INTERIM FINANCIAL REPORTING

1. Under PAS 34, interim financial reports should be published

a. Once a year at any time in that year.
b. Within a month of half year end
c. On a quarterly basis.
d. Whenever the entity wishes.
2. The IASB encourages publicly traded entities to provide interim financial reports
a. At least at the end of the half year and within 60 days of the end of the interim period.
b. Within a month of half-year-end.
c. On a quarterly basis.
d. Whenever the entity wishes.
3. If an entity does not prepare interim financial reports, then
a. The year-end financial statements are deemed not to comply with IFRS.
b. The year-end financial statements’ compliance with IFRS is not affected.
c. The year-end financial statements will not be acceptable under local legislation.
d. Interim financial reports should be included in the year-end financial statements.
4. Interim financial reports should include as a minimum
a. A complete set of financial statements complying with PAS 1.
b. A condensed set of financial statements and selected notes.
c. A balance sheet and income statement only.
d. A condensed balance sheet, income statement, and cash flow statement only.
5. An entity owns a number of farms that harvest produce seasonally. Approximately 80% of the entity’s
sales are in the period August to October. Because the entity’s business is seasonal, PAS 34 suggests
a. Additional notes be written in the interim reports about the seasonal nature of the business.
b. Disclosure of financial information for the latest and comparative 12-month period in addition to the
interim report.
c. Additional disclosure in the accounting policy note.
d. No additional disclosure.
6. An entity is preparing half-yearly financial information in line with PAS 34. The period to be covered by
the financial statements is the six months to June 30, 20x7. A new IFRS has been published that is
effective for periods beginning on or after January 1, 20x7. The entity must adopt the IFRS
a. In the financial statements for the year to December 31, 20x7, only.
b. In its interim financial statements to June 30, 20x7, only.
c. In its interim financial statements to June 30, 20x7, and its annual financial statements to
December 31, 20x7.
d. At its own discretion.
7. Which of the following statements is most likely not true regarding standards for interim reporting?
a. Declines in inventory value should be deferred to future interim periods.
b. Use of gross margin method for computing cost of goods sold must be disclosed.
c. Costs and expenses not directly associated with interim revenue must be allocated to interim
periods on a reasonable basis.
d. Gains and losses that arise in an interim period should be recognized in the interim period in which
they arise if they would not normally be deferred at year-end.
8. The inexperienced accountant of Friday Corp. prepares the following statement of profit or loss and other
comprehensive income for the first quarter ended March 31, 20x1:
Revenue 9,000,000
Dividend Income 100,000
Cost of goods sold (5,000,000)
Commission expense (60,000)
Other operating expenses (2,800,000)
Profit 1,240,000
Other comprehensive income ---
Comprehensive income 1,240,00

Additional information:
a. On January 28, 20x1, the entity acquires 10% interest in the ordinary shares of Sunday Co. for
₱500,000. Transactions costs on the acquisition amounts to ₱60,000. The transaction costs are
recognized as commission expense. The investment is classified as financial asset measured at
fair value through other comprehensive income. The fair value of the investment on March 31,
20x1 is ₱450,000. Friday Corp. strongly believes that the fluctuation in fair value is only temporary.
In fact, the fair value of the investment increases to ₱580,000 on April 5, 20x1.
b. Sunday Co. has an established practice of declaring dividends every year-end. Friday expects that
Sunday will declare dividends of ₱1,000,000 on December 20x1. Friday recognizes the estimate
as dividend income.
c. On January 1, 20x1, Friday has an outstanding 12%, long-term, loan receivable with carrying
amount of ₱2,000,000. Although the principal amount is due only at maturity, interests are
collectible every year-end. Friday recognizes interest income every year-end when the interest is
collected.
d. As of March 31, 20x1, Friday’s inventory has a total cost of ₱2,800,000 and a net realizable value
of ₱2,200,000. The inventory decline is not recognized because Friday believes that it is only
temporary. Friday’s past experience supports this fact.
Requirement: Prepare a correct statement of profit or loss and other comprehensive income for Friday
Corp. (Ignore income taxes)
Solution:
Revenue 9,000,000
Cost of goods sold (5,000,000)
Gross profit 4,000,000
Other operating expenses (2,800,000)
Write-down of inventory (2,200,000 – 2,800,000) (600,000)
Interest income (2,000,000 × 12% × 3/12 ) 60,000
Profit 660,000
Other comprehensive income:
Unrealized loss on FVOCI [450,000 – (500,000 + 60,000)] (110,000)
Comprehensive income, 1st Quarter 550,000

