TaxTMI 
TaxTMI 
Interim Financial Reporting
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....quired 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 period. 5. During the first year of operations of an enterprise, it....
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....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, for an interim period. 13. If an enterprise's annual financial report included the consolidated financial statements in addition to the pare....
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....al 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 yearto- date basis. However, the enterprise should also disclose any events or transactions that are material to an understanding of the current interim period. 17. Other Accounting Standards specify disclosures that should be made in financial statements. In that context, financial statements mean complete set of financial statements normally inc....
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....es that information 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 information". 23. Judgment 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 a case, paragraph 25 requires certain disclosures to be made in the annual financial statements for that financia....
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.... 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 deferred on the balance sheet date either to await future information as to whether it has met the definition of an asset or to smooth earnings....
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....-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 received seasonally or occasionally within a financial year should not be anticipated or deferred as of an interim date if anticipation or deferral would not be appropriate ....
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.... 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-todate period of the immediately preceding financial year. Illustration 1 Illustrative Format of Condensed Financial Statements This Illustration 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 financial statements and the selected explanatory notes as required by the Standard. Additional line items or notes should be included if their omission would make the condensed interim financial statements misleading. The purpose of the following illustrative f....
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....ted explanatory notes as required by paragraph 16 of this Statement. Illustrative Format of Condensed Financial Statements for a Bank (A) Condensed Balance Sheet Figures at the end of the current interim period Figures at the end of the previous accounting year 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 1 Cash and balances with Reserve Bank of India 2. Balances with banks and money at call and short notice 3. Investments 4. Advances 5. Fixed assets (a) Tangible fixed assets (b) Intangible fixed assets 6. Other Assets Total (B) Condensed Statement of Profit and Loss Three months ended Corresponding three months of the previous accounting year Year-to-date figures for current period Year-to-date figures for the previous year 1. Interest earned (a) Interest/discount on advances/bills (b) Interest on Investments (c) Interest on balances with Reserve Bank of India and other inter banks funds (d) Others 2. Other Income Total Income 1. Interest expended 2. Operating expenses (a) P....
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....er 2001 30 September 2000 Cash Flow Statement: 6 months ending 30 September 2001 30 September 2000 Enterprise whose business is highly seasonal Preparing and Presenting Interim Financial Reports Quarterly An enterprise whose financial year ends on 31 March, may present financial statements (condensed or complete) for the 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 30 September 2000 Statement of Profit and Loss: 6 months ending 30 September 2001 30 September 2000 3 months ending 30 September 2001 30 September 2000 12 months ending 30 September 2001 30 September 2000 Cash Flow Statement: 6 months ending 30 September 2001 30 September 2000 12 months ending 30 September 2001 30 September 2000 Illustration 3 Illustration of Applying the Recognition and Measurement Principles This Illustration which does not form part of the Accounting Standard, illustrates application of the general recognition and measurement principles set out in paragraphs 27-38 of this Standard. Its purpose is to illustrate the application of the Accounting Standard to assist in....
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....er in the financial year is not justified. Other Planned but Irregularly Occurring Costs 7. An enterprise's budget may include certain costs expected to be incurred irregularly during the financial year, such as employee training costs. These costs generally are discretionary even though they are planned and tend to recur from year to year. Recognising an obligation at an interim financial reporting date for such costs that have not yet been incurred generally is not consistent with the definition of a liability. Measuring Income Tax Expense for Interim Period 8. Interim period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate applied to the pre-tax income of the interim period. 9. This is consistent with the basic concept set out in paragraph 27 that the same accounting recognition and measurement principles should be applied in an interim financial report as are applied in annual financial statements. Income taxes are assessed on an annual basis. Therefore, interim period income tax expense is calculated by applying, to an interim period's pre-ta....
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....rprise's financial reporting year ends 30 September and it reports quarterly. Its year as per taxation laws ends 31 March. For the financial year that begins 1 October, Year 1 ends 30 September of Year 2, the enterprise earns ₹ 100 lakhs pre-tax each quarter. The estimated weighted average annual income tax rate is 30 per cent in Year 1 and 40 per cent in Year 2. (Amount in Rs. lakhs) Quarter Quarter Quarter Quarter Year Ending Ending Ending Ending Ending 31 Dec. 31 Mar. 30 June 30 Sep. 30 Sep. Year 1 Year 1 Year 2 Year 2 Year 2 Tax Expense 30 30 40 40 140 Tax Deductions/Exemptions 14. Tax statutes may provide deductions/exemptions in computation of income for determining tax payable. Anticipated tax benefits of this type for the full year are generally reflected in computing the estimated annual effective income tax rate, because these deductions/exemptions are calculated on an annual basis under the usual provisions of tax statutes. On the other hand, tax benefits that relate to a one-time event are recognised in computing income tax expense in that interim period, in the same way that special tax rates applicable to particular c....
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....isposals planned for later in the financial year. Inventories 19. Inventories are measured for interim financial reporting by the same principles as at financial year end. AS 2 on Valuation of Inventories, establishes standards for recognising and measuring inventories. Inventories pose particular problems at any financial reporting date because of the need to determine inventory quantities, costs, and net realisable values. Nonetheless, the same measurement principles are applied for interim inventories. To save cost and time, enterprises often use estimates to measure inventories at interim dates to a greater extent than at annual reporting dates. Paragraph 20 below provides an example of how to apply the net realisable value test at an interim date. Net Realisable Value of Inventories 20. The net realisable 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 ....