THEORY OF ACCOUNTS

HAND-OUT NO. 12: INTERIM REPORTING

INTRODUCTION
Interim financial reporting is the preparation and presentation of financial information for a period of less than
one year. These may be presented monthly, quarterly or semiannually.

Quarterly interim reports are the most common although publicly traded entities are encouraged to provide
interim financial reports semiannually and such reports are to be made available not later than 60 days after the
end of the interim period.

IAS 34 Interim Financial Reporting does not mandate which entities are required to publish interim financial
reports, how frequently, or how soon after the end of an interim period.

DIFFERENT VIEWS ON INTERIM FINANCIAL REPORTING

There are two views on interim financial reporting:
1. Integral view
2. Discrete (or independent) view

Integral view of interim financial reporting

Under this view, costs incurred which clearly benefit the entire year are allocated to the interim periods
benefited.

Discrete view of interim financial reporting

Under this view, each interim period is considered a separate accounting period with status equal to a fiscal
year. Thus, no estimations or allocations are made for interim purposes, unless such estimations or allocations
are allowed for annual reporting. The same expense recognition rules shall apply as under annual reporting.

COMPONENTS OF INTERIM FINANCIAL REPORT

An interim financial report shall include, as a minimum, the following components:
1. Condensed statement of financial position
2. Condensed statement of comprehensive income
3. Condensed statement of changes in equity
4. Condensed statement of cash flows
5. Selected explanatory notes

COMPARATIVE INTERIM REPORT

1. Statement of financial position
a. Statement of financial position at the end of current interim period.
b. Comparative statement of financial position at the end of preceding year.

2. Statement of comprehensive income

a. Statement of comprehensive income for the current interim period.
b. Statement of comprehensive income cumulatively for the current financial year to date
c. Comparative statement of comprehensive income for the comparable interim period of the
preceding year
d. Comparative statement of comprehensive income cumulatively for the comparable financial year
to date of the preceding year.

3. Statement of changes in equity

a. Statement of changes in equity cumulatively for the current financial year to date.
b. Comparative statement of changes in equity for the comparable financial year to date of the
preceding year

4. Statement of cash flows

a. Statement of cash flows cumulatively for the current financial year to date.
b. Comparative statement of cash flows for the comparable financial year to date of the preceding
year

BASIC PRINCIPLES OF INTERIM FINANCIAL REPORTING

 1. An entity shall apply the same accounting policies in the interim financial statements as are applied in
the annual financial statements.
2. Revenues from products sold or services rendered are generally recognized for interim reports on the
same basis as for the annual period.
3. Costs and expenses are recognized as incurred in an interim period.
(a) Expenses associated directly with revenue are matched against revenue in those interim periods in
which the related revenue is recognized.
(b) Expenses not associated directly with revenue are recognized in interim periods as incurred or
allocated over the interim periods benefited. Costs incurred such as year-end bonuses, insurance,
property taxes and depreciation are allocated over the interim periods benefited.
4. If the business is seasonal, in addition to the current interim period financial statements, the entity is
encouraged to disclose information:
a. For the latest 12 months
b. Comparative information for the prior comparable 12-month period.
5. The preparation of interim financial reports generally requires a greater use of estimation than annual
financial reports.

DISCUSSION QUESTIONS:
1. Which statement is true regarding interim reporting?
A. Interim reports are required on a quarterly basis.
B. The integral view is required for interim financial statements.
C. The discrete view is required for interim financial statements.
D. Interim reports are not required.

2. Which statement about interim report is true?

A. An interim financial report must consist of a complete set of financial statements.
B. An interim financial report must consist of a condensed set of financial statements.
C. An interim financial report may consist of a condensed set or complete set of financial statements.
D. All of these statements are true.

3. Which basic financial statements are prepared as a minimum for interim financial reporting?
I. Condensed statement of financial position
II. Condensed statement of comprehensive income
III. Condensed statement of changes in equity
IV. Condensed statement of cash flows
V. Selected explanatory notes

A. I and II only
B. I, II and IV only
C. I, II, III and IV only
D. I, II, III, IV and V

4. Interim reports shall be published

A. At least annually
B. Every six months
C. On a quarterly basis
D. Whenever the entity wishes

5. Interim financial statements are usually presented on a

A. Monthly basis
B. Quarterly basis
C. Semi-annual basis
D. Annual basis

6. Publicly traded entities are ________ to provide interim financial reports ___________.
A. Encouraged; at least at the end of the half year and within 60 days of the end of the interim period.
B. Encouraged; whenever the entity wishes.
C. Required; at least at the end of the half year and within 60 days of the end of the interim period.
D. Required; whenever the entity wishes.

7. ABC Co. is preparing interim financial statements for six months ended June 30, 2020. In the interim
financial statements for six months, the following financial statement will be presented:
(1) Statement of financial position on June 30, 2020
 (2) Statement of comprehensive income for six months ended June 30, 2020
(3) Statement of cash flows for six months ended June 30, 2020

In addition, all of the following shall be presented, except

A. Statement of financial position on June 30, 2019
B. Statement of financial position on December 31, 2019
C. Statement of comprehensive income for six months ended June 30, 2019
D. Statement of cash flows for six months ended June 30, 2019

8. When the business is seasonal, what does IFRS suggest?

A. Additional notes be written in the interim reports about seasonal nature of the business.
B. Disclosure of financial information for the latest 12-months and comparative information for the prior
comparable 12-month period in addition to the interim report.
C. Additional disclosure in the accounting policy note.
D. No additional disclosure.

END OF HANDOUT