IAS 34 Interim Financial Reporting

Background

IAS 34 Interim Financial Reporting provides guidelines for preparing reporting of interim financials which is a complete or summarized set of financial statements for a shorter period than a financial year. IAS 34 recommends the minimum content of such an interim financial report. Also outlines the accounting measurement and recognition principles which are applicable to an interim financial report.

IAS 34 was issued in June 1998 and is applicable for period start on or after 1 January 1999.

 

Objective

The objective of this Standard is to impose the smallest content of an interim financial report and to prescribe the recognition & measurement principal for preparing a complete or condensed financial statements for interim period. Timely and reliable interim financial reporting improves the ability of users to gain the understand of an entity’s capacity and its financial condition and liquidity.

 

Scope

This Standard does not require the publication of provisional financial reports for any entity. However, it applies if an entity is required or elects to publish an interim financial report in accordance with International Financial Reporting Standards at the requirement of governments, securities regulators, stock exchanges and accounting agencies if their securities Debt or equity are publicly traded for publication. Those entities are encouraged to:

(a) provide interim financial reports for at least the first half of the financial year; and

(b) interim financial reports must be available no later than 60 days after the end of the interim period. 

If an entity's interim financial report is labeled as in compliance with IFRS, it must meet all the needs of this Standard. Paragraph 19 requires certain disclosures in this regard.

Key definition

Interim period

A financial reporting period shorter than a full financial year.

 

Interim financial report

It means a financial report containing either a complete set of financial statement or a set of condensed financial statements (as described in this Standard) for an interim period.

 

Content of an interim financial report

IAS 1 defines a complete set of financial statements that includes a statement of financial position at the end of the period; income statement and other comprehensive income; statement of change of equity, etc. An entity may use titles for statements other than those used in this Standard. For example, an entity may use the title "statement of comprehensive income" instead of "statement of income and other comprehensive income".

For the sake of timeliness and cost considerations and to avoid repetition of previously reported information, an entity may be required or may choose to provide less information at interim dates compared to its annual financial statements. The interim financial report is intended to provide an update on the latest complete set of annual financial statements. Consequently, it focuses on new activities, events and circumstances and does not duplicate previously reported information.

Nothing in this Standard is intended to prohibit or discourage an entity from publishing a complete set of financial statements (as described in IAS 1 ) in its interim financial report, rather than appreciate condensed financial statements and selected explanatory notes. The entity may include more than the minimum order lines or selected explanatory notes as established in this Standard.

 

Minimum components of an interim financial report

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

(a) a condensed statement of financial position;

(b) a condensed statement or condensed statements of profit or loss and other comprehensive income;

(c) a condensed statement of changes in equity;

(d) a condensed statement of cash flows; and

(e) selected explanatory notes.

 

Form and content of interim financial statements

·       If an entity publishes a complete set of financial statements in its interim financial report, the form and content of those statements must meet the requirements of IAS 1  for a complete set of financial statements.

·       If an entity publishes a set of condensed financial statements in its interim financial report, those condensed statements will include, at a minimum, each of the headings and subtotals that were included in its most recent annual financial statements and the selected explanatory notes as required by this standard.

·       If an entity presents profit or loss elements in a separate statement as described in paragraph 10A of IAS 1  (as amended in 2011), it presents basic and diluted earnings per share in that statement.

 

Disclosures

Significant events and transactions - An entity shall include in its interim financial report an explanation of events and transactions that are significant in understanding changes in the entity's financial position and performance since the end of the last annual reporting period.

In addition to disclosing significant events, an entity will include the following information:

• a statement that the same accounting policies and calculation methods are followed in the interim financial statements compared to the most recent annual financial statements or, if those policies or methods have been modified, a description of the nature and effect of the change .

• explanatory comments on seasonality or the cyclical nature of provisional operations.

• the nature and amount of items that affect assets, liabilities, equity, net income or cash flows that are unusual due to their nature, size or incidence.

• the nature and amount of changes in estimates of amounts reported in prior interim periods of the current financial year or changes in estimates of amounts reported in prior years.

• issues, repurchases and redemptions of debt and equity securities.

• dividends paid (aggregate or per share) separately for ordinary shares and other shares.

• Disclosure of segment information is required in an entity's interim financial report only if IFRS 8 Operating Segments requires the entity to disclose segment information in its annual financial statements as advised by this standard.

• events after the interim period that have not been reflected in the financial statements for the interim period.

 

Disclosure of compliance with IFRSs - If an entity’s interim financial report is in compliance with this Standard, that fact shall be disclosed. An interim financial report shall not be described as complying with IFRSs unless it complies with all the requirements of IFRSs

 

Periods for which interim financial statements are required to be presented

• statement of financial position at the end of the current interim period and a comparative statement of financial position at the end of the immediately preceding year.

• Income statements and other comprehensive income for the current interim period and cumulatively for the current financial year to date, with comparative statements.

• statement of changes in equity accumulated for the current fiscal year to date, with a comparative statement for the comparable period of the fiscal year preceding the immediately preceding financial year.

• statement of accumulated cash flows for the current financial year to date, with a comparative statement for the comparable period of the immediately preceding fiscal year.

 

Materiality

In deciding how to recognize, measure, classify or disclose an item for interim financial reporting purposes, the materiality in relation to interim financial data will be assessed. In conducting materiality assessments, it will be recognized that interim measurements may be based on estimates to a greater extent than annual financial data measurements.

Disclosure in annual financial statements

If an estimate of an amount reported in an interim period changes significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period, the nature and amount of that change in the estimate will be disclosed in a note to the annual financial statements for that financial year.

 

Recognition and measurement

An entity will apply the same accounting policies in its interim financial statements that apply in its annual financial statements, except for accounting policy changes made after the date of the most recent annual financial statements that will be reflected in the next annual financial statements. However, the frequency of an entity's reports (annual, semi-annual or quarterly) will not affect the measurement of its annual results. To achieve that goal, measurements for interim reporting purposes will be made annually.

 

Measurements for interim reporting purposes should be made on an annual basis, so that the frequency of entity reporting does not affect the measurement of its annual results.

Several important measurement points:

Income received seasonally, cyclically, or occasionally within a financial year should not be anticipated or deferred from the interim date, if anticipation or deferral would not be appropriate at the end of the financial year. Costs incurred unevenly during a financial year should be anticipated or deferred for interim reporting purposes if, and only if, it is also appropriate to anticipate or defer that type of cost at the end of the financial year. Income tax expense should be recognized based on the best estimate of the expected weighted average effective annual income tax rate for the entire fiscal year.

An appendix to IAS 34 provides guidance for applying the basic principles of recognition and measurement at interim dates to various types of assets, liabilities, income and expenses.

You may also refer standard:-

IAS 16 Property, Plant and Equipment