Chapter 4

Understanding Corporate
Financial Statements
and Reports

UNDERSTANDING CORPORATE
FINANCIAL STATEMENTS
AND REPORTS
CORPORATE FINANCIAL
STATEMENTS

CORPORATE REPORTS

Corporate Financial
Statements
Preparation and presentation of corporate financial statements in
India should conform to statutory requirements prescribed
by the Companies Act.

Books of Accounts
Section 209 of the Companies Act requires every company to
keep proper books of accounts with respect to
(a) all receipts and all payments,
(b) all expenditures and revenues,
(c) all sales and purchases and
(d) all assets and liabilities. In the case of manufacturing companies,
details relating to utilisation of materials, labour other items of
manufacturing costs are also required.

Annual Accounts and Balance Sheet

Section 210 requires the Board of Directors to present balance
sheet as at the end of the period and statement of profit and
loss for the period in every annual general meeting.
Form and Contents of Balance Sheet and Statement of Profit
and Loss
Section 211 requires the companys balance sheet and its
statement of profit and loss to give a true and fair view of its
state of affairs. While the balance sheet should be set out in
the prescribed format in accordance with Schedule VI of the
Companies Act, the Statement of P&L should include the
prescribed contents. Both these financial statements should
comply with accounting standards also, wherever applicable.

Authentication of Balance Sheet and Statement of Profit and

Loss
Section 215 requires that balance sheet as well as statement
of profit and loss should be signed by the manager or
secretary (on behalf of the Board of Directors) and by at least
two directors of the company, one of whom should be a
managing director, if any. The financial statements so
authenticated should be submitted to the auditors for their
report.
Statement of Profit and Loss and Auditors Report to be
Annexe to Balance Sheet
Section 216 requires the Statement of P&L and the auditors
report to be annexed to the balance sheet .

Exhibit 1: Form of Balance Sheet

Name of the Company ..........................
Balance Sheet as at ..........................
Particulars

Note No.

Figures as at the
end of current
reporting period

I. EQUITY AND LIABILITIES

(1) Shareholders funds

a) Share capital
b) Reserves and surplus
c) Money received against share Warrants

(2) Share application money pending allotment

(3) Non-current liabilities
a)
b)
c)
d)

Long-term borrowings
Deferred tax liabilities (net)
Other long-term liabilities
Long-term provisions

Figures as at the
end of previous
reporting period

Particulars

Note No.

(4) Current liabilities

a)
b)
c)
d)

Short-term borrowings
Trade payables
Other current liabilities
Short-term provisions

TOTAL
II. ASSETS

(1) Non-current assets

(a) Fixed assets
i.Tangible assets
ii.Intangible assets
iii.Capital work-in-progress
iv.Intangible assets under development
(b) Non-current investments
(c) Deferred tax assets (net)
(d) Long-term loans and advances
(e) Other non-current assets

Figures as at the
end of current
reporting period

Figures as at the
end of previous
reporting period

Particulars

Note No.

(2) Current assets

(a)Current

investments
(b)Inventories
(c)Trade receivables
(d)Cash and cash equivalents
(e)Short-term loans and advances
(f)Other current assets
TOTAL

Figures as at the
end of current
reporting period

Figures as at the
end of previous
reporting period

Notes and General Instructions

1) An asset will be classified as current when it satisfies any of the
following criteria:
a. it is expected to be realised in, or is intended for sale or consumption in,
the companys normal operating cycle
b. it is held primarily for the purpose of being traded
c. it is expected to be realised within 12 months after the reporting date
d. it is in cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least twelve months after the
reporting date.
All other assets will be classified as non-current.
2) An operating cycle is the time that elapses between the acquisition of
assets for processing and their realisation in cash or cash equivalents.
Where the normal operating cycle cannot be identified, it is assumed to
have duration of 12 months.
3) A liability will be classified as current when it satisfies any of the
following criteria:
a. it is expected to be settled in the companys normal operating cycle;
b. it is held primarily for the purpose of being traded; or
c. it is due to be settled within 12 months of the reporting date.
All other liabilities will be classified as non-current.

