TOPIC 2

MFRS 134
INTERIM FINANCIAL REPORTING
TOPIC OUTCOME
Ability to:
 Explain the main principles in the preparation

of interim financial statements

 Discuss the content and presentation of

interim reports
 Recognize and measure of items in interim

financial statements
 Discuss the disclosure requirements of MFRS

134 Interim Financial Reports

 MFRS 134 - INTERIM FINANCIAL
REPORTING
 Bursa Malaysia requires all entities whose debt or
equity securities are publicly traded to publish
interim financial reports.
 Is a financial report for a period shorter than a full
financial year
 Can be complete or condensed set of FS
 Can be issued semi-annually, quarterly or bi-
monthly
 MFRS134 prescribes the minimum content
including disclosures, and identifies the
recognition and measurement principles that
should be applied in interim financial reports.
Reasons

 To provide investors and others users

with more timely or current information
 To enable users to evaluate entity’s

financial position, performance and cash

flows on continual basis.
Basis of preparation

Basis

Integral method Discrete method

Interim report is Annual values x Reports are

Interim period is
a fraction of the fraction of the prepared on a
a separate period
annual report reporting period periodic basis
Example
 A company incurs all is advertising expenses
amount RM12,000 in the first quarter of a
financial year, but none in the subsequent
three quarters of the financial year

Discrete Integral
1st quarter RM12,000 RM3,000
2nd quarter - RM3,000
3rd quarter - RM3,000
4th quarter - RM3,000
Minimum Component of an Interim Financial
Report

Entities can choose to either present:

a) Complete set of financial statements (as prescribed in
MFRS 101); OR

b) Condensed set of financial statements

It should include at a minimum, the following
component:
1. Condensed statement of financial position;
2. Condensed statement of profit or loss and other
comprehensive income;
3. Condensed statement of changes in equity;
4. Condensed statement of cash flows; and
5. Selected explanatory notes
Form and Content of Interim FSs
If entity publishes a set of condensed financial statements in
its interim financial report, the condensed statement shall,
include, as a minimum:
i. Each of the headings and subtotals that was included
in its most recent annual financial statements
ii. Selected explanatory notes as required by the
standards
iii. Basic and diluted earnings per share on the face of
the statement of profit or loss and other
comprehensive income
 Basic EPS = (PAT – PS dividend) / No. of

Shares outstanding
 Diluted EPS = (PAT – PS dividend ) / (Shares

outstanding + convertible instruments)

Form and Content of Interim FSs
 In condensed FSs, certain line items may be
aggregated such that the content is usually
less detail than the complete set of FSs
 Example: to aggregate:
 Trade receivables and other receivables
 Cash, bank and deposits may be
aggregated and present as cash and cash
equivalent
 Detail classification of expenses by
function or nature may aggregated as
operating expenses
 Selected Explanatory notes
 Disclosure of accounting policies is not required because the
presumption is that users would have assess to most recent
FSs
 Focus on significant updates and changes in financial
position and performance since last reporting date.
 As a minimum, the following information, if material should be
disclosed:
1. A statement the same accounting policies and methods of
computation are followed in the interim FS as compared with the
most recent annual FS. If changed, describe the nature and effect
of the change
2. If audit report of the preceding annual FS was qualified –
disclosure of the qualification and the current status
3. Comments on the seasonality or cyclicality if interim operation
4. The nature and amount of items affecting assets, liabilities, equity,
net income, or cash flows that are unusual
Selected Explanatory notes
5. The nature and amount of changes in estimates of amount
reported in prior interim periods of the current financial year
6. Issuance, cancellations, repurchases, resale and repayments
of debts and equity securities
7. Dividend paid (aggregate or per share) separately for OS and
other shares
8. Segment revenue, to external customers and intersegment
revenues, segment results, and other information
9. Material events subsequent to the end of the interim period
10. The effect of changes in the composition of the entity during
the interim period
11. Changes in contingent liabilities or contingent assets since
the last annual reporting period
Reporting period for interim FS
 Generally can be half-yearly OR quarterly
report
 The reports cover the:

◦ Current period
◦ Year to date; and
◦ Comparatives
 Reporting period for interim FS
 MFRS 134 prescribes that interim reports shall
include interim FSs for the period as follows:
1. SOFP as of the end of the current interim period,
and a comparative SOFP as of the end of the
immediately preceding year
2. SPOCI for the current interim period and
cumulatively for the current financial year to date,
with comparative SPOCI for the comparable interim
periods (current and year to date)
 Reporting period for interim FS
3. SOCIE cumulatively for the current financial year to
date, with a comparative statement for the
comparable year to date of immediately preceding
financial year
4. SOCF cumulatively for the current financial year to
date, with a comparative statement for the
comparable year to date period of immediately
preceding financial year

** refer Schedule A and B

Example:

ABC Bhd has a financial year ending on 31

December. It is preparing the interim report for
the 2nd quarter ended 30 June 2016

Required:

Indicate the periods for which interim FSs are

required to be presented
 ABC Bhd
Interim SOFP as at 30 June 2016
As at 30/6/16 As at 31/12/2015
RM’000 RM’000
Line items xxx xxx

