IAS 34 Interim Financial Reporting

This Standard is effective for financial statementscovering periods beginning on or after 1 January 1999.
In April 2000, Appendix C, paragraph 7, was amended by IAS40, Investment Property.

Introduction


1   This Standard ('IAS 34')addresses interim financial reporting, a matter not covered in a priorInternational Accounting Standard. IAS 34 is effective for accounting periodsbeginning on or after 1 January 1999.
2   An interim financialreport is a financial report that contains either a complete or condensed setof financial statements for a period shorter than an enterprise's fullfinancial year.
3   This Standard does notmandate which enterprises should publish interim financial reports, howfrequently, or how soon after the end of an interim period. In IASC'sjudgement, those matters should be decided by national governments, securitiesregulators, stock exchanges, and accountancy bodies. This Standard applies if acompany is required or elects to publish an interim financial report inaccordance with International Accounting Standards.
4   This Standard:
(a) defines the minimum content of aninterim financial report, including disclosures; and
(b) identifies the accounting recognitionand measurement principles that should be applied in an interim financialreport.
5   Minimum content of aninterim financial report is a condensed balance sheet, condensed incomestatement, condensed cash flow statement, condensed statement showing changesin equity, and selected explanatory notes.
6   On the presumption thatanyone who reads an enterprise's interim report will also have access to itsmost recent annual report, virtually none of the notes to the annual financialstatements are repeated or updated in the interim report. Instead, the interimnotes include primarily an explanation of the events and changes that aresignificant to an understanding of the changes in financial position andperformance of the enterprise since the last annual reporting date.
7   An enterprise shouldapply the same accounting policies in its interim financial report as areapplied in its annual financial statements, except for accounting policychanges made after the date of the most recent annual financial statements thatare to be reflected in the next annual financial statements. The frequency ofan enterprise's reporting - annual, half-yearly, or quarterly - should notaffect the measurement of its annual results. To achieve that objective,measurements for interim reporting purposes are made on a year-to-date basis.
8   An appendix to thisStandard provides guidance for applying the basic recognition and measurementprinciples at interim dates to various types of asset, liability, income, andexpense. Income tax expense for an interim period is based on an estimatedaverage annual effective income tax rate, consistent with the annual assessmentof taxes.
9   In deciding how torecognise, classify, or disclose an item for interim financial reportingpurposes, materiality is to be assessed in relation to the interim periodfinancial data, not forecasted annual data.
International Accounting Standard 34 Interim FinancialReporting (IAS 34) is set out in paragraphs 1-46 and Appendices A-C. All theparagraphs have equal authority but retain the IASC format of the Standard whenit was adopted by the IASB. IAS 34 should be read in the context of itsobjective, the Preface to International Financial Reporting Standards and the Frameworkfor the Preparation and Presentation of Financial Statements. These provide abasis for selecting and applying accounting policies in the absence of explicitguidance.

Objective


The objective of this Standard is to prescribe the minimumcontent of an interim financial report and to prescribe the principles forrecognition and measurement in complete or condensed financial statements foran interim period. Timely and reliable interim financial reporting improves theability of investors, creditors, and others to understand an enterprise'scapacity to generate earnings and cash flows and its financial condition andliquidity.

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8 Intercompany reconciliations: Some intercompany balances that are reconciled on a detailed level in preparing consolidated financial statements at financial year end might be reconciled at a less detailed level in preparing consolidated financial statements at an interim date.
9 Specialised industries: Because of complexity, costliness, and time, interim period measurements in specialised industries might be less precise than at financial year end. An example would be calculation of insurance reserves by insurance companies.

7 Revaluations and fair value accounting: IAS 16 Property, Plant and Equipment allows an entity to choose as its accounting policy the revaluation model whereby items of property, plant and equipment are revalued to fair value. Similarly, IAS 40 Investment Property requires an entity to determine the fair value of investment property. For those measurements, an entity may rely on professionally qualified valuers at annual reporting dates though not at interim reporting dates.
Editorial note: Substituted by improvements project standard IAS 16 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 "Revaluations and fair value accounting: IAS 16, Property, Plant and Equipment, allows as an alternative treatment the revaluation of property, plant, and equipment to fair value. Similarly, IAS 40, Investment Property, requires an enterprise to determine the fair value of investment property. For those measurements, an enterprise may rely on professionally qualified valuers at annual reporting dates though not at interim reporting dates."