Notes and General Instructions

4) A receivable will be classified as a trade receivable if it is in respect of
the amount due on account of goods sold or services rendered in the
normal course of business.
5) A payable will be classified as a trade payable if it is in respect of the
amount due on account of goods purchased or services received in the
normal course of business.
6) A company will disclose the following (in notes) to accounts:

Statement of Profit and Loss

The main requirements of Part II of Schedule VI of the
Companies Act are the following:
1)

The statement of profit and loss should:

a)

be made in such a manner that it discloses clearly

the result of the working of the company during the
period covered by the account and

b)

disclose every material feature, including credits or

receipts and debits or expenses in respect of nonrecurring transactions or transactions of an
exceptional nature.

Exhibit 1: Form of Statement of Profit and Loss

Name of the Company ..........................
Balance Sheet as at ..........................
Particulars

Note
No.

Figures for
the current
reporting
period

Figures for the

previous
reporting
period

Revenue from operations (gross)

xxx

xxx

II

Other income

xxx

xxx

xxx

xxx

xxx
xxx
xxx

xxx
xxx
xxx

xxx

xxx

III Total revenue (I + II)

IV Expenses

Cost of materials consumed

Purchases of stock-in-trade
Changes in inventories of finished
goods, work-in-progress and
stock-in-trade
Employee benefits expense

Figures for
the current
reporting
period

Figures for the

previous
reporting
period

Finance costs
Depreciation and amortisation
expense
Other expenses
Total expenses

xxx
xxx

xxx
xxx

xxx
xxx

xxx
xxx

Profit before exceptional and

extraordinary items and tax
(III IV)

xxx

xxx

VI

Exceptional items

xxx

xxx

VII

Profit before extraordinary items

and tax (V + VI)

xxx

xxx

VIII

Extraordinary items

xxx

xxx

IX

Profit before tax (VII + VIII)

xxx

xxx

Tax expense
Current tax
Deferred tax

xxx
xxx

xxx
xxx

Particulars

Note
No.

Particulars

Note
No.

Figures for
the current
reporting
period

Figures for the

previous
reporting
period

XI

Profit (Loss) for the period from

continuing operations
(VII VIII)

xxx

xxx

XII

Profit (Loss) from discontinuing

operations

xxx

xxx

XIII Tax expense of discontinuing

xxx

xxx

XIV

Profit/(Loss) from discontinuing

operations (after tax) (XII XIII)

xxx

xxx

XV

Profit (Loss) for the period

(XI + XIV)

xxx

xxx

XVI

Earnings per equity share:

(1)Basic
(2)Diluted

xxx
xxx

xxx
xxx

operations

Example 1
From the following trial balance of Prakash Machineries Limited and
additional information, prepare final accounts of the company as per
Schedule VI of the Companies Act.
Particulars
Opening stock
Raw materials
Work-in-process
Finished goods
Purchases
Salaries and wages
Plant & machinery (at
cost)
Investment at cost
(short-term)
Sundry debtors
Cash at bank

Amount Particulars
Rs 1,50,000
28,000
1,90,000
15,50,000
2,30,000
12,20,000
3,29,000
1,58,000
3,00,900

Sales
General reserve
Provision for
depreciation on
plant and machinery
Sundry creditors
Provision for
depreciation on
furniture
Purchases returns
Equity share capital
(Rs 100 each)

Amount
Rs 47,50,000
25,000

1,40,000
1,35,000

30,000
25,000
30,00,000

(Contd.)
Particulars

Amount Particulars

Directors remuneration
Interim dividend
Office furniture (at cost)
Rates and taxes
Insurance
Audit fee
Sales return
Excise duty on finished
goods
Rent
Rent prepaid
Bad debts
Interest on debentures
Freehold premises
Other expenses
Bills receivable

