Its Interim! - IAS 34: Interim Financial Reporting

Hi everyone, 

We shall study IAS 34 today!

Let's consider this: As a citizen, it is mandatory you pay your taxes but it is not mandatory you own a car. Hence, if you don't own a car, the rules that apply to motorists such as: obeying the traffic light does not apply to you.

In the same manner, this standard applies to companies that prepare interim financial reports. The standard doesn't specify that, companies must prepare interim financial reports. Any company which does not prepare interim reports does not compromise its compliance with IFRS.

This standard is a simple one that prescribes the minimum contents of an interim report. 

What then, is an interim financial report?

It is a complete or condensed set of financial statements for an interim period.

Also, an interim period is any period less than the financial reporting period.

The standard prescribes the preparation of interim reports for quoted companies at least at the end of half the financial year (usually 6months). It further specifies that the interim report should be available not later than 60days after the end of the interim period.

Contents of Interim Financial statement:

1. Condensed Statement of Financial Position

2. Condensed Statement of Profit or Loss and other comprehensive income.

3. Condensed Statement of Cash flow. 

4. Condensed Statement of Changes in Equity.

5. Selected Explanatory Notes.

Selected Explanatory Notes:

These notes are not necessarily the regular notes to the year end financial statement. Rather, they should explain the events or changes that have occurred since the last annual reporting period. They include:

• Accounting policies and any changes in accounting policies

• Changes in capital structure

• Interim dividend

• Seasonality & Cyclicality of activities

• Segmental Information

• Changes in estimates

• Exceptional or Unusual Items

• Significant events occurring after the end of the interim period.

• Business combinations etc.

Comparatives:

According to IAS 1, it is expected that we provide comparatives for the financial statement (most recent past information to aid comparism)

This also applies to interim reports in a slightly different way.

For statement of financial position (SOFP), the comparative is the last statement of financial position reported whilst the statements of profit or loss, cash flow and equity, the comparative is the last interim statement reported. 

For example, if a company prepared its accounts to 31st December 2014 and its interim to 30th June 2015. Its comparatives shall be as follows:

1) SOFP - 31st December 2014

2) SOP/L, SOCF & SOCE - 30th June 2014

(The last reported interim statement)

Notes to consider in the preparation of interim financial statements:

• Income Tax Expense: For interim reports, the income tax expense is based on the average annual effective income tax rate consistent with the tax assessment.

• Assets: the test for future economic benefits should apply as at the interim dates. 

• Liabilities: there should be a representation of an existing obligation at an interim period.

• Revenue & Expenses: the related inflow and outflow must have taken place for them to be recognized

• Consolidation: A consolidated interim report can be prepared if the recent annual financial statements were consolidated.

DAILY CHALLENGE: Summarize the standard in 5 lines.

For further clarifications, mail: nneomakristen@gmail.com

Regards.