Adopting ASPE: transition entries and the impact note

Have the end of N-2 balances

The date of transition is the start of the comparative year: you need the end of N-2 balance sheet under the previous framework. Ledger reads it from the client's previous engagement when there is one. Otherwise, import the trial balance with its Balance N-2 column, or, on the financial statements page, use Enter the balances as at (the end of N-2 date) in the third balance sheet column. Without these balances, the Opening balance sheet tab and the assistants that need them say so.

Settings tab: previous framework and exemptions

• Framework of the previous financial statements: Basis of accounting of the compiled financial information (the usual case), or Other (specify).
• Optional exemptions elected (para. 1500.09): check those the company elects. No box checked: the note says the company has not elected any exemption.

The same settings appear in the Notes & schedules tab when the impact note is active.

Adjustments tab: the assistants

Below the list of adjustments, assistants propose the entries from the engagement's balances and worksheets. You see each entry, account by account, before clicking Create the entries.

• Income taxes: change to the taxes payable method. If the previous statements carried future income taxes, the assistant eliminates them: the end of N-2 balance against opening retained earnings, the comparative-year change against future income tax expense.
• Income taxes: change to the future income taxes method. Shown instead of the previous one when form R2-05-1 retains the future income taxes method. A grid of temporary differences at both dates: the carrying amount is prefilled from the restated balance sheet (capital assets, intangibles, lease obligations), you enter the tax value and the rates (taken from the Income taxes worksheet when it has them). Each line's tax is computed as in the Income taxes worksheet; enter a liability as a negative amount.
• Capital leases previously expensed as rent. For each lease of the Capital leases worksheet accounted for as an operating lease in the previous statements: check Expensed as rent in the previous financial statements. The assistant computes the asset, accumulated amortization and obligation at the date of transition, then the comparative-year movements.
• Shares redeemable at the option of the holder (estate freeze). Three questions decide the classification. All yes: the shares remain in equity, no entry. Otherwise, the assistant presents them as a liability at their redemption amount: the stated capital moves to the redeemable shares account, the difference up to the redemption amount to the adjustment (grouping UU57), against opening retained earnings.

Example: a truck leased since January 1, 2024 ($60,000, 5.5%, annual payments of $14,000, amortized over 5 years), expensed as rent in the compiled statements. At the date of transition, the assistant proposes:

Account	Debit	Credit
Leased rolling stock	60,000.00
Accumulated amortization, leased rolling stock		12,000.00
Obligation under a capital lease		49,300.00
Retained earnings, beginning	1,300.00

And for the comparative year: the $14,000 rent reversed, the $12,000 amortization and $2,712 interest recognized, the obligation reduced by $11,288.

Adjustments tab: manual entries

For any other adjustment, the Adjustment at the date of transition and Comparative-year adjustment buttons open the adjusting entry window with the ASPE transition adjustment (first-time adoption) section already filled in: scope and Nature of the adjustment. Ledger checks the scope:

• an adjustment at the date of transition affects no income statement item;
• a comparative-year adjustment does not affect opening retained earnings: its effect flows through net income;
• the offset goes to opening retained earnings (UU17), never to the adjustment accounts (UU18, UU19): the statement of retained earnings shows the impact separately.

The list shows, for each entry, its scope, its nature and its effect on Opening retained earnings and Prior-year net income, with a total. On the Adjusting entries page, a transition entry carries the ASPE badge.

Opening balance sheet tab

The balance sheet item by item, at the date of transition and then at the end of the comparative year, in three columns: Previous framework, Adjustments, ASPE. In the truck example:

Item, at the date of transition (simplified example)	Previous framework	Adjustments	ASPE
Assets under capital lease		48,000	48,000
Obligations under capital leases		49,300	49,300
Retained earnings	30,000	(1,300)	28,700

Checks tab

What to review before issuing the first-year financial statements:

• the adjustments explain the change in retained earnings at the date of transition and in comparative-year net income;
• the ASPE opening balance sheet and the comparative-year balance sheet balance;
• each transition entry respects its scope;
• the note on the impact of the change in accounting framework is active (otherwise: add it in the Notes & schedules tab).

A difference the entries do not explain (an N-1 column edited by hand, for example) shows on an “Other adjustments” line of the note and is flagged here.

The note on the impact of the change in accounting framework

In the Notes & schedules tab, add the note from the catalog. Its text takes the date of transition, the previous framework and the exemptions from Settings, and its tables are computed from the transition entries, with nothing to enter:

Reconciliation of retained earnings	January 1, 2025	December 31, 2025
Retained earnings under the previous framework	30,000	40,000
(a) Capital leases	(1,300)	(2,012)
Retained earnings under ASPE	$28,700	$37,988

Then come the reconciliation of comparative-year net income (here $10,000 under the previous framework, $9,288 under ASPE), the impact on cash flows when there is one, and an explanation per nature of adjustment. An entry edited or added later updates the note by itself.