80,000
1,20,000
1,80,000
17,000
25,000
30,000
70,000

10% Preference shares

capital (Rs 100 each)
9% Debentures
Debenture redemption
reserve
Bills payable
Securities premium
Income from
3,20,000 investments
90,000 Excise duty payable
20,000 Profit and loss
18,000
27,000
47,30,000
37,100
30,000
99,40,000

Amount
5,00,000
6,00,000
3,00,000
90,000
2,80,000
30,000
15,000
20,000

________
99,40,000

Additional information:
(1) Stock as at March 31, 2013
Raw materials and stores, Rs 1,45,000; Work-in-process, Rs 22,000; Finished
goods, Rs 1,98,000.
(2) Provide depreciation on written down value basis on plant and machinery @ 20
per cent per annum and on furniture @ 15 per cent per annum and on freehold
premises @ 5 per cent per annum.
(3) In the middle of the year machine costing Rs 3,00,000 was purchased and duly
recorded.
(4) Sundry debtors include Rs 18,000 due for more than six months. Provide for bad
and doubtful debts @ 5 per cent on debtors.
(5) Market value of investments is Rs 3,19,000.
(6) Make a provision for income-tax @ 35 per cent.
(7) Corporate dividend tax is 14.025 per cent including surcharge of 10 per cent and
education cess of 2 per cent.
(8) The Board of Directors has recommended a final dividend @ 15 per cent on equity
shares.
(9) Transfer Rs 1,00,000 to debenture redemption reserve.
(10) Transfer minimum amount to statutory reserve as required by Company law.
(11) Provision for depreciation on freehold premises as on 31/3/2012 was Rs
12,70,000.
(12) Interest on debentures becomes due on October 31 and March 31.

SOLUTION
Balance Sheet of Prakash Machineries
as at March 31, 2013
I
(1)

Equity and Liabilities

Shareholders funds
a)Share capital
b)Reserves and surplus
c)Money received against share warrants

(2)

Share application money pending allotment

(3)

Non-current liabilities
a)Long-term borrowings
b)Deferred tax liabilities (net)
c)Other long-term liabilities
d)Long-term provisions

(4)

Current liabilities
a)Short-term borrowings
b)Trade payables
c)Other current liabilities
d)Short-term provisions
TOTAL

Note No.

1
2

Figures as at
March 31, 2013
Rs. 35,00,000
10,81,545
Nil
Nil

6,00,000
Nil
Nil
Nil

3
4
5

Nil
2,25,000
58,830
11,96,625
66,62,000

II
(1)

(2)

ASSETS
Non-current assets
a)Fixed assets
i.Tangible assets
ii.Intangible assets
iii.Capital work-in-progress
iv.Intangible assets under development
b)Non-current investments
c)Deferred tax assets (net) Nil
d)Long-term loans and advances Nil
e)Other non-current assets
Current assets
a)Current investments (at market value)
b)Inventories
c)Trade receivables
d)Cash and cash equivalents
e)Short-term loans and advances@
f)Other current assets
TOTAL

Includes prepaid rent.

Note No.

7
8

Figures as at
March 31, 2013

54,77,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil

3,19,000
3,65,000
1,80,100
3,00,900
20,000
Nil
66,62,000

Statement of Profit and Loss

for the Year Ended March 31, 2013
Particulars
I
II
III
IV

V
VI
VII
VIII
IX

Revenue from operations (gross)

Other income
Total revenue (I + II)
Expenses
Cost of materials consumed
Purchases of stock-in-trade
Changes in inventories of finished goods,
work-in-progress and stock-in-trade
Finished goods
Work-in-progress
Stock-in-trade
Employee benefits expenses
Finance costs
Depreciation and amortisation expenses
Other expenses
Total expenses
Profit before exceptional and
extraordinary items and tax (III IV)
Exceptional items
Profit before extraordinary items and
tax (V + VI)
Extraordinary items
Profit before tax (VII + VIII)

Note
No.

