INDIAN ACCOUNTING STANDARD (Ind AS) 34

INTERIM FINANCIAL REPORTING

SUBMITTED BY SUBMITTED TO

REETIKA VAID Mr DIGVIJAY SINGH KATOCH

BBA LLB (1ST YEAR) ASSISTANT PROFESSOR

1120202165 OF MANAGEMENT

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 ACKNOWLEDGEMENT

I would like to express my gratitude to my teacher Mr Digvijay Singh Katoch who gave me
the golden opportunity to do this wonderful project on the topic Indian Accounting Standard
(Ind 34) Interim Financial Reporting which also helped me in doing a lot of research and I
came to know about so many new things I am really thankful to them. Secondly, I would also
like to thank my parents and friends who helped me a lot in finalizing this project within the
limited time frame.

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 TABLE OF CONTENTS

Sr. No. CONTENTS PAGE No.

1. EXECUTIVE SUMMARY 3

2. INTRODUCTION 4-5

3. OBJECTIVES OF INTERIM REPORTING 6-8

4. RECOGNITION AND MEASUREMENT 9-12

5. CASE STUDY 13-14

6. CONCLUSION 15

7. BIBLIOGRAPHY 16

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 EXECUTIVE SUMMARY

An interim financial report collection of financial statements for a duration less than that of a
financial year. Ind AS 34 does not define which organizations must issue an interim financial
report. That is usually a concern for laws and government ordinances. Ind AS 34 is
implemented if an organization approving IFRS Standards in its yearly financial statements
proceeds with an interim financial report that declares agreement with IFRS Standards. Ind AS
34 directs the least matter of such an interim financial report. It also defines the accounting
recognition and measurement policies suitable to an interim financial report.

The minimum matter or the content is a collection of condensed financial statements for the
prevailing period and corresponding previous period data, i.e., statement of financial condition,
statement of overall income, statement of cash flows, statement of modifications in equity, and
picked informative entries. In some circumstances, a statement of financial position at the
commencement of the previous period is also needed. Usually, data available in the
organization's most current annual report is not copied or renewed in the interim report. The
interim report works with reforms since the end of the last annual reporting session.

The likewise accounting strategies are implemented in the interim report as in the newest
annual report, or extraordinary revelations are needed if an accounting policy is modified.
Assets and liabilities are acknowledged and measured for interim reporting based on data
obtainable on a year-to-date basis. Whereas analysis in both annual financial statements and
interim financial reports are usually formed on sensible approximations, the preparation of
interim financial reports will ordinarily demand more application of estimation techniques than
annual financial statements.

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 INTRODUCTION

Interim reporting is the reporting of the financial outcomes of any duration that is less than a
financial year. Interim reporting is normally needed for any organisation that is publicly held,
and it usually includes the issuing of three quarterly financial records every year. These records
constitute:

• BALANCE SHEET: As the end of the present interim period and the instantly preceding
financial year.
• INCOME STATEMENT: For the prevailing interim period, and the financial year-to-date,
and the corresponding periods for the directly preceding financial year.
• STATEMENT OF CASH FLOWS: For the prevailing financial year-to-date duration, and
the corresponding duration for the directly preceding financial year.

The specific setup and contents of interim reports allotted by publicly-held organisations are
determined by the Securities and Exchange Commission. These reports are examined by an
organisation's auditor, rather than experiencing an entire audit (which would be ineffective,
given the swiftness with which these reports are delivered to the public).

Interim financial statements are financial statements that comprise a duration shorter than one
financial year. They are used to carry data about the working of the issuing organization before
the end of the regular reporting year, and so are strictly followed by investors. The concept is
usually employed to publicly-held organisations, which must issue these reports at quarterly
intervals. These organizations issue three sets of interim statements each year, that are for the
first, second, and third quarters. The concluding reporting stage of the year is incorporated by
the year-end financial statements, and so is not considered to be linked with interim financial
statements.

The interim statement concept can refer to any period, such as the last five months. Precisely,
the "interim" concept does not refer to the balance sheet, as this financial statement only refers
to assets, liabilities, and equity as of a definite point in time, rather than over a period of time.
Interim financial statements include the same reports as will be observed in annual financial
statements - that is, the income statement, balance sheet, and statement of cash flows. The line
items seen in these reports will also match the ones seen in annual financial statements. The
chief variations between interim and annual statements can be observed in the following areas:

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 • DISCLOSURES: Some accompanying disclosures are not needed in interim financial
statements or can be displayed in a wider paraphrased form.
• ACCRUAL BASIS: The foundation upon which accrued expenses are made can differ
within interim reporting durations. For instance, an expense could be copied completely
within one reporting period, or its identification may be scattered over various periods.
These concerns can make the results and financial conditions included within interim
periods to seem slightly incompatible when examined on a comparative basis.
• SEASONALITY: The revenues produced by a company may be significantly affected by
seasonality. If so, interim statements may show terms of significant losses and profits,
which are not clear in the annual financial statements.

