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TMI BlogInterim Financial ReportingX X X X Extracts X X X X X X X X Extracts X X X X ..... terim period. If an enterprise is required or elects to prepare and present an interim financial report, it should comply with this Standard. 2. A statute governing an enterprise or a regulator may require an enterprise to prepare and present certain information at an interim date which may be different in form and/or content as required by this Standard. In such a case, the recognition and measurement principles as laid down in this Standard are applied in respect of such information, unless otherwise specified in the statute or by the regulator. 3. The requirements related to cash flow statement, complete or condensed, contained in this Standard are applicable where an enterprise prepares and presents a cash flow statement for the purpose of its annual financial report. Definitions 4. The following terms are used in this Standard with the meanings specified: 4.1 Interim period is a financial reporting period shorter than a full financial year. 4.2 Interim financial report means a financial report containing either a complete set of financial statements or a set of condensed financial statements (as described in this Standard) for an interim per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed cash flow statement; and (d) selected explanatory notes. Form and Content of Interim Financial Statements 10. If an enterprise prepares and presents a complete set of financial statements in its interim financial report, the form and content of those statements should conform to the requirements as applicable to annual complete set of financial statements. 11. If an enterprise prepares and presents a set of condensed financial statements in its interim financial report, those condensed statements should include, at a minimum, each of the headings and sub-headings that were included in its most recent annual financial statements and the selected explanatory notes as required by this Standard. Additional line items or notes should be included if their omission would make the condensed interim financial statements misleading. 12. If an enterprise presents basic and diluted earnings per share in its annual financial statements in accordance with Accounting Standard (AS) 20, Earnings Per Share, basic and diluted earnings per share should be presented in accordance with AS 20 on the face of the statement of profit and loss, complete or condensed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms), separately for equity shares and other shares; (g) segment revenue, segment capital employed (segment assets minus segment liabilities) and segment result for business segments or geographica l segments, whichever is the enterprise s primary basis of segment reporting (disclosure of segment information is required in an enterprise s interim financial report only if the enterprise is required, in terms of AS 17, Segment Reporting, to disclose segment information in its annual financial statements); (h) material events subsequent to the end of the interim period that have not been reflected in the financial statements for the interim period; (i) the effect of changes in the composition of the enterprise during the interim period, such as amalgamations, acquisition or disposal of subsidiaries and long-term investments, restructurings, and discontinuing operations; and (j) material changes in contingent liabilities since the last annual balance sheet date. The above information should normally be reported on a financial year- to-date basis. However, the enterprise should also disclose any events or transactions that are material to an under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eface to the Statements of sentation of Financial Statements, issued by the Institute of Chartered Accountants of India, states that n is material if its misstatement (i.e., omission or erroneous statement) could influence the economic decisions of users taken on the basis of the financial . 23. Judgement is always required in assessing materiality for financial reporting purposes. For reasons of understandability of the interim figures, materiality for making recognition and disclosure decision is assessed in relation to the interim period financial data. Thus, for example, unusual or extraordinary items, changes in accounting policies or estimates, and prior period items are recognised and disclosed based on materiality in relation to interim period data. The overriding objective is to ensure that an interim financial report includes all information that is relevant to understanding an enterprise's financial position and performance during the interim period. Disclosure in Annual Financial Statements 24. An enterprise may not prepare and present a separate financial report for the final interim period because the annual financial statements are presented. In such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent reporting period. However, by providing that the frequency of an enterprise's reporting should not affect the measurement of its annual results, paragraph 27 acknowledges that an interim period is a part of a financial year. Year-to-date measurements may involve changes in estimates of amounts reported in prior interim periods of the current financial year. But the principles for recognising assets, liabilities, income, and expenses for interim periods are the same as in annual financial statements. 