For the year ended

March 31, 2013
Rs. 43,60,000
30,000
43,90,000
Rs. 15,30,000
Nil

9
10
11

(8000)
6,000
Nil
3,10,000
54,000
4,73,000
2,35,000
26,00,000
17,90,000
Nil
17,90,000
Nil
17,90,000

Particulars
X
XI
XII
XIII
XIV
XV
XVI

Note
No.

For the year ended

March 31, 2013

Tax expenses
1)Current tax
2)Deferred tax
Profit for the period from continuing
operations (IX X)
Profit (Loss) from discontinuing
operations
Tax expenses of discontinuing
operations
Profit (Loss) from discontinuing
operations (after tax) (XII XIII)
Profit (Loss) for the period (XI + XIV)
Earnings per equity share:
1)Basic*
2)Diluted

*(Rs 11,63,500 Rs 57,012.50 dividend on preference shares = Rs 11,06,487.50/30,000 Equity shares)

6,26,500
Nil
11,63,500
Nil
Nil
Nil
11,63,500
36.88
Nil

NOTES

1. Share Capital
Authorised share capital
Issued and subscribed capital:
30,000 equity shares of Rs 100 each fully paid up
5000 preference shares of Rs 100 each fully paid up
Total

Nil
Rs 30,00,000
5,00,000
35,00,000

2. Reserves and Surplus

Securities premium
Debenture redemption reserve
As per last Balance Sheet
Add: Transfer from profit and loss statement
General reserve
As per last Balance Sheet
Add: Statutory transfer from profit and loss statement
Surplus/(Deficit)
As per last Balance Sheet
Add: Profit for the year
Total
Less: Interim dividend
Proposed dividend:
Equity
Preference
Corporate dividend tax payable (Interim dividend)
Provision for dividend tax payable (Final dividend)
Transferred to debenture redemption reserve
Transferred to general reserve
Total

Rs 2,80,000
Rs 3,00,000
1,00,000
25,000
58,175

4,00,000
83,175
3,18,370

20,000
11,63,500
11,83,500
1,20,000
Rs 4,50,000
50,000

5,00,000
16,830
70,125
1,00,000
58,175

Tata McGraw-Hill Publishing Company Limited, Management Accounting

Tata McGraw-Hill Publishing Company Limited, Management Accounting

________
10,81,545
4 - 22
4 - 22

Corporate Reports
Corporates have to annex to their financial statements the
corporate reports specified by the Companies Act.
Corporate report primarily consists of
(i) Report of the Board of Directors, (ii) Management Discussion and
Analysis, (iii) Corporate Governance Report (iv) Compliance report on
Corporate Governance and (v) Select accounting information as required
under various Accounting Standards Relating to
Segment Reporting (AS-17),
Related Party Disclosures (AS-18),
Discontinuing Operations (AS-24),
Interim Financial Reporting (AS-25), and
Financial Reporting of Interests in Joint Venture (AS-27).

1. Board of Directors Report

The Board of Directors report provides information, among others,
pertaining to the financial state of the company affairs, the dividend
amount proposed, appropriations made for various reserves, major
events and future plans, foreign exchange earnings and outflows,
employee relations, and so on. It also includes a Directors
Responsibility statement stating the
(a) Adherence to the accounting standards,
(b) Selection of prudent accounting policies which are consistently
followed and
(c) Response to every reservations, qualification or adverse remark
contained in the auditors report.

2. Management Discussion and Analysis

Management discussion and analysis contains forwardlooking statements relating to the operating results and
companys financial performance, landmark events, likely
opportunities and threats faced by the companys
business, say, in the wake of change in Government
policy.
3. Corporate Governance Report
Corporate governance refers to the distribution of rights
and responsibilities among different participants in the
company, such as, the Board of Directors, management,
shareholders and other stakeholders such as
lenders/creditors and spells out rules and procedures for
making decisions on corporate affairs.