Interim financial statements are not normally inspected. Given the price and time needed for
an audit, only the year-end financial statements are examined. If a business is publicly-held, its
quarterly financial statements are reviewed instead. A review is led by external auditors, but
the exercises incorporated by a review are greatly decreased from those employed in an audit.

Interim financial reports are issued at different periods presenting data about the firm’s working
at various stages during the accounting period. Publicly held businesses come up with quarterly
financial numbers, Real estate firms come up with their numbers on a Project base as and when
these projects are developed. They essentially present the necessary analytical data.

Analyse the following financials of a Major IT company.

Even though the running profit has grown on a year-on-year basis, there is a reduction in
quarterly numbers. It infers that Q4 was not suitable for the company, even though there was a
stable 12% rise in the profit on an annual basis. The information unquestioningly implies the
seasonality of the IT business in the Oct-Dec quarter. This information should lead the
management in preparing for their long-term strategic actions.

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 OBJECTIVES OF INTERIM REPORTING

The financing resolutions are taken around the year. Investors don’t wait for the annual reports
that are stated at the end of the financial year. With organisations depending not only on organic
but also on inorganic growth, annual information is inadequate in assessing improvements and
profits prediction of the organisation and the firm. In such a changing business climate, interim
reports propose a more suitable periodic picture to the shareholders. Presenting current data
will always keep a firm in the great chapters of the investors, making the allocation of capital
investment simple, leading to better market liquidity, which is the primary goal of capital
markets, following are the important purposes:

• Calculation of annual profits formulated on interim financials

• Preparing cash flow predictions.
• Classifying turning points in the organisation's financial situation.
• Check management performance
• To compose internal control methods.
• To enhance the annual report

ADVANTAGES

• It assists in building a healthier relationship with investors.

• It is advantageous for big conglomerates that are managing various groups of business,
assisting them in tracking if their short-term actions are in order with the long-term
policy.
• Material mistake (Error and frauds) in a financial statement can be identified and
stopped at an early phase compared to an annual report.
• It assists in the execution of a thorough internal control method, which moreover makes
accounting policies healthy.
• Issuing of interim dividend is viable when financial statements are recorded for short
periods encouraging the shareholders to continue their investments.

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CHALLENGES AND LIMITATIONS

• Although interim statements decrease the reporting period, they enhance the influence
of mistakes in predictions heading to matter in reporting correct data.
• Many operating expenses are incurred in one period, and the profits are made in the
succeeding periods like advertising, renovations, and other maintenance costs. Such
expenses can change the financial situation of the organisation for an interim period,
although in the longer term it might be important.
• The influence of seasonality and economic sequences is held more in interim statements
and almost annul in the Annual report. They are also more prone to management
manipulation by displaying a solid quarterly increase in the early and end quarters. This
variation influences the flexibility and comparability of such statements.
• Inventory is the principal component of revenue production in any industry. Periodic
estimations of inventory in an interim period are repeated, time-consuming, and prone
to error. Determination of the number of inventory and its cost leads to undesirable
alterations in the interim financial statements.
• The deficiency of a regulatory structure for revelation methods points to uncertainty as
to what degree these should be presented. The exposure can differ from two
organisations within the same sector, which can be deceiving to the shareholder.
• Interim Report forms an excessive emphasis on short-term effects, sometimes showing
a distorted image which can be harmful to both investors and businesses.

GUIDELINES

To dodge repetition and decrease complexity regarding the quality of interim reports, a
company may report limited data. However, it should include at least the following elements:

• Condensed Balance sheet

• The condensed Cash flow statement
• Condensed P &L statement
• Explanatory notes related to the Data reported

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THERE ARE A FEW GUIDELINES FOR DESCRIPTIVE NOTES ALSO. THEY SHOULD INCLUDE:

• A revelation that the same accounting procedures are followed in the interim report as
is being followed in annual reporting.
• Records on the matters concerning the sections of financial statements like assets,
liabilities, equity, Income;
• Any new issuance of stocks, buybacks, repayments, or restructuring of debt;
• Dividends for equity shares.
• Influence of new assets or long-term investments that are acquired during the interim
period.
• Any investor or regulatory grievances during the interim period.

