TMI BlogInterim Financial ReportingX X X X Extracts X X X X X X X X Extracts X X X X ..... erim period. If an enterprise is required or elects to prepare and present an interim financial report, it should comply with this Standard. 2. A statute governing an enterprise or a regulator may require an enterprise to prepare and present certain information at an interim date which may be different in form and/or content as required by this Standard. In such a case, the recognition and measurement principles as laid down in this Standard are applied in respect of such information, unless otherwise specified in the statute or by the regulator. 3. The requirements related to cash flow statement, complete or condensed, contained in this Standard are applicable where an enterprise prepares and presents a cash flow statement for the purpose of its annual financial report. Definitions 4. The following terms are used in this Standard with the meanings specified: 4.1 Interim period is a financial reporting period shorter than a full financial year. 4.2 Interim financial report means a financial report containing either a complete set of financial statements or a set of condensed financial statements (as described in this Standard ) for an interim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include, at a minimum, the following components: ( a ) condensed balance sheet; ( b ) condensed statement of profit and loss; ( b ) condensed cash flow statement; and ( d ) selected explanatory notes. Form and Content of Interim Financial Statements 10. If an enterprise prepares and presents a complete set of financial statements in its interim financial report, the form and content of those statements should conform to the requirements as applicable to annual complete set of financial statements. 11. If an enterprise prepares and presents a set of condensed financial statements in its interim financial report, those condensed statements should include, at a minimum, each of the headings and sub-headings that were included in its most recent annual financial statements and the selected explanatory notes as required by this Standard. Additional line items or notes should be included if their omission would make the condensed interim financial statements misleading. 12. If an ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 financial years, if those changes have a material effect in the current interim period; ( e ) issuances, buy-backs, repayments and restructuring of debt, equity and potential equity shares; ( f ) dividends, aggregate or per share (in absolute or percentage terms), separately for equity shares and other shares; ( g ) segment revenue, segment capital employed (segment assets minus segment liabilities) and segment result for business segments or geographical segments, whichever is the enterprise s primary basis of segment reporting (disclosure of segment information is required in an enterprise s interim financial report only if the enterprise is required, in terms of AS 17, Segment Reporting, to disclose segment information in its annual financial statements); ( h ) material events subsequent to the end of the interim period that have not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od may be useful. Accordingly, enterprises whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in the preceding paragraph. 20. Illustration 2 attached to the Standard illustrates the periods required to be presented by an enterprise that reports half-yearly and an enterprise that reports quarterly. Materiality 21. In deciding how to recognise, measure, classify, or disclose an item for interim financial reporting purposes, materiality should be assessed in relation to the interim period financial data. In making assessments of materiality, it should be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data. 22. The Preface to the Statements of Accounting Standards states that The Accounting Standards are intended to apply only to items which are material . The Framework for the Preparation and Presentation of Financial Statements, issued by the Institute of Chartered Accountants of India, states that information is material if its misstatement (i.e., omission or erroneous statement) could influence the economic decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information in its annual financial statements. Recognition and Measurement Same Accounting Policies as Annualy 27. An enterprise should apply the same accounting policies in its interim financial statements as are applied in its annual financial statements, except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements. However, the frequency of an enterprise's reporting (annual, half-yearly, or quarterly) should not affect the measurement of its annual results. To achieve that objective, measurements for interim reporting purposes should be made on a year to- date basis. 28. Requiring that an enterprise apply the same accounting policies in its interim financial statements as in its annual financial statements may seem to suggest that interim period measurements are made as if each interim period stands alone as an independent reporting period. However, by providing that the frequency of an enterprise's reporting should not affect the measurement of its annual results, paragraph 27 acknowledges that an interim period is a part of a financial year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must represent an existing obligation at that date, just as it must at an annual reporting date. 32. Income is recognised in the statement of profit and loss when an increase in future economic benefits related to an increase in an asset or a decrease of a liability has arisen that can be measured reliably. Expenses are recognised in the statement of profit and loss when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably. The recognition of items in the balance sheet which do not meet the definition of assets or liabilities is not allowed. 33. In measuring assets, liabilities, income, expenses, and cash flows reported in its financial statements, an enterprise that reports only annually is able to take into account information that becomes available throughout the financial year. Its measurements are, in effect, on a year-to-date basis. 34. An enterprise that reports half-yearly, uses information available by mid-year or shortly thereafter in making the measurements in its financial statements for the first six-month period and information available by year end or shortly thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding of the financial position or performance of the enterprise is appropriately disclosed. While measurements in both annual and interim financial reports are often based on reasonable estimates, the preparation of interim financial reports generally will require a greater use of estimation methods than annual financial reports. 