dollars the answer may differ. This determines which transactions are foreign currency transactions and how balances are translated.

Step 6. Notes and disclosures

IFRS notes are several times longer than notes under national standards. Accounting policy, judgements and estimates, related parties, financial risks and events after the reporting date must all be disclosed. The notes are where a transformation is most often found to be incomplete.

Step 7. IFRS 1 reconciliations

The first IFRS statements must show how equity and profit under national standards became the IFRS figures: a reconciliation of equity at the transition date and at the end of the comparative period, and a reconciliation of profit for the comparative period. Without these reconciliations the auditor cannot sign off the first statements.

How long it takes and who does it

For a company with one line of business and tidy records the transformation takes three to six weeks. For a group, or a company with leases, foreign currency loans and complex contracts, the timeline is agreed after a diagnostic review. Importantly, the transformation and the audit are performed by different firms; otherwise the auditor’s independence is compromised. What the auditor examines in transformed statements is described on the page IFRS audit in Ukraine.

MK Audit has operated since 2000, is listed in the Ukrainian audit register under No. 4624 and belongs to DFK International. We perform IFRS transformations, and for statements prepared by another firm we provide an audit with a report in English and Ukrainian. Request a proposal: we quote after reviewing the assignment and reply within one working day.