Interim Financial Reporting

The objective of IAS 34 is to prescribe the minimum content of an interim financial report and to prescribe the principles for recognition and measurement in financial statements presented for an interim period.

The objective of this Standard is to prescribe the minimum content of an interim financial report and to prescribe the principles for recognition and measurement in a complete or condensed financial statements for an interim period. Timely and reliable interim financial reporting improves the ability of investors, creditors, and others to understand an enterprise’s capacity to generate earnings and cash flows, its financial condition and liquidity.

An interim financial report should include, at a minimum, the following components:

(a) Condensed balance sheet

(b) Condensed statement of profit and loss

(c) Condensed cash flow statement

(d) Selected explanatory notes.

Components:

A complete set of financial statements normally includes:

(a) Balance sheet

(b) Statement of profit and loss

(c) Cash flow statement

(d) Notes including those relating to accounting policies and other statements and explanatory material that are an integral part of the financial statements.

In the interest of timeliness and cost considerations and to avoid repetition of information previously reported, an enterprise may be required to or may elect to present less information at interim dates as compared with its annual financial statements.

The benefit of timeliness of presentation may be partially offset by a reduction in detail in the information provided. Therefore, this Standard requires preparation and presentation of an interim financial report containing, as a minimum, a set of condensed financial statements. The interim financial report containing condensed financial statements is intended to provide an update on the latest annual financial statements. Accordingly, it focuses on new activities, events, and circumstances and does not duplicate information previously reported.

This Standard does not prohibit or discourage an enterprise from presenting a complete set of financial statements in its interim financial report, rather than a set of condensed financial statements. This Standard also does not prohibit or discourage an enterprise from including, in condensed interim financial statements, more than the minimum line items or selected explanatory notes as set out in this Standard. The recognition and measurement principles set out in this Standard apply also to complete financial statements for an interim period, and such statements would include all disclosures required by this Standard (particularly the selected disclosures in paragraph as well as those required by other Accounting Standards.

The periods to be covered by the interim financial statements are as follows: [IAS 34.20]

balance sheet (statement of financial position) as of the end of the current interim period and a comparative balance sheet as of the end of the immediately preceding financial year statement of comprehensive income (and income statement, if presented) for the current interim period and cumulatively for the current financial year to date, with comparative statements for the comparable interim periods (current and year-to-date) of the immediately preceding financial year statement of changes in equity cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year statement of cash flows cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year.

Note disclosures

The explanatory notes required are designed to provide an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the last annual reporting date. IAS 34 states a presumption that anyone who reads an entity’s interim report will also have access to its most recent annual report. Consequently, IAS 34 avoids repeating annual disclosures in interim condensed reports. [IAS 34.15].

The main differences between interim and annual statements can be found in the following areas:

• Some accompanying disclosures are not required in interim financial statements, or can be presented in a more summarized format.
• The revenues generated by a business may be significantly impacted by seasonality. If so, interim statements may reveal periods of major losses and profits, which are not apparent in the annual financial statements.
• Accrual basis. The basis upon which accrued expenses are made can vary within interim reporting periods. For example, an expense could be recorded entirely within one reporting period, or its recognition may be spread across multiple periods. These issues can make the results and financial positions contained within interim periods appear to be somewhat inconsistent, when reviewed on a comparative basis.