IAS 34-Interim Financial Reporting
Summary of IAS 34-Interim Financial Reporting
An interim financial report is a complete or condensed set of financial statements for a period shorter than a financial year. IAS 34 does not specify which entities must publish an interim financial report. That is generally a matter for laws and government regulations. IAS 34 applies if an entity using IFRS Standards in its annual financial statements publishes an interim financial report that asserts compliance with IFRS Standards.
IAS 34 prescribes the minimum content of such an interim financial report. It also specifies the accounting recognition and measurement principles applicable to an interim financial report.
The minimum content is a set of condensed financial statements for the current period and comparative prior period information, ie statement of financial position, statement of comprehensive income, statement of cash flows, statement of changes in equity, and selected explanatory notes. In some cases, a statement of financial position at the beginning of the prior period is also required. Generally, information available in the entity’s most recent annual report is not repeated or updated in the interim report. The interim report deals with changes since the end of the last annual reporting period.
The same accounting policies are applied in the interim report as in the most recent annual report, or special disclosures are required if an accounting policy is changed. Assets and liabilities are recognised and measured for interim reporting on the basis of information available on a year-to-date basis. While measurements in both annual financial statements and interim financial reports are often based on reasonable estimates, the preparation of interim financial reports will generally require a greater use of estimation methods than annual financial statements.
Objective of IAS 34
IAS 34 does not mandate the preparation of interim financial reports, but the objective of IAS 34 is to prescribe the minimum content of an interim financial report and to prescribe the principles for recognition and measurement in financial statements presented for an interim period.
Interim period: a financial reporting period shorter than a full financial year (most typically a quarter or half-year).
Interim financial report: a financial report that contains either a complete or condensed set of financial statements for an interim period.
Matters left to local regulators
The standard does not make the preparation of interim financial reports mandatory.
The IASB strongly recommend to governments that interim reporting should be a requirement for companies whose equity or debt securities are publicly traded
- An interim financial report should be produced for at least the first 6 months of their financial year
- The report should be available no later than 60 days after the end of the interim period
- E.g. A company with a year end (Y/E) ending 31 December will prepare an interim report for the half year to 30 June.This report will be available before the end of August
IAS 34 specifies the content of an interim financial report that is described as conforming to International Financial Reporting Standards. However, IAS 34 does not mandate:
- which entities should publish interim financial reports,
- how frequently, or
- how soon after the end of an interim period.
Such matters will be decided by national governments, securities regulators, stock exchanges, and accountancy bodies.
However, the Standard encourages publicly-traded entities to provide interim financial reports that conform to the recognition, measurement, and disclosure principles set out in IAS 34, at least as of the end of the first half of their financial year, such reports to be made available not later than 60 days after the end of the interim period.
Minimum content of an interim financial report
The minimum components specified for an interim financial report are: [IAS 34.8]
- a condensed balance sheet (statement of financial position)
- a condensed statement of comprehensive income
- a condensed statement of changes in equity
- a condensed statement of cash flows
- selected explanatory notes
If the entity provides a complete set of FS then it should comply with IAS 1 (full compliance with IFRSs).
If condensed, they should include each of the headings and sub-totals included in the most recent annual financial statements and the explanatory notes required by IAS 34.
Additional line-items should be included if their omission would make the interim financial information misleading
The interim accounts are designed to provide an update so should focus on new events and not duplicate info already reported on
Comparative figures for previous interim periods and previous full years are required.
The following table shows the period for which each component of the interim financial report must be presented:
|Financial statement||Current period||Comparative period|
|Statement of financial position||As at the end of the interim period||At the end of the preceding complete financial year|
|Statement of profit or loss and other comprehensive income||Current interim period and cumulative year to date for the current financial year||Equivalent interim period and cumulative year to date for the preceding financial year|
|Statement of changes in equity||Cumulative year to date for the current financial year||Cumulative year to date for preceding financial year|
|Statement of cash flows||Cumulative year to date for the current financial year||Cumulative year to date for the preceding financial year|
Recognition and measurement
The same accounting policies should be applied for interim reporting as are applied in the entity’s 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.
A key provision of IAS 34 is that an entity should use the same accounting policy throughout a single financial year. If a decision is made to change a policy mid-year, the change is implemented retrospectively, and previously reported interim data is restated.
Items are measured on a year to date basis
Lets say a company produces quarterly interim accounts and in the first quarter it writes off some inventory, but then in the next quarter it actually sells it
In the second quarter interim accounts therefore the write down is reversed
Several important measurement points:
- Revenues that are received seasonally, cyclically or occasionally within a financial year should not be anticipated or deferred as of the interim date, if anticipation or deferral would not be appropriate at the end of the financial year.
- Costs that are 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 recognised based on the best estimate of the weighted average annual effective income tax rate expected for the full financial year.
These will be used more heavily in interim accounts
No need for an actuarial valuation. Just use the most recent and roll it forward
No need for expert guidance at the interim stage
No need for a full stock count. Make an estimate based in sales margins to get a valuation
- Intangible Assets
If development costs do not meet the capitalisation criteria at the interim date they should not be capitalised, even if they are expected to be reached by the financial year end
This should be accrued using the tax rate that would be applicable to total expected earnings
Notes to the financial statements must disclose of significant events and transactions since the end of the last full period.
The explanatory notes required are designed to provide an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the last annual reporting date. IAS 34 states a presumption that anyone who reads an entity’s interim report will also have access to its most recent annual report. Consequently, IAS 34 avoids repeating annual disclosures in interim condensed reports.
|Examples of specific disclosure requirements of IAS 34|
|Examples of events and transactions for which disclosures are required if they are significant
Examples of other disclosures required
- Phnom Penh HR
- ifrs.org /issued-standards/list-of-standards/ias-34-interim-financial-reporting/
- acowtancy . com /textbook/acca-sbr/c11-other-reporting-issues/ias-34-interim-financial-reporting/notes
- iasplus . com/en/standards/ias/ias34
- xplaind.com /629479/ias-34-interim-financial-reporting