AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
Interim Financial Reporting
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.... 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 period. 5. During the first yea....
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....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, for an interim period. 13. If an enterprise's annua....
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...., segment capital employed (segment assets minus segment liabilities) and segment result for business segments or geographical 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....
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....to items which are material". The Framework for the Preparation and Presentation of Financial Statements, issued by the Institute of Chartered Accountants of India, states 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 b....
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.... if each interim period stands alone as an independent 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 definiti....
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....ear or shortly thereafter in making the measurements in 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 Seasonal....
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....ly to the beginning of the financial year. Transitional Provision 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-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 fina....
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.... 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 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 financial statements) ....
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.... 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) Payments to and provisions for employees (b) Other operating expenses 3. Total expenses (excluding provisions and contingencies) 4. Operating profit (profit before provisions and contingencies) 5. Provisions and contingencies ....
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....eet: 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^[1]: 6 months ending 30 September 2001 30 September 2000 Enterprise Preparing and Presenting Interim Financial Reports Quarterly 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: 6 months ending 30 September 2001 30 September 2000 3 months ending 30 September 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 ....
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....s is anticipated for interim reporting purposes if, and only if, (a) the bonus is a legal obligation or an obligation arising from past practice for which the enterprise has no realistic alternative but to make the payments, and (b) a reliable estimate of the obligation can be made. Intangible Assets 6. An enterprise will apply the definition and recognition criteria for an intangible asset in the same way in an interim period as in an annual period. Costs incurred before the recognition criteria for an intangible asset are met are recognised as an expense. Costs incurred after the specific point in time at which the criteria are met are recognised as part of the cost of an intangible asset. "Deferring" costs as assets in an interim balance sheet in the hope that the recognition criteria will be met later 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 a....
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....g quarters (thus having zero income for the year), and is governed by taxation laws according to which its estimated average annual income tax rate is expected to be 35 per cent. The following table shows the amount of income tax expense that is reported in each quarter: (Amount in Rs. lakhs) 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Annual Tax Expense 52.5 (17.5) (17.5) (17.5) 0 Difference in Financial Reporting Year and Tax Year 12. If the financial reporting year and the income tax year differ, income tax expense for the interim periods 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. 13. To illustrate, an enterprise'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 Rs. 100 lakhs....
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....120 lakhs/Rs. 400 lakhs) x 100]. This average annual effective income tax rate would be applied to earnings of each quarter. Accordingly, tax expense would be as follows: 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Annual Tax Expense 30.00 30.00 30.00 30.00 120.00 Contractual or Anticipated Purchase Price Changes 17. Volume rebates or discounts and other contractual changes in the prices of goods and services are anticipated in interim periods, if it is probable that they will take effect. Thus, contractual rebates and discounts are anticipated but discretionary rebates and discounts are not anticipated because the resulting liability would not satisfy the conditions of recognition, viz., that a liability must be a present obligation whose settlement is expected to result in an outflow of resources. Depreciation and Amortisation 18. Depreciation and amortisation for an interim period is based only on assets owned during that interim period. It does not take into account asset acquisitions or disposals planned for later in the financial year. Inventories 19. Inventories are meas....