29. To illustrate: (a) the principles for recognising and measuring losses from inventory write-downs, restructurings, or impairments in an interim period are the same as those that an enterprise would follow if it prepared only annual financial statements. However, if such items are recognised and measured in one interim period and the estimate changes in a subsequent interim period of that financial year, the original estimate is changed in the subsequent interim period either by accrual of an additional amount of loss or by reversal of the previously recognised amount; (b) a cost that does not meet the definition of an asset at the end of an interim period is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its financial statements for the first six-month period and information available by year- end or shortly thereafter for the twelve-month period. The twelve-month measurements will reflect any changes in estimates of amounts reported for the first six-month period. The amounts reported in the interim financial report for the first six-month period are not retrospectively adjusted. Paragraphs 16(d) and 25 require, however, that the nature and amount of any significant changes in estimates be disclosed. 35. An enterprise that reports more frequently than half-yearly, measures income and expenses on a year-to-date basis for each interim period using information available when each set of financial statements is being prepared. Amounts of income and expenses reported in the current interim period will reflect any changes in estimates of amounts reported in prior interim periods of the financial year. The amounts reported in prior interim periods are not retrospectively adjusted. Paragraphs 16(d) and 25 require, however, that the nature and amount of any significant changes in estimates be disclosed. Revenues Received Seasonally or Occasionally 36. Revenues that are receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the financial year. Transitional Provision 35 44. On the first occasion that an interim financial report is presented in accordance with this Standard, the following need not be presented in respect of all the interim periods of the current financial year: (a) comparative statements of profit and loss for the comparable interim periods (current and year-to-date) of the immediately preceding financial year; and (b) comparative cash flow statement for the comparable year-to-date period of the immediately preceding financial year. Illustration 1 Illustrative Format of Condensed Financial Statements This illustration which does not form part of the Accounting Standard, provides illustrative format of condensed financial statements. Its purpose is to illustrate the application of the Accounting Standard to assist in clarifying its meaning. Paragraph 11 of the Accounting Standard provides that if an enterprise prepares and presents a set of condensed financial statements in its interim financial report, those condensed statements should include, at a minimum, each of the headings and sub-headings that were included in its most recent annual financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent liabilities (d) Short-term provisions TOTAL II. ASSETS (1) Non-current assets (a) Property, Plant and Equipment (i) Tangible assets (ii) Intangible assets (iii) Capital work-in-progress (iv) Intangible assets under development (b) Non-current investments (c) Deferred tax assets (net) (d) Long-term loans and advances (e) Other non-current assets (2) Current assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Depreciation and amortisation expense Other expenses Total expenses V. Profit before exceptional and extraordinary items and tax (III - IV) VI. Exceptional items VII. Profit before extraordinary items and tax (V - VI) VIII. Extraordinary items IX. Profit before tax (VII- VIII) X. Tax expense: (1) Current tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (D) Selected Explanatory Notes This part should contain selected explanatory notes as required by paragraph 16 of this Standard. Illustrative Format of Condensed Financial Statements for a Bank (A) Condensed Balance Sheet Figures at the end of the current interim period (in Rs.) (DD/MM/YYYY) Figures at the end of the previous accounting year (in Rs.) (DD/MM/YYYY) I. Capital and Liabilities 1. Capital 2. Reserve and surplus 3. Minority interests (in case of consolidated financial statements) 4. Deposits 5. Borrowings 6. Other liabilities and provisions Total II. Assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Provisions and contingencies 4. Total expenses 5. Profit or loss from ordinary activities before tax 6. Extraordinary items 7. Profit or loss before tax 8. Tax expense (B) Condensed Statement of Profit and Loss Three months ended (in Rs.) From (DD/MM/YYYY) Corresponding three months of the previous accounting year (in Rs.) Year-to-date figures for current period (in Rs.) From Year-to-date figures for the previous year (in Rs.) From To _ (DD/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r complete) for following periods in its half-yearly interim financial report as of 30 September 2001: Balance Sheet: As at 30 September 2001 31 March 2001 Statement of Profit and Loss : 6 months ending 30 September 2001 30 September 2000 Cash Flow Statement 36 : 6 months ending 