Final answer:
Entity D must adjust the carrying amounts of Entity K's assets and liabilities to what would be recognized under IFRS at the date of the first-time adoption.
Step-by-step explanation:
Under IFRS, when a first-time adopter like Entity D must consolidate a subsidiary such as Entity K for the first time, it has specific requirements to follow. According to IFRS 1, First-time Adoption of International Financial Reporting Standards, the correct option for Entity D is: When an entity adopts IFRS for the first time and needs to consolidate a subsidiary that was not previously consolidated under other GAAP, it must adjust the carrying amounts of the subsidiary's assets and liabilities to what would be recognized according to IFRS.
The goal of these adjustments is to ensure that the consolidated financial statements reflect the financial position and results of the parent and the subsidiary as if the group had always used IFRS. These adjustments are made at the date of transitioning to IFRS and ensure compliance with IFRS principles, providing plagiarism free content and a transparent view of the financial situation for stakeholders.