31 Under the Framework for the Preparation and Presentation of Financial Statements (the Framework), recognition is the "process of incorporating in the balance sheet or income statement an item that meets the definition of an element and satisfies the criteria for recognition". The definitions of assets, liabilities, income, and expenses are fundamental to recognition, both at annual and interim financial reporting dates.
32 For assets, the same tests of future economic benefits apply at interim dates and at the end of an enterprise's financial year. Costs that, by their nature, would not qualify as assets at financial year end would not qualify at interim dates either. Similarly, a liability at an interim reporting date must represent an existing obligation at that date, just as it must at an annual reporting date.

33 An essential characteristic of income (revenue) and expenses is that the related inflows and outflows of assets and liabilities have already taken place. If those inflows or outflows have taken place, the related revenue and expense are recognised; otherwise they are not recognised. The Framework says that "expenses are recognised in the income statement when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably.... [The] Framework does not allow the recognition of items in the balance sheet which do not meet the definition of assets or liabilities."
34 In measuring the assets, liabilities, income, expenses, and cash flows reported in its financial statements, an enterprise that reports only annually is able to take into account information that becomes available throughout the financial year. Its measurements are, in effect, on a year-to-date basis.

35 An enterprise that reports half-yearly uses information available by mid-year 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 possible 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 26 require, however, that the nature and amount of any significant changes in estimates be disclosed.
36 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 26 require, however, that the nature and amount of any significant changes in estimates be disclosed.

Revenues Received Seasonally, Cyclically, or Occasionally
37 Revenues that are received seasonally, cyclically, 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.
38 Examples include dividend revenue, royalties, and government grants. Additionally, some enterprises consistently earn more revenues in certain interim periods of a financial year than in other interim periods, for example, seasonal revenues of retailers. Such revenues are recognised when they occur.
Costs Incurred Unevenly During the Financial Year
39 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.
Applying the Recognition and Measurement Principles

40 Appendix B provides examples of applying the general recognition and measurement principles set out in paragraphs 28-39.
Use of Estimates
41 The measurement procedures to be followed in an interim financial report should be designed to ensure that the resulting information is reliable and that all material financial information that is relevant to an understanding of the financial position or performance of the enterprise is appropriately disclosed. While measurements in both annual and interim financial reports are often based on reasonable estimates, the preparation of interim financial reports generally will require a greater use of estimation methods than annual financial reports.
42 Appendix C provides examples of the use of estimates in interim periods.
Restatement of Previously Reported Interim Periods

43 A change in accounting policy, other than one for which the transition is specified by a new Standard or Interpretation, shall be reflected by:
(a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of any prior financial years that will be restated in the annual financial statements in accordance with IAS 8; or
(b) when it is impracticable to determine the cumulative effect at the beginning of the financial year of applying a new accounting policy to all prior periods, adjusting the financial statements of prior interim periods of the current financial year, and comparable interim periods of prior financial years to apply the new accounting policy prospectively from the earliest date practicable.
Editorial note: Substituted by improvements project standard IAS 8 with effect for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period. Previously "A change in accounting policy, other than one for which the transition is specified by a new International Accounting Standard, should be reflected by: (a) restating the financial statements of prior interim periods of the current financial year and the comparable interim periods of prior financial years (see paragraph 20), if the enterprise follows the benchmark treatment under IAS 8; or (b) restating the financial statements of prior interim periods of the current financial year, if the enterprise follows the allowed alternative treatment under IAS 8. In this case, comparable interim periods of prior financial years are not restated."

44 One objective of the preceding principle is to ensure that a single accounting policy is applied to a particular class of transactions throughout an entire financial year. Under IAS 8, a change in accounting policy is reflected by retrospective application, with restatement of prior period financial data as far back as is practicable. However, if the cumulative amount of the adjustment relating to prior financial years is impracticable to determine, then under IAS 8 the new policy is applied prospectively from the earliest date practicable. The effect of the principle in paragraph 43 is to require that within the current financial year any change in accounting policy is applied either retrospectively or, if that is not practicable, prospectively, from no later than the beginning of the financial year.
Editorial note: Substituted by improvements project standard IAS 8 with effect for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period. Previously "One objective of the preceding principle is to ensure that a single accounting policy is applied to a particular class of transactions throughout an entire financial year. Under IAS 8, a change in accounting policy is reflected by retrospective application, with restatement of prior period financial data, if practicable. However, if the amount of the adjustment relating to prior financial years is not reasonably determinable, then under IAS 8 the new policy is applied prospectively. An allowed alternative is to include the entire cumulative retrospective adjustment in the determination of net profit or loss for the period in which the accounting policy is changed. The effect of the principle in paragraph 43 is to require that within the current financial year any change in accounting policy be applied retrospectively to the beginning of the financial year."

45 To allow accounting changes to be reflected as of an interim date within the financial year would allow two differing accounting policies to be applied to a particular class of transactions within a single financial year. The result would be interim allocation difficulties, obscured operating results, and complicated analysis and understandability of interim period information.
Effective Date
46 This International Accounting Standard becomes operative for financial statements covering periods beginning on or after 1 January 1999. Earlier application is encouraged.

Appendix A - Illustration of Periods Required to Be Presented
This Appendix, which is illustrative and does not form part of the Standard, provides examples to illustrate application of the principle in paragraph 20. The purpose of the appendix is to illustrate the application of the Standard to assist in clarifying its meaning.
Enterprise Publishes Interim Financial Reports Half-Yearly
1 The enterprise's financial year ends 31 December (calendar year). The enterprise will present the following financial statements (condensed or complete) in its half-yearly interim financial report as of 30 June 2001:
Balance Sheet:
At 30 June 2001 31 December 2000
Income Statement:
6 months ending 30 June 2001 30 June 2000
Cash Flow Statement:
6 months ending 30 June 2001 30 June 2000
Statement of Changes in
Equity:
6 months ending 30 June 2001 30 June 2000
Enterprise Publishes Interim Financial Reports Quarterly
2 The enterprise's financial year ends 31 December (calendar year). The enterprise will present the following financial statements (condensed or complete) in its quarterly interim financial report as of 30 June 2001:
Balance Sheet:
At 30 June 2001 31 December 2000
Income Statement:
6 months ending 30 June 2001 30 June 2000
3 months ending 30 June 2001 30 June 2000
Cash Flow Statement:
6 months ending 30 June 2001 30 June 2000
Statement of Changes in
Equity:
6 months ending 30 June 2001 30 June 2000

Appendix B - Examples of Applying the Recognition and Measurement Principles
This Appendix, which is illustrative and does not form part of the Standard, provides examples of applying the general recognition and measurement principles set out in paragraphs 28-39 of this Standard. The purpose of the appendix is to illustrate the application of the Standard to assist in clarifying its meaning.
Employer Payroll Taxes and Insurance Contributions
1 If employer payroll taxes or contributions to government-sponsored insurance funds are assessed on an annual basis, the employer's related expense is recognised in interim periods using an estimated average annual effective payroll tax or contribution rate, even though a large portion of the payments may be made early in the financial year. A common example is an employer payroll tax or insurance contribution that is imposed up to a certain maximum level of earnings per employee. For higher income employees, the maximum income is reached before the end of the financial year, and the employer makes no further payments through the end of the year.