Exhibit 3: Suggested List of Items to be Mandatory

Included in the Report on Corporate Governance
in the Annual Report of Companies
1. A brief statement on companys philosophy on code of governance.
2. Board of Directors
i.

ii.

iii.

iv.

Composition and category of directors, for example, promoter,

executive, non-executive, independent non-executive, nominee director,
which institution represented as lender or a equity investor.
Attendance of each director at the Board of Directors (BOD)
meetings and the last AGM.
Number of other BODs or Board committees in which he/she is a
member or chairperson.
Number of BOD meetings held, dates on which held.

3. Audit Committee
i.
ii.
iii.

Brief description of terms of reference

Composition, name of members and chairperson
Meetings and attendance during the year.

(Contd.)
4. Remuneration Committee
i.
ii.
iii.
iv.
v.

Brief description of terms of reference

Composition, name of members and chairperson
Attendance during the year
Remuneration policy
Details of remuneration to all the directors, as per format in main
report.

5. Shareholders Committee
i.
ii.
iii.
iv.
v.

Name of non-executive director heading the committee

Name and designation of compliance officer
Number of shareholders complaints received so far
Number not solved to the satisfaction of shareholders
Number of pending complaints

6. General Body Meetings

iv.
v.

Location and time, where last three AGMs were held

Whether any special resolutions passed in the previous three AGMs
Whether any special resolution passed last year through postal
ballotdetails of voting pattern
Person who conducted the postal ballot exercise
Whether any special resolution is proposed to be conducted through

vi.

postal ballot
Procedure for postal ballot.

i.
ii.
iii.

(Contd.)
7. Disclosures
i.
ii.
iii.

iv.

Disclosures on materially significant related party transactions that may

have potential conflict with the interests of the company at large
Disclosure of accounting treatment, if different, from that prescribed in
Accounting Standards with explanation
Details of non-compliance by the company, penalties, strictures
imposed on the company by stock exchange(s) or SEBI or any statutory
authority, on any matter related to capital markets, during the last three
years
Whistle blower policy and affirmation that no personnel has been
denied access to the Audit Committee

8. Means of Communication
i.
ii.
iii.
iv.
v.
vi.
vii.

Half-yearly report sent to each household of shareholders

Quarterly results
Newspapers wherein results normally published
Any web site, where displayed
Whether it also displays official news releases
The presentations made to institutional investors or to the analysts
Whether management decision and analysis (MDA) is a part of annual
report or not

(Contd.)
9. General Shareholder Information
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
xii.
xiii.
xiv.
xv.

AGM: Date, time and venue

Financial calendar
Date of book closure
Dividends payment date
Listing on stock exchange(s)
Stock code
Market price data: high, low during each month in last financial year
Performance in comparison to broad-based indices such as BSE
sensex, CRISIL index and so on.
Registrar and transfer agents
Share transfer system
Distribution of shareholding
Dematerialisation of shares and liquidity
Outstanding GDRs/ADRs/warrants or any convertible instruments,
conversion date and likely impact on equity
Plant locations
Address for correspondence

Exhibit 4: Non-Mandatory Requirements

To be Included in Corporate
Governance Report
(1) The Board: A non-executive Chairman may be entitled to maintain a Chairmans
office at the companys expense and also allowed reimbursement of expenses
incurred in performance of his duties. Independent Directors may have a tenure
not exceeding, in the aggregate, a period of nine years, on the Board of a
company.
(2) Remuneration Committee
(i) The Board may set up a remuneration committee to determine on their
behalf and on behalf of the shareholders with agreed terms of reference,
the companys policy on specific remuneration packages for executive
directors including pension rights and any compensation payment.
(ii) To avoid conflicts of interest, remuneration committee, which would
determine the remuneration packages of the executive directors may
comprise of at least three directors, all of whom should be non-executive
directors, the Chairman of committee being an independent director.
(iii) All the members of the remuneration committee could be present at the
meeting.
(iv) The Chairman of the remuneration committee could be present at the
Annual General Meeting, to answer the shareholder queries. However, it
would be up to the Chairman to decide who should answer the queries.