The purpose of this Standard is to order the minimum content of an interim financial report and
to direct the principles for identification and calculation in complete or condensed financial
statements for an interim period. Timely and dependable interim financial reporting enhances
the capability of investors, creditors and others to understand an organisation's ability to
produce profits and cash flows, its financial position and liquidity.

SCOPE OF IND AS-34

• This Standard does not instruct which company should be expected to present interim
financial reports, how often, or how soon after the completion of an interim period. If
a company is expected or chooses to make and display an interim financial report, it
should fall within this Standard.
• A statute administering a company or a regulator may need a company to develop and
present some data at an interim date which may vary in form and content as expected
by this Standard. In such a case, the recognition and measurement principles as
mentioned in this Standard are implemented in respect of such data, unless otherwise.
• The conditions for cash flow statement, complete or condensed, included in this
Standard are relevant where a company develops and presents a cash flow statement
for its annual financial report.

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 CONTENTS OF AN INTERIM FINANCIAL REPORT

An entire set of financial statements usually includes:

(a) balance sheet;

(b) statement of profit and loss;

(c) cash flow statement; and

(d) records including those related to accounting policies and other statements and
supplementary material that is an essential component of the financial statements.

In the interest of timeliness and cost considerations and to prevent the duplication of data earlier
stated, an industry may be needed to or may choose to give less information at interim dates as
compared to its annual financial statements. The advantage of timeliness of presentation may
be somewhat balanced by a decrease in detail in the data presented. Consequently, this Standard
demand preparation and presentation of an interim financial report including, as at least, a set
of condensed financial statements. The interim financial report including condensed financial
statements is expected to present an update on the latest annual financial statements. Hence, it
concentrates on new activities, events, and conditions and does not repeat information earlier
reported.

This Standard does not prevent or hinder an industry from presenting a whole set of financial
statements in its interim financial report, rather than a set of condensed financial statements.
This Standard also does not prevent or hinder an industry from adding, in condensed interim
financial statements, more than the minimum line objects or picked descriptive records as
mentioned in this Standard. The recognition and measurement policies mentioned in this
Standard refer to develop financial statements for an interim period, and such statements would
cover all acknowledgements asked by this Standard as well as those needed by other
Accounting Standards.

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 Recognition and Measurement

An organisation shall implement the same accounting policies in its interim financial
statements as are employed in its annual financial statements, except for accounting policy
variations made after the interim date of the current annual financial statements that are to be
reflected in the subsequent annual financial statements. However, the rate of an entity’s
reporting (annual, half-yearly, or quarterly) shall not influence the measurement of its yearly
outcomes. To accomplish that goal, measurements for interim reporting purposes must be made
on a year-to-date basis.

Wanting that an organisation implements the similar accounting procedures in its interim
financial statements as in its annual financial statements may appear to recommend that interim
period measurements are made as if each interim period is simply an independent reporting
period. However, by giving that the rate of an organisation's reporting must not influence the
measurement of its annual results, it is acknowledged that an interim period is a portion of a
financial year. Year-to-date measurements may include variations in assessments of amounts
reported in earlier interim periods of the prevailing financial year. But the policies for
classifying assets, liabilities, income, and expenses for interim periods are identical as in annual
financial statements.

To demonstrate:

(a) the policies for recognising and measuring damages from inventory write-downs,
restructurings, or impairments in an interim period are the same as those that an organisation
would follow if it made only annual financial statements. However, if such things are identified
and measured in one interim period and the estimation varies in a succeeding interim period of
that financial year, the initial estimate is modified in the succeeding interim period either by
the accrual of a supplementary amount of loss or by the cancellation of the earlier recognised
amount;

(b) a value that does not satisfy the description of an asset at the end of an interim period is not
submitted on the balance sheet date either to expect coming information as to whether it has
reached the description of an asset or to soften profits over the interim periods within a financial
year

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(c) the income tax amount is identified in each interim period based on the most reliable
estimation of the weighted average annual income tax charge required for the full financial
year. Amounts collected for income tax expense in one interim phase might be improved in a
succeeding interim phase of that financial year if the evaluation of the annual income tax rate
modifies.

Under the structure for the construction and display of financial statements, recognition is the
method of combining in the balance sheet or report of profit and loss an article that satisfies
the description of a component and provides the guidelines for recognition. The descriptions
of assets, liabilities, income, and expenses are significant to recognition, both at annual and
interim financial reporting periods.

For assets, the similar inquiries of future economic advantages employ to interim dates as they
employ to the end of an organisation's fiscal year. Values that, by their nature, would not fit as
assets at financial year-end would not fit at interim dates as well. Furthermore, a liability at an
interim reporting period must express a present commitment at that date, exactly as it must at
an annual reporting period.

