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Contents

Objective
Scope
Form and Content of an interim financial statement
Period for which interim financial statements are
required to be presented
Disclosure in Annual Financial Statements
Recognition and Measurement
Examples of applying the recognition and measurement
principles
Comparison
Issues

Objective
To prescribe :

Minimum content of an interim financial


report;
Principles for recognition and
measurement in a complete or condensed
financial statements for an interim period

Scope
Does not mandate which enterprises should be
required to present interim financial reports
If an enterprise is required or elects to prepare and
present interim financial report -the standard
should be complied with
The recognition and measurement principles as
laid down in this standard should be applied in
respect of information required to be given unless
the statute requires otherwise.

Scope...
Cash flow statement, complete or
condensed to be prepared if the enterprise
presents cash flow statement for the purpose
of its annual financial report

Minimum Components of an
Interim Financial Report
An interim financial report should include
-condensed balance sheet
-condensed statement of profit and loss
-condensed cash flow statement and
- selected explanatory notes

Form & Content of an Interim


Financial Statement
Complete set of financial statements should conform to the
requirements applicable to annual financial statements.
Condensed set of financial statements should at minimum
have each headings or subheadings that were included in
the latest annual financial statements.

Form & Content...


If EPS is disclosed in the annual financial statement then
the same needs to be disclosed on the face of the interim
statement of profit and loss;
If consolidated annual financial statements are prepared
then interim consolidated statements need to be prepared
in addition to the separate financial statements.

Condensed Balance Sheet


Figures at the end of Figures at the end of
current interim period
the previous
accounting year
I Sources of Funds
1 Capital
2 Reserve and surplus
3 Minority interests (in case of consolidated
financial statements)
4 Loans funds:
(a) Secured loans
(b) Unsecured loans
Total
II Application of funds
1 Fixed assets
(a) Tangible fixed assets
(b) Intangible fixed assets

Condensed Balance Sheet


Figures at the end of Figures at the end of
current interim period
the previous
accounting year
2 Investments
3 Current assets, loans and advances
(a) Inventories
(b) Sundry debtors
(c) Cash and bank balances
(d) Loans and advances
(e) Others
Less: Current liabilites and provisions
(a) Liabilities
(b) Provisions
Net Current assets
4 Miscellaneous expenditure to the extent of
written off or adjusted
5 Profit and loss acount
Total

Condensed Profit and Loss


Three months Corresponding three
Year-to-date
Year-to-date
ended
months of the previous
figures for
figures for the
accounting year
current period previous year
1 Turnover
2 Other Income
Total
3 Changes in inventories of
finished goods and work in
progress
4 Cost of Raw materials and
consumables used
5 Salaries, wages and other staff
costs
6 Other expenses
7 Interest
8 Depreciation and amortisations
Total

Condensed Profit and Loss


Three months Corresponding three
Year-to-date
Year-to-date
ended
months of the previous figures for
figures for the
accounting year
current period previous year
9 Profit or loss from ordinary
activities before tax
10 Extraordinary items
11 Profit or loss before tax
12 Tax expense
13 Profit or loss after tax
14 Minority Interests (in case of
consolidated financials
statements)
15 Net profit or loss for the period
Earnings Per share
1. Basic Earnings Per Share
2. Diluted Earnings Per Share

Condensed Cash Flow Statement


Year-to-date figures for Year-to-date figures for
the current period
the previous year
1
2
3
4

Cash flows from operating activities


Cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in cash and
cash equivalents
5 Cash and cash equivalents at
beginning of period
6 Cash and cash equivalents at end of
period

Selected Explanatory Notes


The following minimum notes should be given
a statement that the same accounting policies as those
followed in the latest annual financial statements or if there
have been changes then a description of the nature and effect of
the change;
explanatory comments about seasonality of interim operations;

the nature and amount of item affecting assets, liabilities, equity,


net income, or cash flows that are unusual because of their nature,
size or incidence; - AS 5

the nature and amount of changes in estimates of amounts


reported in prior interim periods of current financial year or
changes in estimates in prior financial years if those changes
have a material effect in current interim period;

Selected Explanatory Notes...