(Contd.)
(3) Shareholder Rights: A half-yearly declaration of financial performance
including summary of the significant events in last six-months, may be sent to
each household of shareholders.
(4) Audit Qualifications: The company may move towards a regime of
unqualified financial statements.
(5) Training of Board Members: A company may train its Board members in
the business model of the company as well as the risk profile of the business
parameters of the company, their responsibilities as directors, and the best
ways to discharge them.
(6) Merchanism for Evaluating Non-executive Board Members: The
performance evaluation of non-executive directors could be done by a peer
group comprising the entire Board of Directors, excluding the director being
evaluated; and Peer Group evaluation could be the mechanism to determine
whether to extend/continue the terms of appointment of non-executive
directors.
(7) Whistle Blower Policy: The company may establish a mechanism for
employees to report to the management concerns about unethical behaviour,
actual or suspected fraud or violation of the companys code of conduct or
ethics policy. This mechanism could also provide for adequate safeguards
against victimisation of employees who avail of the mechanism and also
provide for direct access to the Chairman and the Audit Committee in
exceptional cases. Once established, the existence of the mechanism may be
appropriately communicated within the organisation.

4. Compliance Report on
Corporate Governance
A certificate relating to the compliance report
on corporate governance should be
obtained form either the auditor or
practising company secretary.

Exhibit 5: Quarterly Compliance Report on Corporate Governance

Name of the Company:
Quarter ending on:
Particulars

I.

Board of Directors
(A)Composition of Board
(B)
Non-executive Directors
compensation and disclosures
(C)
Other provisions as to
Board and Committees
(D)
Code of Conduct
II. Audit Committee
(A)Qualified and Independent
Audit Committee
(B)
Meeting of the Audit Committee
(C) Powers of Audit Committee
(D)
Role of Audit Committee
(E)Review of Information by Audit
Committee

Clause of
Listing
Agreement
49 I
49 (IA)
49 (IB)
49 (IC)
49 (ID)

49 (II)
49 (IIA)
49 (IIB)
49 (IIC)
49 (IID)

Compliance
Status
Yes/No

Remarks

(Contd.)
Particulars

III.

Clause of
Listing
Agreement
Subsidiary

Companies 49 (IIE)
49 (IV)

IV.

Disclosures
(A)
Basis of Related Party
Transactions
(B)
Board Disclosures
(C)
Proceeds From Public
Issues,
Rights Issues, Preferential
Issues etc.
(D)
Remuneration of
Directors
(E)
Management
(F) Shareholders
V. CEO/CFO Certification
VI.
Report on Corporate
Governance
VII. Compliance

49 (IVA)
49 (IVB)
49 (IVC)
49 (IVD)
49 (IVE)
49 (IVF)
49 (V)
49 (VI)
49 (VII)

Compliance
Status
Yes/No

Remarks

NOTES
1) The details under each head shall be provided to incorporate all the
information required as per the provisions of the Clause 49 of the
Listing Agreement.
2) In Column 3, compliance or non-compliance may be indicated by
Yes/No/N.A. For example, if the Board has been composed in
accordance with the Clause 49 (I) of the Listing Agreement, Yes may
be indicated. Similarly, in case the company has no related party
transactions, the words N.A. may be indicated against 49 (IV-A).
3) In the remarks column, reasons for non-compliance may be indicated,
for example, in case of requirement related to circulation of information
to the shareholders, which would be done only in the AGM/EGM, it
might be indicated in the Remarks column as will be complied with
at the AGM. Similarly, in respect of matters which can be complied with
only where the situation arises, for example, Report on Corporate
Governance is to be a part of Annual Report only, the words will be
complied in the next Annual Report may be indicated.