Income is identified in the report of profit and loss when an improvement in coming economic
advantages compared to an increase in an asset or a reduction of liability has emerged that can
be measured certainly. Expenses are identified in the report of profit and loss when a reduction
in projected economic advantages associated with a reduction in an asset or an expansion of
liability has emerged that can be measured dependably. The recognition of objects in the
balance sheet which does not satisfy the description of assets or liabilities is not permitted.

In measuring assets, liabilities, income, expenses, and cash flows described in its financial
statements, an organisation that addresses only yearly can take into account data that becomes
available during the financial year. Its measurements are, in consequence, on a year-to-date
basis.

An organisation that addresses half-yearly, utilises data available by mid-year or soon hereafter
in making the measurements in its financial statements for the initial six-month period and data
available by year-end or soon hereafter for the twelve-month duration. The twelve-month
measurements will indicate any variations in the estimation of values recorded for the initial
six-month duration. The values reported in the interim financial report for the initial six-month
duration are not retrospectively modified. However, the type and importance of any significant
change in estimates to be revealed.

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An organisation that publishes more regularly than half-yearly, measures income and taxes on
a year-to-date basis for every interim period utilising data available when every collection of
financial statements is being made. Sums of revenue and expenses reported in the prevailing
interim period will indicate any change in assessments of amounts recorded in previous interim
periods of the financial year. The amounts listed in previous interim periods are not
retrospectively modified. The nature and amount of any important variation in estimates be
disclosed.

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 CASE STUDY

QUESTION

The making of interim financial reports demands prominent use of evaluation techniques than
annual financial reports. Explain the use of estimates for the followings:

● Inventories

● Provisions

● Pensions

● Contingencies

● Intercompany reconciliations

ANSWER

Inventories

Full stock-taking and valuation methods may not be needed for inventories at interim dates,
although it may be done at financial year-end. It may be adequate to make estimations at interim
dates based on sales boundaries.

Provisions

Verification of the relevant amount of a provision (such as a provision for warranties,

environmental costs, and site restoration costs) may be complicated and usually expensive and
time-absorbing. Companies sometimes recruit external specialists to help in the annual
calculations. Creating similar estimates at interim dates usually requires updating of the
previous annual provision rather than the recruiting external specialists to do a new calculation.

Pensions

Employee privileges require that a company verify the existing value of specified interest
responsibilities and the business value of plan assets after every reporting period and reinforces
a company to include a professionally adequate examiner in the measurement of the
responsibilities. For interim reporting motives, trustworthy measurement is usually achieved
by estimating the advanced valuation.

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Contingencies

The measurement of contingencies may include the views of legal authorities or other advisers.
Formal reports from autonomous specialists are sometimes collected concerning contingencies.
Such views about litigation, claims, assessments, and other contingencies and possibilities may
or may not be required at interim dates.

Inter-company reconciliations

Some intercompany balances that are settled on a comprehensive level in making consolidated
financial statements at financial year-end might be fixed up at a short-detailed level in making
consolidated financial statements at an interim date.

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 CONCLUSION

Interim reporting is not very distinctive from Annual reporting in terms of content but only
alters in the timing of the publishing the statements. It is a sub-component of annual reporting
that gives all important and meaningful financial information like revenues, income,
expenditure, losses, etc. for a specific duration. A company doesn’t need to issue it, but doing
so can be very advantageous for the company, investors, and stakeholders, leading to an
improved and developed financial ecosystem.

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 BIBLIOGRAPHY

Icai.org

https://indasaccess.icai.org/download/2020/compendium-indas/323/323asb-cias-2020-21-
vol2-34.pdf

• Scope: This report highlights the important terms, scope and objectives of interim
financial reporting and Ind AS-34

Iasplus.com

https://www.iasplus.com/en/binary/dttpubs/0903ias34guide.pdf

• Scope: This journal specifies the requirements, contents and accounting policies for
preparing interim financial reports.

Accounting tools

https://www.accountingtools.com/articles/what-is-interim-
reporting.html#:~:text=Interim%20reporting%20is%20the%20reporting,quarterly%2
0financial%20statements%20each%20year.

• Scope: This article includes the interim reporting considerations and the factors that
need to be kept in mind while constructing interim reports.

Mca.gov.in

https://www.mca.gov.in/Ministry/notification/pdf/AS_25.pdf

• Scope: This report highlights the disclosure in the annual financial statements,
recognition and measurement, accounting policies.

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