- issuances, buy-backs, repayments and restructuring of debt,
equity and potential equity shares;
- dividend, aggregate or per share, seperately for equity and others;
- segment revenue, segment capital employed and segment result
for the enterprises primary segment;
- effect of changes in composition of enterprise during the
interim period, such as amalgamations, acquisition or disposal of
subsidiaries and long term investments, restructuring and
discontinuing operations;
- material changes in contingent liabilities since last annual
balance sheet date.

Selected Explanatory Notes...


The above information should normally be reported on a
financial year to date basis. Any event or transactions that
are material for understanding of current interim period
should also be disclosed.
Disclosures under other Accounting standards to be made
if complete set of financial statements are prepared. Those
disclosures are not required if condensed financial
statements are prepared.

Periods for which interim financial statements


are required to be presented
Enterprise Preparing and Presenting Interim Financial Reports Half-Yearly
1 An enterprise whose financial year ends on March 31, presents financial statements (condensed or
complete) for following periods in its half-yearly financial report as of September 30, 2001
Balance Sheet:
As at

September 30, 2001

March 31, 2001

Statement of Profit and Loss:


6 months ending
September 30, 2001

September 30, 2000

Cash Flow Statement


6 months ending

September 30, 2000

September 30, 2001

Periods for which interim financial statements


are required to be presented
Enterprise Preparing and Presenting Interim Financial Reports Quarterly
1 An enterprise whose financial year ends on March 31, presents financial statements (condensed or
complete) for following periods in its interim financial report for the second quarter ending
September 30, 2001:
Balance Sheet:
As at

September 30, 2001

March 31, 2001

Statement of Profit and Loss:


6 months ending
September 30, 2001

September 30, 2000

3 months ending

September 30, 2001

September 30, 2000

Cash Flow Statement


6 months ending

September 30, 2001

September 30, 2000

Periods for which interim financial statements are


required to be presented
Enterprise whose Business is highly Seasonal Preparing and Presenting
Interim Financial Reports Quarterly
1 An enterprise whose financial year ends on March 31, may present financial statements
condensed or complete) for following periods in its interim financial report for the second quarter
ending September 30, 2001:
Balance Sheet:
As at

September 30, 2001

March 31, 2001

Statement of Profit and Loss:


6 months ending
September 30, 2001

September 30, 2000

3 months ending

September 30, 2001

September 30, 2000

12 months ending

September 30, 2001

September 30, 2000

Cash Flow Statement


6 months ending

September 30, 2001

September 30, 2000

12 months ending

September 30, 2001

September 30, 2000

Disclosure in Annual Financial


Statements
An enterprise may not prepare separate financial report for
final interim period.
However, disclosures need to be made in the annual
financial statements of significant change in the estimates.
e.g.estimates relating to inventory write downs,
restructuring, or impairment losses reported in the earlier
interim periods.

Recognition and Measurement


In deciding how to recognise, measure, classify, or disclose an item
materiality should be assessed in relation to the interim period
financial data
Accounting policies applied should be same except for accounting
policy changes made after the date of the latest annual financial
statements.
Year to date measurements may involve changes in estimates but the
principles for recognising assets, liabilities, income and expenses for
the interim periods are the same as in the annual financial statements
Current financial statement will reflect any changes in the estimates
of amounts reported in prior interim periods of financial year. The
amounts reported in prior interim periods are not retrospectively
adjusted.

Recognition and Measurement ...


Revenues received seasonally or occasionally within a
financial year should be recognised when they occur.
Costs incurred unevenly during a financial year should be
anticipated or deferred for interim reporting purposes if it
is appropriate to anticipate or defer that type of cost at the
end of the financial year.
Preparation of interim financial reports require greater use
of estimation as compared to annual financial reports.

Recognition and Measurement ...