ABC Bhd
Interim SPOCI for the quarter ended30 June 2016
Quarter Quarter 6-month 6-month
ended ended ended ended
30/6/16 30/6/15 30/6/16 30/6/15
RM’000 RM’000 RM’000 RM’000
Line items xxx xxx xxx xxx
 ABC Bhd
Interim SOCIE for the period ended 30 June 2016
6-month ended 6-month ended
30/6/16 30/6/ 2015
RM’000 RM’000
Line items xxx xxx
ABC Bhd
Interim SOCF for the quarter ended 30 June 2016
6-month ended 6-month ended
30/6/16 30/6/15
RM’000 RM’000
Line items xxx xxx
Materiality
 MFRS 134 states that “in deciding how to
recognize, measure, classify or disclose an item for
interim financial reporting purposes, materiality shall
be assessed in relation to the interim period
financial data”

 The goal is that an interim report includes all

information that is relevant to understanding an
entity’s financial position and performance during
the interim period.
2. Recognition and measurement principles
a) Same accounting policies as annual
• The accounting policies applied in the interim FS have to be the
same as that applied in the annual FS
• If the are changes in the accounting policies after the date of the
most recent annual FS, then the new policies should be applied
in the interim FS
Recognition and measurement principles
a) Same accounting policies as annual

A change in accounting policy (except when the change is

brought about by a new standard or interpretation), is to be
accounted for as follows:
1. The FS of prior interim periods of the current financial year
and the comparative interim periods of prior financial years
to be restated.
2. When it is impracticable to determine the cumulative effect
at the beginning of the financial year to all prior periods,
the financial statements of the prior interim periods of the
current financial year and comparative interim periods of
prior financial years are to be adjusted prospectively from
the earliest date practicable.
Recognition and measurement principles
Example:

If the change in policy is made in the 3rd

quarter of the current financial year and the
change will also be reflected for the current
annual financial statement, the financial
statement of the 1st and 2nd quarters shall be
restated as if the new policy had been
reflected at the beginning of the 1st quarter
Recognition and measurement principles
b) Seasonal, Cyclical or Occasional Revenue and
Cost
• There could be seasonal fluctuation in revenue earned
• Revenue earned in a particular period is recognized in that
period
• There should not be deferral or anticipation of revenue
• Can recognized cost if its incurred and not otherwise
• Example:
• If significant revenues are anticipated in the final quarter of the
current financial year, those revenue shall not be recognized by
an accrual in the first three quarters but to be recognized in the
final quarter
• If significantly more revenues are earned in the current quarter,
the revenues shall not be deferred to the subsequent quarters
Recognition and measurement principles
c) Costs incurred unevenly during the financial
year
• Costs incurred unevenly during an entity’s financial year shall
be anticipated or deferred if it appropriate to anticipate or
defer that type of cost at the end of financial year
• Example:
• An insurance premium paid in the first quarter but which
provide protection for the entire financial year, shall be
recognized ratably over the four quarters by a deferment in
prepayment
Recognition and measurement principles
d) Use of estimate
• The preparation of interim financial reports generally will
require a greater use of estimation method than annual
financial reports
• The measurement procedures to be followed in an interim
financial reports shall be design to ensure the resulting
information is reliable and all material information that is
relevant is appropriately disclosed
 Recognition and measurement: Example
 Income and expenses
◦ Recognized and measured in accordance with the framework
◦ If the reported income or expenses in an interim report is
different then the changes are accommodated in the following
interim FS
◦ Revenue earned in a particular period is recognized in that
period.
◦ Entity can only recognize the cost if it is incurred and not
otherwise
◦ Example:
 Q - A Bhd makes donations to its favourite charities just before
year end.
 S - The donations will be recognize in the last interim reporting
period, that is, when the donations are made.
Recognition and measurement - Example
 Inventory
◦ At the end of each interim period, need to determine
inventory quantities
◦ however, full stock taking not required (use estimates
based on sales margin).
◦ Apply the FRS102 of Inventory = stated at the lower of
cost and NRV. If at a subsequent interim period the
NRV has changed, a reversal of a write down is done
only if it is appropriate to do so at the end of financial
year.
 Impairment

◦ review & estimate changed need to be taken in current

period
Recognition and measurement - Example
 Depreciation
◦ based on asset owned during that period
 Research and Development

◦ Capitalizing development costs has to be done at the end

of each interim period.
◦ The costs are not deferred to await future information as to
determine if costs incurred meet the definition of assets
 Tax Expenses

◦ Tax expense is based on the estimate of the weighted

average annual income tax rate expected for the full
financial year.
Recognition and measurement - Example
 Foreign currency translation gains and losses
◦ Measured at the interim reporting period
◦ Should not be deferral of gains or losses in anticipation of
changes in future exchange rate
 Major Planned Periodic Maintenance or overhaul

o Seasonal expenditure that is expected to occur late in the

year is not anticipate for interim reporting purposes unless
an event has caused the entity to have legal or constructive
obligation
 Provision

◦ Entity should applies the same criteria for recognizing and

measuring a provision at an interim date as it would at the
end of its financial year
◦ For example a provision for warranties is recognized for
products sold during the interim period