9. The statement of profit or loss of Sunny Corporation for the first quarter ended March 31, 20x1 is shown
below:
Revenue 7,000,000
Cost of goods sold (3,000,000)
Gross profit 4,000,000
Other operating expenses (2,800,000)
Property tax expenses (1,200,000)
Depreciation expense (240,000)
Insurance expense (60,000)
Profit (300,000)
Other comprehensive income:
Revaluation increase 150,000
 Comprehensive income (150,000)
Additional information:
a. The 20x1 property tax of ₱1,200,000 was paid on February 28, 20x1.
b. Sunny’s depreciable asset consists only of equipment with carrying amount of ₱1,200,000 and
remaining useful life of 5 years as of January 1, 20x1. Sunny depreciates this asset using the
straight-line method with no residual value.
c. Sunny took a one-year fire insurance on January 1, 20x1 for ₱60,000.
d. During January 20x1, Sunny revalued its land from its original cost of ₱3,800,000 to ₱4,400,000.
Requirement: Prepare a correct statement of profit or loss and other comprehensive income for Sunny
Corporation. (Ignore income taxes)
Solution:
Revenue 7,000,000
Cost of goods sold (3,000,000)
Gross profit 4,000,000
Other operating expenses (2,800,000)
Property tax expense (1,200,000 × 1/4qtr,) (300,000)
Depreciation expense (240,000 × 3/12) or [(1,200,000/5yrs) × 3/12] (60,000)
Insurance expense (60,000 × 3/12) (15,000)
Profit 825,000
Other comprehensive income:
Revaluation increase (4,400,000 – 3,800,000) 600,000
Comprehensive income, 1st Quarter 1,425,000

10. The statement of profit or loss of Sunset Co. for the first quarter ended March 31, 20x1 is shown below:
Revenue 9,000,000
Cost of goods sold (3,000,000)
Gross profit 6,000,000
Other operating expenses (2,800,000)
Impairment loss (125,000)
Profit 3,075,000

Additional information:
a. Sunset Co. pays its employees 13 th month pay as year-end bonus. Since the bonus is paid only at
year-end, this is not reflected in the statement of profit or loss above. Sunset expects that a total
amount of ₱2,800,000 will be paid to the employees as 13 th month pay on December 31, 20x1.
The estimate is based on Sunset’s current number of employees, the employees’ expected service
hours during the year, and their expected salary levels on December 20x1.
b. On March 1, 20x1, the carrying amount of Sunset’s land exceeded its recoverable amount by
₱500,000. A portion of this amount is recognized during the quarter.
c. On March 16, 20x1, Sunset committed to a plan to sell a component of an entity. All of the
conditions under PFRS 5 are met. The carrying amount of the net assets of the component
approximates the fair value less costs of sell. The component incurred an operating loss of
₱700,000 during the first quarter. Sunset decided to defer the loss until the actual sale of the
component. The component is sold on April 8, 20x1.
Requirement: Prepare a correct statement of profit or loss and other comprehensive income for Sunny
Corporation. (Ignore income taxes)
Solution:
Revenue 9,000,000
Cost of goods sold (3,000,000)
Gross profit 6,000,000
Other operating expenses (2,800,000)
Impairment loss (500,000)
 Salaries expense (2,800,000 × 3/12) (700,000)
Profit 2,000,000
Discontinued operations (700,000)
Profit for the 1st quarter 1,300,000

11. On January 1, 20x1, Midnight Co. has an operating loss carryforward of ₱300,000. Midnight Co. is
subject to an income tax rate of 30%. For the year 20x1, Midnight expects to earn profit of ₱1,200,000
before tax and before the loss carryforward. Midnight Co. earns profit before tax of ₱350,000 during the
first quarter of 20x1.
Requirement: Compute for the income tax expense for the 1 st quarter of 20x1.
Solution:
Estimated profit before tax for the year 20x1 1,200,000
Operating loss carryforward (300,000)
Total 900,000
Multiply by: Income tax rate 30%
Income tax expense, 20x1 270,000
Divide by: Estimated profit before tax, 20x1 1,200,000
Weighted average annual income tax rate 22.50%

Pretax profit – 1st Quarter 350,000

Multiply by: Ave. tax rate 22.50%
Income tax expense, 20x1 - 1st Quarter 78,750