INTERIM

FINANCIAL
REPORTING
CHAPTER 28
TECHNICAL KNOWLEGDE

• To know the basic principles of interim financial

reporting
• To identify the components of an interim financial
reporting
• To be able to prepare and present comparative
interim financial statements
INTERIM FINANCIAL REPORTING
• Preparation and presentation of financial statements for
a period of less than one year.
• It may be presented monthly, quarterly , or semi annually.
• Quarterly are the most common
• The publicly traded entities are encouraged to provide
interim financial reports at least semiannually and such
reports are to be made available not later than 60 days
after the end of interim period.
Frequency of interim reporting

• Interim financial reporting does not mandate which entities

are required to publish interim financial reports, how
frequently, or how soon after the interim period.
Philippine Jurisdiction
• The Securities and Exchange Commission and 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 the first three quarters.
• The SEC requires entities covered by the Rules on Commercial Papers
and Financing Act to file quarterly financial reports within 45 days after
each quarter-end.
• Entities provide interim financial reports in conformity with PFRS shall
conform the recognition, measurement, and disclosure requirements set
out in the standard.
Components of an Interim Financial Reports
a) Condensed statement of financial position
b) Condensed statement of comprehensive income
c) Condensed statement of changes in equity
d) Condensed statement of cash flows
e) Selected explanatory notes
• Condensed statement of financial position provides an entity can
present items of profit or loss in a separate condensed income
statement.
• Nothing in the standard is intended to prohibit or discourage an entity
from publishing a complete set of financial statements, rather than
condensed financial statements and selected explanatory notes.
• Interim financial reporting allows an entity to publish a set of condensed
financial statements or complete set of financial statements in the
interim financial report.
• “Condensed” means that each of the headings and subtotals presented in
the entity’s most recent annual financial statements is required but
there is no requirement to include greater detail unless this specifically
required.
Disclosure of compliance with PFRS
• Provides that if an entity’s interim financial report is in
compliance with PFRS, such fact shall be disclosed.
• Entity shall not describe an interim financial report as
complying with PFRS unless it complies with all of the
requirements of each applicable PFRS.
Selected explanatory notes
• Designed to provide an explanation of significant events and
transactions arising since the last annual financial
statements.
• Interim financial reporting assumes that financial statement
users have an excess to the entity’s most recent annual
financial report.
• As a result, the standard reiterates that it is a superfluity to
provide the same notes in the interim financial report that
appeared in the most recent annual financial reports.
Example of disclosure in condensed interim
financial report:
a) Write down of inventories to NRV and the reversal of such a writedown.
b) Recognition of a loss from the impairment of property, plant and equipment and intangible
assets and the reversal of such an impairment loss.
c) The reversal of any provision for restructuring.
d) Acquisition and disposal items of property, plant, and equipment.
e) Commitments for the purchase of property, plant, and equipment.
f) Litigation settlements.
g) Corrections of prior period errors in previously reported financial data.
h) Changes in the economic circumstances that affect fair value of financial assets and financial
liabilities.
i) Any debt default or any breach of a debt covenant that has not been corrected subsequently.
j) Related party transaction
k) Changes in classification of financial assets.
l) Contingent liabilities and contingents assets.
Presentation of Comparative Interim Statements
1. Statement of Financial Position
a) Statement of financial position at the end of current interim period.
b) Comparative statement of financial position at the end of preceding year.
2. Income Statement
a) Income statement for the current interim period.
b) Income statement cumulatively for the current financial year to date.
c) Comparative income statement for the comparable interim period of the preceding year.
d) Comparative income statement cumulatively for the comparable financial year to date of the preceding
year.
3. Statement of Comprehensive Income
a) Statement of comprehensive income for the current interim period
b) Statement of comprehensive income cumulatively for the current financial year to date
c) Comparative statement of comprehensive income for the comparable interim period of the preceding
year
d) Comparative statement of comprehensive financial year to date of the preceding year
4. Statement of changes in equity
a) Statement of changes in equity cumulatively for the current financial year to date
b) Comparative statement of changes in equity for the comparable financial year to date of the preceding
year.
Presentation of comparative Interim statements
5. Statement of Cash flows
a) Statement of cash flows cumulatively for the current financial year to
date.
b) Comparative statement of cash flows for the comparable financial year
to date.
Illustration- half-yearly
If an entity publishes interim financial reports half-yearly, the ff. comparative financial
statements are presented on June 30, 2021:
Statement of financial position:
On June 30, 2021 December 31, 2020
Statement of Comprehensive Income:
6 months ending June 30, 2021 June 30, 2020
Statement of Cash Flows:
6 months ending June 30, 2021 June 30, 2020
Statement of Changes in Equity:
6 months ending June 30, 2021 June 30, 2020
Illustration-Quarterly
If an entity publishes interim financial reports quarterly, the ff. comparative financial
statements are included in the quarterly interim financial report on June 30, 2021:
Statement of financial position:
On June 30, 2021 December 31, 2020
Statement of Comprehensive Income:
3 months endingJune 30, 2021 June 30, 2020
6 months endingJune 30, 2021 June 30, 2020
Statement of Cash Flows:
6 months endingJune 30, 2021 June 30, 2020
Statement of Changes in Equity:
6 months ending June 30, 2021 June 30, 2020
Basic Principle
1. PAS 34 provides that an entity shall apply the same accounting policies in the interim
financial statements as are applied in the annual financial statements. Measurement
for interim reporting shall be made on a year to date basis.
2. Revenues from products sold and services rendered are generally recognized for
interim reports on the same basis as for the annual period.
3. Cost and expenses are recognized as incurred in an interim period.
4. Paragraph 21 provides that if the business is highly seasonal, in addition to the
current interim period financial statements, the entity is encouraged to disclose
financial information
5. Paragraph 41 provides that the preparation of interim financial reports generally
requires a greater use of estimation than annual financial reports.
Inventories
• Inventories shall be measured at the lower cost or net realizable value
even for interim purposes.
• Inventory can be estimated using the gross profit method or retail
inventory method
• Full inventory and valuation procedures are not required for
inventories at interim date.
• If the net realizable value is lower than cost, a loss on inventory
writedown shall be recognized regardless of whether the writedown is
temporary or nontemporary.
• The NRV of inventories is determined by reference to selling price and
related cost to complete and cost of disposal at interim dates.
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 entity’s reporting
period
• Dividend revenue, royalties and government grants shall be recognized
in the interim period when they occur.
Uneven cost
• Cost are incurred unevenly during an entity’s 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
• 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 a monthly, quarterly or annual measure of
performance.
• Some bonuses may be purely discretionary, contractual, or based on
years of historical precedent.