Reporting Under Select

Accounting Standards
AS-17:
AS-17:Segment
Segment
Reporting
Reporting

AS-18:
AS-18:Related
RelatedParty
Party
Disclosure
Disclosure

AS-24:
AS-24:Discontinuing
Discontinuing
Operations
Operations

AS-25:
AS-25:Interim
InterimFinancial
Financial
Reporting
Reporting

AS-27:
AS-27:Financial
FinancialReporting
Reportingof
ofInterest
Interest
in
inJoint
JointVentures
Ventures

AS-17: Segment Reporting

Segment reporting is reporting financial information about
different types of products and services of an enterprise and the
different geographical areas in which it operates.
Segment information helps the users of financial statements to:
Have a better understanding of the performance of the enterprise;
Assess the risks and returns of the enterprise; and Make more
informed judgements about the enterprise as a whole.
The segment information should be prepared in compliance with
the accounting policies adopted for preparing and presenting the
financial statements of the enterprise as a whole.

AS-18: Related to Party

Disclosures
Related party is a party which has the capacity to control
the other party of exercise significant influence
over the other party.
The required disclosure by the reporting enterprise are:
(a) the name of transacting related party,
(b)the description of the nature of transactions,
(c) volume of transactions,
(d)debt dues written off from or to related parties and,
(e) amount due from related parties at the balance sheet date,
along with provisions, if any.

AS-24: Discontinuing Operations

Discontinuing operations aims at establishing principles for reporting
information about the magnitude of discontinuing operations with a view
to help the stakeholders to make projections of an enterprises cash
flows, earnings capacity and financial position by segregating
information about discontinuing operations from information about
continuing operations. The disclosures pertain to
a) description of the discontinuing operation(s),
b) gain or loss on the disposal of assets or settlement of liabilities
attributable to the discontinuing operations,
c) the amount of pre-tax profit or loss from ordinary activities
attributable to the discontinuing operations during the current
financial reporting period and
d) comparative information for prior periods that is presented in
financial statements prepared after the initial disclosure event to
segregate assets, liabilities, revenue, expenses and cash flows of
continuing and discontinuing operations.

AS-25: Interim Financial

Reporting
Interim Financial Report
Interim Financial Reporting is a financial report containing
a complete set or condensed financial statements
for a period shorter than one year.

Interim Period
Interim period is a financial reporting period shorter than
a full financial year.

Timely and reliable interim financial reporting improves the ability of

investors, creditors, and others to understand an enterprises
capacity to generate earnings and cash flows, its financial condition
and liquidity. In recognition of the importance of interim financial
reporting, the interim financial report should include a minimum.
(a) condensed balance sheet,
(b) condensed statement of profit or loss,
(c) condensed cash flow statement and
(d) select explanatory notes about the seasonality of interim
operations.
While preparing an interim financial report, an enterprise should
apply the same accounting policies as are applied in its annual
financial statements.

AS-27: Financial Reporting of Interest

in Joint Venture
Joint Venture is a contractual agreement between parties to undertake an
economic activity based on contractually agreed sharing of control.
Joint control is the contractually agreed sharing of control over an
economic activity. In respect of its interests in jointly controlled operations,
a venturer should recognise in its separate financial statements and
consequently in its consolidated financial statements:
(a) the assets that it controls and the liabilities that it incurs and
(b) the expenses that it incurs and its share of the income that it earns from
the joint venture (jointly controlled assets).
A venturer should, among others, disclose (a) the aggregate amount of the
contingent liabilities related to the joint venture and its share in contingent
liabilities, (b) the aggregate amount of capital commitments related to joint
venture and its share of the capital commitments, (c) a list of all joint
ventures and description of interests in significant joint ventures and (d)
the aggregate amounts of each of the assets, liabilities, income and
expenses related to its interests in the jointly controlled entities.