Change in accounting policy, other than one for which the
transition is specified by an Accounting Standard should be
reflected by restating the financial statements of prior interim
periods of the current financial year.
Transitional Provision
On the first occasion the interim financial report is presented in
conformity with this standard the following need not be
presented in respect of all interim periods of the current financial
year:
- a comparative statements of profit and loss for comparative
interim periods of the preceding financial year;
- a comparative cash flow statement for the comparable year to
date period of the preceding financial year.

Examples of Applying the recognition and


measurement principles
Gratuity and other defined benefit schemes- actuarial
valuation not necessary
Major planned periodic maintenance or overhaul- not to
anticipate unless an event has caused the enterprise to have a
present obligation
Year end bonuses- to be anticipated only if the bonus is a
legal obligation and a reliable estimate of the obligation can
be made
Intangible assets- deferring costs as assets in an interim
balance sheet to meet the recognition criteria later in financial
year is not justified.
Provisions - obligation should exist on the reporting date

Examples of Applying the recognition and


measurement principles
Other planned but irregularly occurring costs- to be recognised
only if the costs have been incurred.

Contractual or anticipated purchase price changescontractual rebates and discounts are recognised but
discretionary rebates & discounts are not recognised.
Depreciation and amortisation- only on assets owned
during the interim period.
Inventories- similar as year end
Foreign currency translation gains and losses- same
principles as at year end ie in accordance with AS 11
Impairment of Assets- same impairment tests, recognition
and reversal criteria as at year end.

Examples of Applying the recognition and


measurement principles
Measuring income tax expense for interim period

expense is accrued using the estimated average annual


effective income tax rate

estimated average annual effective income tax rate should


reflect the applicable tax rate applicable to the full years
earnings.
separate estimated average annual effective income tax
rate is determined for each governing taxation law and
applied individually to the interim period pre-tax income
under such laws

Examples of Applying the recognition and


measurement principles
- if different categories of income (such as capital gains or income
earned in particular industries) a separate rate is applied for each
individual category of interim period pre-tax income.
- if the financial reporting year and the income tax year differ, income
tax expense for interim period of that financial reporting year is
measured using separate weighted average estimated effective tax
rates for each of the income tax years applied to the portion of pre-tax
income earned in each of those income tax years.
- estimated annual effective income-tax rate considers tax exemptions/
deductions available on annual basis.
- tax benefit relating to one time events should be recognised in
computing tax expenses for that interim period.
- tax carry forward loss should be reflected in the computation of the
estimated average effective income tax rate

Examples of Applying the recognition and


measurement principles
Pre-tax
profits
Tax
Expense

1st
Quarter
150

2nd
Quarter
(50)

52.5

(17.5)

(Amount Rs. In lacs)


3rd
4th
Annual
Quarter
Quarter
(50)
(50)
0
(17.5)

Difference in Financial Reporting year and Tax year


1st
2nd
3rd
Quarter
Quarter
Quarter
Pre-tax
100
100
100
profits
Tax
30
30
40
Expense

(17.5)

4th
Quarter
100
40

Annual
400
140

Tax Laws Carry forwards

Pre-tax
profits
Tax
Expense

1st
Quarter
100

2nd
Quarter
100

3rd
Quarter
100

4th
Quarter
100

30

30

30

30

Annual
400
40

Comparison
Particulars
Scope
Content

Periods for which interim


financial statements are
required to be prepared

Notes

Indian
For companies who
are required or elect
to present
Balance Sheet
Profit and loss
Cash flow
Selected
explanatory notes

Half-yearly or
quarterly
Profit and losscurrent quarter,
cumulative year to
date and
comparable for the
preceding year

IAS
Encourages publicly traded
enterprises

US GAAP
Publicly traded companies

Additionally
Statement showing
(i)
all changes in equity
(ii)
changes in equity
other than those
arising from capital
transaction with
owners &
distribution to
owners

Balance sheet not required


Funds flow to be given.

Similar to Indian

Material events subsequent to


end of interim period that
have not been reflected in the
financial statements of
interim period

Half-yearly not required


Current quarter, current
year to date or last twelve
months to date together
with comparable data for
the preceding year

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