Recognition of Bonuses
a) 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 the obligation can be made.
Irregular Cost
• Certain costs are expected to be incurred irregularly
during the financial year, such as charitable
contribution and employee training cost.
Depreciation and amortization
• Depreciation and amortization for an interim period
shall be based only on assets owned during that
interim period.
• Asset acquisition and dispositions planned for later in
the financial year shall not be taken into account.
Paid vacation and holiday
• Paid vacation and holiday leave shall be accrued
for interim purposes because these are
enforceable as legal commitments.
Gain and Loss
• Gain and Loss from disposal of property, gain or loss
from discontinued operation and other again or loss
shall not be allocated over interim periods.
• The gain is reported in the interim period when
realized and the loss is reported in the interim period
when incurred.
Income tax
Interim period income tax expense shall reflect the same general
principles of income tax accounting applicable to annual reporting
Difference in financial reporting year and tax year
If the financial reporting year and the income tax year differ, it states that the income tax
expense for interim periods of that financial year is measured using separate effective
tax rates for each of the tax years applied to the portion of pretax income earned in each
of those tax years.
Change in accounting policy
• Shall be reflected by restating the financial statements of prior interim
periods of the current year and the comparable interim periods of the
prior financial year.
• The objective of this is to ensure that a single accounting policy is
applied to a particular class of transaction throughout the entire
financial year.
• It may result interim allocation difficulties, obscured operating results,
and complicated analysis and understandability of interim information
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