Interim financial reporting (IFR) is next on the agenda at the Institute of Chartered Accountants of India (ICAI). This means that AS-25, which was till date not decided, will be on interim financial reporting.
It is expected that the final proposal on the subject will be approved by November. The institute has fixed October 20, as the last date for submitting views and suggestions.
The objective of IFR is to describe the main concept of an interim financial report and to prescribe the principles for recognition and measurement in a complete or condensed financial statements for an interim period.
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IFR was framed with the view to harmonise interim accounting with the international accounting standard. After October 20, the draft scheme will be once again opened for discussion and will have to be passed by the board which will then be passed on to the council for final approval.
According to the draft proposal, IFR will contain either a set of complete financial statements or a set of condensed financial statements.
A set of complete financial statements is normally expected to include balance sheet, statement of profit and loss, cash flow statement and notes and other statements and explanatory material that are an integral part of the financial statements. Interim reports should include interim financial statements for periods as follows balance sheet as of the end of the current interim period and a comparative balance sheet as of the end of the immediately preceding financial year statements of profit and loss for the current interim period and cumulatively for the current financial year to date, with comparative statements of profit and loss for the comparable interim periods (current and year-to-date) of the immediately preceding financial year.
IFR will also include cash flow statement cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year.
In deciding how to recognise, measure, classify, or disclose an item for interim financial reporting purposes, materiality should be assessed in relation to the interim period financial data. In making assessments of materiality, it should be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data.
An enterprise should apply the same accounting policies in its interim financial statements as are applied in its annual financial statements, except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements. However, the frequency of an enterprise's reporting (annual, half-yearly, or quarterly) should not affect the measurement of its annual results. To achieve that objective, measurements for interim reporting purposes should be made on a year-to-date basis.
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 at the end of the enterprise's financial year.
Costs that are incurred unevenly during an enterprise's financial year should be anticipated or deferred for interim reporting purposes if, and only if, it is also appropriate to anticipate or defer that type of cost at the end of the financial year.