IAS 34 Interim Financial Reporting (2024)

FAQs

Does IAS 34 presumes that anyone reading interim financial reports will? ›

IAS 34 is based on the presumption that interim financial statements are essentially an extension of the previous annual financial statements to which anyone who reads the entity's interim report will also have access.

Unlike annual statements, interim statements do not have to be audited. Interim statements increase communication between companies and the public and provide investors with up-to-date information between annual reporting periods. These may also be referred to as interim reports.

Downsides of interim reporting

Also, check that accounting practices are consistent between the interim and year-end financial statements. Specifically, interim numbers may omit estimates for bad-debt write-offs, accrued expenses, prepaid items, management bonuses or income taxes.

Include statements of profit or loss and OCI: a. for the current interim reporting period; b. cumulatively for the current financial year to date; and c. comparative information for the comparable interim reporting periods (current and year-to-date) of the immediately preceding financial year.

Interim reports are used to provide an overview of the company's financial performance before the end of the financial reporting cycle. This helps increase communication between the public and the business while also providing investors with up-to-the-minute financial information.

IAS 34 generally requires reporting the information in the notes to interim financial statements on a financial year-to-date basis, although with disclosure of any events or transactions material to an understanding of the current interim period.

Although there is no requirement under statute or the listing rules for a quoted company to have its interim accounts audited, it has increasingly become best practice to obtain a review from the auditors.

It helps increase the efficiency and effectiveness of the management functioning concerning the accounting and financial part of the business. It is less expensive than other audits that are required to be conducted, and it helps in the easy finalization of final accounts.

The interim report should include:

A description of the progress of the project, including what has been accomplished so far, an evaluation of any obstacles that have been encountered, and what remains to be done. A financial report, detailing what funds have been spent and how.

Problems in Interim Reporting

As the business operations are not uniform throughout the year, difficulties are created in matching costs and revenues. Some expenses incurred during a period may be uncertain for a given period of time when revenues have been reported.

What are the benefits of interim financial reporting? ›

They provide investors, creditors, and other stakeholders with a snapshot of a company's financial health and performance during the reporting period. Interim financial statements can be useful for assessing a company's financial performance and making decisions about investing or lending money to the company.

Minimum Components of an Interim Financial Report

9. 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; and (d) selected explanatory notes.

State separately, in the balance sheet or in a note thereto, any item in excess of 5 percent of total current liabilities. Such items may include, but are not limited to, accrued payrolls, accrued interest, taxes, indicating the current portion of deferred income taxes, and the current portion of long-term debt.

(1) Balance sheets should include separate captions for each balance sheet component presented in the annual financial statements that represents 10% or more of total assets. Cash and retained earnings should be presented regardless of relative significance to total assets.

Interim reporting theories typically polarize into two extreme views: the discrete approach (i.e., each interim interval is a stand-alone reporting period), and the integral approach (i.e., an interim period is an integral part of the annual period).

The interim financial report is intended to provide an update on the latest complete set of annual financial statements. Accordingly, it focuses on new activities, events, and circ*mstances and does not duplicate information previously reported.

Under IFRS Standards, condensed interim financial statements include, at a minimum, each of the headings and subtotals that were included in the most recent annual financial statements; there is no such requirement under US GAAP⁴. In addition, IAS 34 requires presentation of a condensed statement of changes in equity.

A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.