What are interim financial statements?

Definition of Interim Financial Statements

Interim financial statements report amounts for time intervals that are shorter than a
company's annual financial statements. The interim financial statements give management,
investors, and other users some updated information on the company's operations and
financial position. Unlike the annual financial statements, the interim financial statements will
likely be unaudited and either condensed or more detailed depending on the distribution.

Interim financial statements to stockholders (external financial statements) will be more

condensed than the annual financial statements. Interim financial statements for the
company's management (internal financial statements) will be more detailed, but will omit the
notes to the financial statements.

Examples of Interim Financial Statements

A few examples of interim financial statements (other than the balance sheet) for a company
with an accounting year ending on each December 31 will include the following in their
headings:

 For the month ended January 31 (for use by management)

 For the three months ended March 31
 For the three months ended June 30
 For the six months ended June 30
 For the nine months ended September 30

A few examples of interim balance sheet dates for a company with an accounting year ending
on each December 31 include:

 January 31 (for use by management)

 March 31
 June 30
 September 30
What is inventory valuation?
Definition of Inventory Valuation
In the U.S., inventory valuation is the dollar amount associated with the items remaining in a
company's inventory.

Generally speaking, the amount is the cost of the items. (Cost is defined as all of the costs
necessary to get the inventory items in place and ready for sale.) The cost may vary somewhat
since U.S. companies may choose between the periodic inventory system and the perpetual
inventory system. In addition, these companies may select from several cost flow assumptions,
including FIFO, LIFO, average, etc.

While reporting at cost is the general rule, inventories must be reported at less than cost in
certain situations. For example, some inventories will have to be reported at their net realizable
value when it is less than cost.

A manufacturer's inventory valuation will include the costs of production, namely direct
materials, direct labor, and manufacturing overhead. Manufacturers are also required to
consistently follow their selected cost flow assumption.

Examples of Inventory Valuation

Assume that a new company purchased three truckloads of its only merchandise item during its
first year of operations at the following costs:

 January: 500 units at $10 each

 May: 1,000 units at $11 each
 September: 1,000 units at $12 each

Assume that throughout the year the company sold 2,300 units. As a result, the company had
200 units in inventory at the end of the year.
If the company uses the periodic system and the FIFO cost flow assumption, its inventory will
be reported at the cost of $2,400 (200 units X $12). On the other hand if the company uses the
periodic system and the LIFO cost flow assumption, its inventory will be reported at the cost of
$2,000 (200 units $10).

Inventory valuation is also important because of its effect on the following:

 Cost of goods sold for more than one accounting period

 The amount of a company's current assets
 The company's working capital
 The company's current ratio

What is long-term debt?

Definition of Long-term Debt
In accounting, long-term debt generally refers to a company's loans and other liabilities that will
not become due within one year of the balance sheet date. (The amount that will be due within
one year is reported on the balance sheet as a current liability.)

Example of Long-term Debt

Let's assume that a company has a mortgage loan with a principal balance of $200,000 with 120
monthly payments remaining. The loan payments due in the next 12 months include $12,000 of
principal payments. The $200,000 of debt should be reported on the company's balance sheet
as follows:

 $188,000 as a long-term or noncurrent liability such as noncurrent portion of mortgage

loan
 $12,000 as a current liability such as current portion of mortgage loan
When the word "debt" is used to mean "liabilities" (as is done in financial ratios) then other
examples will include vehicle loans, bonds payable, capital lease obligations, pension and other
post-retirement benefit obligations, and deferred income taxes.

Some long-term debt that will be due within one year can continue to be reported as a
noncurrent liability if the company intends to refinance the debt and can prove it will be done
within 12 months without reducing its working capital.