5 Income taxes: Enterprises may calculate income tax expense and deferred income tax liability at annual dates by applying the tax rate for each individual jurisdiction to measures of income for each jurisdiction. Paragraph 14 of Appendix B acknowledges that while that degree of precision is desirable at interim reporting dates as well, it may not be achievable in all cases, and a weighted average of rates across jurisdictions or across categories of income is used if it is a reasonable approximation of the effect of using more specific rates.
6 Contingencies: The measurement of contingencies may involve the opinions of legal experts or other advisers. Formal reports from independent experts are sometimes obtained with respect to contingencies. Such opinions about litigation, claims, assessments, and other contingencies and uncertainties may or may not also be needed at interim dates.

2 Classifications of current and non-current assets and liabilities: Enterprises may do a more thorough investigation for classifying assets and liabilities as current or non-current at annual reporting dates than at interim dates.
3 Provisions: Determination of the appropriate amount of a provision (such as a provision for warranties, environmental costs, and site restoration costs) may be complex and often costly and time-consuming. Enterprises sometimes engage outside experts to assist in the annual calculations. Making similar estimates at interim dates often entails updating of the prior annual provision rather than the engaging of outside experts to do a new calculation.
4 Pensions: IAS 19, Employee Benefits, requires that an enterprise determine the present value of defined benefit obligations and the market value of plan assets at each balance sheet date and encourages an enterprise to involve a professionally qualified actuary in measurement of the obligations. For interim reporting purposes, reliable measurement is often obtainable by extrapolation of the latest actuarial valuation.

Appendix C - Examples of the Use of Estimates
This Appendix, which is illustrative and does not form part of the Standard, provides examples to illustrate application of the principle in paragraph 41 of this Standard. The purpose of the appendix is to illustrate the application of the Standard to assist in clarifying its meaning.
1 Inventories: Full stock-taking and valuation procedures may not be required for inventories at interim dates, although it may be done at financial year-end. It may be sufficient to make estimates at interim dates based on sales margins.
Editorial note: Substituted by improvements project standard IAS 2 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 "Inventories: Full stock-taking and valuation procedures may not be required for inventories at interim dates, although it may be done at financial year end. It may be sufficient to make estimates at interim dates based on sales margins. Similarly, at interim dates LIFO inventories can be estimated by using representative samples for each LIFO layer or pool and inflation indices."

36 This Standard requires that an enterprise apply the same impairment testing, recognition, and reversal criteria at an interim date as it would at the end of its financial year. That does not mean, however, that an enterprise must necessarily make a detailed impairment calculation at the end of each interim period. Rather, an enterprise will review for indications of significant impairment since the end of the most recent financial year to determine whether such a calculation is needed.

33 IAS 29, Financial Reporting in Hyperinflationary Economies, requires that the financial statements of an enterprise that reports in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at balance sheet date, and the gain or loss on the net monetary position is included in net income. Also, comparative financial data reported for prior periods is restated to the current measuring unit.
34 Enterprises follow those same principles at interim dates, thereby presenting all interim data in the measuring unit as of the end of the interim period, with the resulting gain or loss on the net monetary position included in the interim period's net income. Enterprises do not annualise the recognition of the gain or loss. Nor do they use an estimated annual inflation rate in preparing an interim financial report in a hyperinflationary economy.
Impairment of Assets
35 IAS 36, Impairment of Assets, requires that an impairment loss be recognised if the recoverable amount has declined below carrying amount.

31 If IAS 21 requires translation adjustments to be recognised as income or expense in the period in which they arise, that principle is applied during each interim period. Entities do not defer some foreign currency translation adjustments at an interim date if the adjustment is expected to reverse before the end of the financial year.
Editorial note: Substituted by improvements project standard IAS 21 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 "If IAS 21 requires that translation adjustments be recognised as income or as expenses in the period in which they arise, that principle is applied during each interim period. Enterprises do not defer some foreign currency translation adjustments at an interim date if the adjustment is expected to reverse before the end of the financial year."
Interim Financial Reporting in Hyperinflationary Economies
32 Interim financial reports in hyperinflationary economies are prepared by the same principles as at financial year end.