Group 5

Leader: Mark Joshua Atlas

Topic: Chapter 10: Interim Financial Reporting
Prepare By: Danica V. Guzman
Definition
Interim Financial Reporting means the preparation and presentation of
financial statements for a period of less than one year.
PAS 24 prescribes the minimum content of an interim financial report and
the principles of recognition and the measurement in complete or condensed
financial statements for an interim period.
Frequency of Interim Reporting
PAS 34 does not mandate which entities are required to publish interim
financial reports, how frequently, or how soon after the end of an interim
period.
Philippine Jurisdiction
The Securities and Exchange Commission and the Philippine Stock Exchange
require entities covered by the reportorial requirements of Revised Securities
Act to file quarterly interim financial reports within 45 days after the end of
each of the first three quarters.
Two Views on Interim Financial Reporting
Integral View - each interim period is an integral part of the annual
accounting period.
Independent or Discrete View each interim period is a basic accounting
period and the results of operations shall be determined in essentially the
same way as if the interim period were an annual accounting period.
Components of an Interim Financial Report
a.) Condensed Statement of Financial Position
b.) Condensed Income Statement
c.) Condensed Statement of Comprehensive Income
d.) Condensed Statement of Changes in Equity
e.) Condensed Statement of Cash Flows
f.) Selected explanatory notes
Disclosure of compliance with PFRS

 PAS 34, paragraph 19, provides that if the entitys interim financial report
is in compliance with Philippine Financial Reporting Standards, such fact shall
be disclosed
Selected Explanatory Notes
The selected explanatory notes are designed to provide an explanation of
significant events and the transactions arising since the last annual financial
statements.
PAS 34 assumes that financial statement users have an access to the
entitys most recent annual report.
Presentation of Comparative Interim Statements
a.) Statement of financial position as the end of the current interim period
and a comparative statement of financial position as of the end of the
immediately preceding year.
b.) Income Statements of the current interim period and cumulatively for the
current financial year to date, with comparative income statements for the
comparable interim periods (current and year to date) of the immediately
preceding year.
c.) Statements of the comprehensive income of the current interim period
and cumulatively for the current financial year to date, with the
comparative statements of the comprehensive income for the comparable
interim periods (current and year to date) of the immediately preceding
year.
d.) Statement of changes in equity cumulatively for the current financial year
to date, with comparative statement for the comparable year to date
period of the immediately preceding year.
e.) Statement of cash flows cumulatively for the current financial year to
date, with comparative statement for the comparable year to date period
of the immediately preceding year.
Basic Principles
1. PAS 34, paragraph 28, provides that an early entity shall apply the same
accounting policies in its interim financial statements as are applied in its
annual financial statements.
However, the frequency of an entitys reporting whether annual, half-yearly or
quarterly shall not affect the measurement of its annual results. Therefore,
measurements of interim reporting purposes shall be made on year to date
basis.
2. Revenues from products sold or services rendered are generally recognized
for interim reports on the same basis as for the annual period.
3. Costs and expenses are recognized as incurred in an interim period.
a.) Expenses associated directly with revenue are matched against revenue
in those interim periods in which the related revenue is recognized.

b.) Expenses not associated directly with revenue are recognized in interim
periods as incurred or allocated over the interim periods benefited.
4. PAS 34
, paragraph 21 , provides that business is seasonal , the entity is
encouraged to disclose financial information for the latest 12 months and
comparative information for the prior 12 month period, in addition to the
interim financial statements.
5. The preparation of interim financial reports generally will require greater use
of estimation than annual financial reports.
Inventories
Paragraph 25 of Appendix of PAS 3 4provides that inventories are
measured for interim financial reporting by the same principles as at
financial year-end.
PAS 34, paragraph 17, requires disclosure of the write down of inventories
to net realizable value and the reversal of such writedown in later interim
period.
Seasonal, Cyclical or Occasional Revenue
Seasonal, Cyclical or Occasional Revenue shall not be anticipated or deferred
as of an interim date if anticipation or deferral would not be appropriate at
the end of the entitys reporting period.
Uneven Costs
Costs that are incurred unevenly during an entitys financial year shall be
anticipated or deferred for interim purposes only if it is also appropriate to
anticipate or defer that type of cost at the end of the financial year.
Year-End Bonuses
A bonus is anticipated for interim purposes if and only if :
a.) The bonus is a legal obligation or past practice would make the bonus a
constructive obligation for which the entity has no realistic alternative but
to make the payment.
b.) A reliable estimate of an obligation can be made.
Irregular Costs
Certain costs are expected to be incurred irregularly during the financial year
such as charitable contribution and employee training cost.
Such costs are generally discretionary and even though they are planned
shall not be anticipated as of an interim date simply because the costs have
not yet been incurred.

Depreciation and Amortization

Depreciation and Amortization for an interim period shall be based only on
assets owned during that interim period.
Paid vacation and Holiday leave
Paid Vacation and Holiday leave shall be accrued for interim purposes
because these are enforceable as legal commitments.

Income Tax
Interim Period income tax expense shall reflect the same general principles of
income tax accounting applicable to annual reporting.
Paragraph 12 of Appendix B of PAS 34 states that the interim period income
tax is accrued using the annual effective income tax rate pretax income of
the interim period.
Difference in financial reporting year and tax year
If the financial reporting year and the income tax year differ paragraph 17 of
Appendix B of PAS 34 states that the income tax expense of the interim
period of that financial year is measured using separate effective tax rates for
each of the tax rates applied to the portion of pretax income earned in each
of those tax years.
Interim reporting of contingencies
Under the settlement terms the entity must retroactively pay a 5% royalty on
all sales of the product including prior years to which the patent applies.
The entity cannot restate the previously issued quarterly financial results to
include the royalty expense.
Gains and Losses
Gains or Losses from disposal of property, gains or losses from discontinued
operation and other gains or losses shall not be allocated over the interim
periods.
The gains shall be reported in the interim in which they are realized and the
losses are reported in the interim period in which they are incurred.
Change in Accounting Policy
A change in accounting policy other than one for which the transition is
specified by a new standard shall be reflected by restating the financial

statements of prior interim periods of the current year and comparable

interim periods of the prior financial year.