41. Illustration 4 attached to the Standard illustrates the use of estimates in interim periods. Restatement of Previously Reported Interim Periods 42. A change in accounting policy, other than one for which the transition is specified by an Accounting Standard, should be reflected by restating the financial statements of prior interim periods of the current financial year. 43. One objective of the preceding principle is to ensure that a single accounting policy is applied to a particular class of transactions throughout an entire financial year. The effect of the principle in paragraph 42 is to require that within the current financial year any change in accounting policy be applied retrospectively to the beginning of the financial year. Transitional Provision 44. On the first occasion that an interim financial report is pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minority interests (in case of consolidated financial statements) 4. Loan funds: ( a ) Secured loans ( b ) Unsecured loans Total II. Application of Funds 1. Fixed assets ( a ) Tangible fixed assets ( b ) Intangible fixed assets 2. Investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used 5. Salaries, wages and other staff costs 6. Other expenses 7. Interest 8. Depreciation and amortisations Total 9. Profit or loss from ordinary activities before tax 10. Extraordinary items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should contain selected explanatory notes as required by paragraph 16 of this Statement. Illustrative Format of Condensed Financial Statements for a Bank (A) Condensed Balance Sheet Figures at the end of the current interim period Figures at the end of the previous accounting year I. Capital and Liabilities 1. Capital 2. Reserve and surplus 3. Minority interests (in case of consolidated financial statements) 4. Deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( d ) Others 2. Other Income Total Income 1. Interest expended 2. Operating expenses ( a ) Payments to and provisions for employees ( b ) Other operating expenses 3. Total expenses (excluding provisions and contingencies) 4. Operating profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Cash flows from financing activities 4. Net increase/(decrease) in cash and cash equivalents 5. Cash and cash equivalents at beginning of period 6. Cash and cash equivalents at end of period (D) Selected Explanatory Notes This part should contain selected explanatory notes as required by paragraph 16 of this Standard. Illustration 2 Illustration of Periods Required to Be Presented This Illustration which does not form part of the Accounting Standard, provides examples to illustrate application of the principles in paragraphs 18 and 19. Its purpose is to illustrate the application of the Accounting Standard to assist in clarifying its meaning. Enterprise Preparing and Presenting Interim Financial Reports Half-Yearly 1. An enterprise whose fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cash Flow Statement: 6 months ending 30 September 2001 30 September 2000 12 months ending 30 September 2001 30 September 2000 Illustration 3 Illustration of Applying the Recognition and Measurement Principles This Illustration which does not form part of the Accounting Standard, illustrates application of the general recognition and measurement principles set out in paragraphs 27-38 of this Standard. Its purpose is to illustrate the application of the Accounting Standard to assist in clarifying its meaning. Gratuity and Other Defined Benefit Schemes 1. Provisions in respect of gratuity and other defined benefit schemes for an interim period are calculated on a year-to-date basis by using the actuarially determined rates at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-time events. Major Planned Periodic Maintenance or Overhaul 2. The cost of a major planned periodic maintenance or overhaul or other season ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Income Tax Expense for Interim Period 8. Interim period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate applied to the pre-tax income of the interim period. 9. This is consistent with the basic concept set out in paragraph 27 that the same accounting recognition and measurement principles should be applied in an interim financial report as are applied in annual financial statements. Income taxes are assessed on an annual basis. Therefore, interim period income tax expense is calculated by applying, to an interim period's pre-tax income, the tax rate that would be applicable to expected total annual earnings, that is, the estimated average effective annual income tax rate. That estimated average annual income tax rate would reflect the tax rate structure expected to be applicable to the full year's earnings including enacted or substantively enacted changes in the income tax rates scheduled to take effect later in the financial year. The estimated average annual income tax rate would be re-estimated on a year-to-date basis, consistent with par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al year that begins 1 October, Year 1 ends 30 September of Year 2, the enterprise earns ₹ 100 lakhs pre-tax each quarter. The estimated weighted average annual income tax rate is 30 per cent in Year 1 and 40 per cent in Year 2. (Amount in Rs. lakhs) Quarter Quarter Quarter Quarter Year Ending Ending Ending Ending Ending 31 Dec. 31 Mar. 30 June 30 Sep. 30 Sep. Year 1 Year 1 Year 2 Year 2 Year 2 Tax Expense 30 30 40 40 140 Tax Deductions/Exemptions 14. Tax statutes may provide deductions/exemptions in computation of income for determining tax payable. Anticipated tax benefits of this type for the full year are generally reflected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or discounts and other contractual changes in the prices of goods and services are anticipated in interim periods, if it is probable that they will take effect. Thus, contractual rebates and discounts are anticipated but discretionary rebates and discounts are not anticipated because the resulting liability would not satisfy the conditions of recognition, viz., that a liability must be a present obligation whose settlement is expected to result in an outflow of resources. Depreciation and Amortisation 18. Depreciation and amortisation for an interim period is based only on assets owned during that interim period. It does not take into account asset acquisitions or disposals planned for later in the financial year. Inventories 19. Inventories are measured for interim financial reporting by the same principles as at financial year end. AS 2 on Valuation of Inventories, establishes standards for recognising and measuring inventories. Inventories pose particular problems at any financial reporting date because of the need to determine inventory quantities, costs, and net realisable values. Nonetheless, the same measurement principles are applied for interim inventori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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