30 September 2001 30 September 2000 Enterprise Preparing and Presenting Interim Financial Reports Quarterly 2. An enterprise whose financial year ends on 31 March, presents financial statements (condensed or complete) for following periods in its interim financial report for the second quarter ending 30 September 2001: Balance Sheet: As at 30 September 2001 31 March 2001 Statement of Profit and Loss : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t market fluctuations since that time and for significant curtailments, settlements, or other significant one-time events. Major Planned Periodic Maintenance or Overhaul 2. The cost of a major planned periodic maintenance or overhaul or other seasonal expenditure that is expected to occur late in the year is not anticipated for interim reporting purposes unless an event has caused the enterprise to have a present obligation. The mere intention or necessity to incur expenditure related to the future is not sufficient to give rise to an obligation. Provisions 3. This Standard requires that an enterprise apply the same criteria for recognising and measuring a provision at an interim date as it would at the end of its financial year. The existence or non-existence of an obligation to transfer economic benefits is not a function of the length of the reporting period. It is a question of fact subsisting on the reporting date. Year-End Bonuses 4. The nature of year-end bonuses varies widely. Some are earned simply by continued employment during a time period. Some bonuses are earned based on monthly, quarterly, or annual measure of operating result. They may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar's earnings including enacted or substantively enacted changes in the income tax rates scheduled to take effect later in the financial year. The estimated average annual income tax rate would be re-estimated on a year-to-date basis, consistent with paragraph 27 of this Standard. Paragraph 16(d) requires disclosure of a significant change in estimate. 10. To the extent practicable, a separate estimated average annual effective income tax rate is determined for each governing taxation law and applied individually to the interim period p re-tax income under such laws. Similarly, if different income tax rates apply to different categories of income (such as capital gains or income earned in particular industries), to the extent practicable a separate rate is applied to each individual categ ory of interim period pre-tax income. While that degree of precision is desirable, it may not be achievable in all cases, and a weighted average of rates across such governing taxation laws or across categories of income is used if it is a reasonable approximation of the effect of using more specific rates. 11. As illustration, an enterprise reports quarterly, earns Rs. 150 lakhs pre - t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are recognised in computing income tax expense in that interim period, in the same way that special tax rates applicable to particular categories of income are not blended into a single effective annual tax rate. Tax Loss Carryforwards 15. A deferred tax asset should be recognised in respect of carryforward tax losses to the extent that it is virtually certain, supported by convincing evidence, that future taxable income will be available against which the deferred tax assets can be realised. The criteria are to be applied at the end of each interim period and, if they are met, the effect of the tax loss carryforward is reflected in the computation of the estimated average annual effective income tax rate. 16. To illustrate, an enterprise that reports quarterly has an operating loss carryforward of Rs 100 lakhs for income tax purposes at the start of the current financial year for which a deferred tax asset has not been recognised. The enterprise earns Rs. 100 lakhs in the first quarter of the current year and expects to earn Rs. 100 lakhs in each of the three remaining quarters. Excluding the loss carryforwa rd, the estimated average annual income tax rate is expected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of inventories is determined by reference to selling prices and related costs to complete and sell the inventories. An enterprise will reverse a write-down to net realisable value in a subsequent interim period as it would at the end of its financial year. Foreign Currency Translation Gains and Losses 21. Foreign currency translation gains and losses are measured for interim financial reporting by the same principles as at financial year end in accordance with the principles as stipulated in AS 11 on The Effects of Changes in Foreign Exchange Rates. Impairment of Assets 22. Accounting Standard ( A S ) 2 8 , Impairment of Assets requires that an impairment loss be recognised if the recoverable amount has declined below carrying amount. 23. An enterprise applies the same impairment tests, recognition, and reversal criteria at an interim date as it would at the end of its financial year. That does not mean, however, that an enterprise must necessarily make a detailed impairment calculation at the end of each interim period. Rather, an enterprise will assess the indications of significant impairment since the end of the most recent financial year to determine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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