Each Accounting Standard offers wide variety of practical applications to the stakeholders in respect of full disclosure and transparency. Therefore, I hereby try to summarize various dimensions with regard to the Accounting Standard related with Ind As-34 : Interim Financial Reporting (By incorporating Changes as per Companies (Indian Accounting Standards) Amendments Rules 2021 .Following are the important concepts related with this standard
1. The Accounting Standards related with “Interim Financial Reporting.”
A. Ind As -34
B. IAS-34, IFRIC-10
2. Differences between IND AS-34 and IAS -34
|IND AS-34||IAS -34|
|1. Allows only single statement Approach for preparing statement of Profit or loss||1. Provides option either to follow single statement Approach or to follow two statement approach for preparing statement of profit or loss|
|2. Relevant terms are Statement of profit and loss and balance sheet
3 Envisages that the requirement to present interim financial report should be governed by the relevant law or regulation
|2. Relevant terms are Statement of Comprehensive Income and Statement of Financial Position
3. It encourages the publicly traded entities to provide interim financial reports conforming to the recognition, measurement and disclosure principles set out as per this standard
No Major differences between IND AS 34 and IAS 34 except the above.
a. To prescribe the minimum content of an interim financial report
b. To prescribe the principle for recognition and measurement in complete or condensed financial statements for interim period.
1. There is no mandatory for entities to follows this standard. But Government ad regulatory bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports.
2. If an entity’s interim financial report is described as complying with Ind ASs, it must comply with all of the requirements of this standard.
A. Interim period is a financial reporting period shorter than a full financial year.
B. Interim financial report means a financial report containing either a complete set of financial statements or a set of condensed financial statements for an interim period.
6. Content of an interim financial report.
A. When complete set is published
i. Ind AS 1 needs to be complied with
Ind AS 1 defines a complete set of financial statements as including the following components
a. A balance sheet as at the end of the period
b. A statement of profit and loss for the period
c. A statement of changes in equity for the period
d. A statement of cash flows for the period.
e. notes, comprising significant accounting policies and other explanatory information
f. a balance sheet as at the beginning of the preceding period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements in accordance with paragraphs 40 A-40 D of Ind AS-1
It should be prepared in the same format and as per the contents and requirements of annual financial statements.
ii. The recognition and measurement guidance under INDAS 34 applies
iii. Disclosure required by the standard as well as those required by other Ind ASs.
B. When Condensed set is published
Minimum components include
i. A condensed balance sheet.
ii. A condensed statement of profit and loss
iii. A condensed statement of changes in equity
iv. A condensed statement of cash flows
v. Selected explanatory notes.
If an entity publishes a set of condensed financial statements in its interim financial report, those condensed statements shall include, at a minimum, each of the headings and subtotals 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 shall be included if their omission would make the condensed interim financial statements misleading.
7. Significant events and transactions.
A. An entity shall include in its interim financial report an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period.
B. The following is a list of events and transactions for which disclosures would be required if they are significant: the list is not exhaustive
i. the write-down of inventories to net realizable value and the reversal of such a write down;
ii. recognition of a loss from the impairment of financial assets, property, plant and equipment, intangible assets, assets arising from contracts with customers, or other assets, and the reversal of such an impairment loss;
iii. the reversal of any provisions for the costs of restructuring;
iv. acquisitions and disposals of items of property, plant and equipment
v. commitments for periods purchase of property, plant and equipment
vi. litigation settlements
vii. corrections of prior period errors
viii. any loan default or breach of a loan agreement that has not been remedied on or before the end of the reporting period
ix. related party transactions
x. changes in contingent liabilities or contingent assets.
C. Other Disclosures.
8. Periods for which interim financial statements are required to be presented.
Interim reports shall include interim financial statements (condensed or complete) for periods as follows:
a. 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
b. 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 comparative interim periods (current and year-to-date)
c. statements of changes in equity 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.
d. statement of cash flows 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 recognize, measure, classify or disclose an item for interim Financial reporting purposes, materiality shall be assessed in relation to the interim period financial data.
Ind AS 1 defines material information and requires separate disclosure of material items, including (for example) discontinued operations, and Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors requires disclosure of changes in accounting estimates, errors, and changes in accounting policies. The two Standards do not contain quantified guidance as to materiality.
10. Disclosure in annual financial statements
If an estimate of an amount reported in an interim period is changed significantly during the final interim period of the financial year but a separate financial report is not published for that final interim period, the nature and amount of that change in estimate shall be disclosed in a note to the annual financial statements for that financial year.
11. Recognition and measurement.
a. Same accounting policies as annual.
An entity shall 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 requirements.
b. Cost incurred unevenly during the financial year.
Costs that are incurred unevenly during the entity’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.
c. Seasonal, Cyclic or Occasional Revenue
Revenues that are received seasonally, cyclically or occasionally within a financial year shall not be anticipated or deferred as of an interim date if anticipation or deferred would not be appropriate at the end of the entity’s financial year. Such revenues are recognized when they occur
d. Use of Estimates.
Interim reports require a greater use of estimates than annual reports.
12. Restatement of previously reported interim periods.
If there is change in accounting policy within the current financial year the effect of change in accounting policy is applied retrospectively.
13. MCA has notified Companies (Accounting Standards) Rules, 2021 on 23rdJune, 2021.
The changes are as follows:-
In “Indian Accounting Standard (Ind AS) 34”, –
(i) for paragraph 31, the following shall be substituted, namely:-
“31 Under the Conceptual Framework for Financial Reporting under Indian Accounting Standards (Conceptual Framework) issued by the Institute of Chartered Accountants of India, recognition is the process of capturing, for inclusion in the Balance Sheet or Statement of Profit and Loss, an item that meets the definition of one of the elements of the financial statements. The definitions of assets, liabilities, income, and expenses are fundamental to recognition, at the end of both annual and interim financial reporting periods.”;
(ii) for paragraph 33, the following shall be substituted, namely:-
“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 Conceptual Framework does not allow the recognition of items in the balance sheet which do not meet the definition of assets or liabilities.”;
(iii) for paragraph 58, the following shall be substituted, namely:-
“58 Amendments to References to the Conceptual Framework in Ind AS issued in 2021 amended paragraphs 31 and 33. An entity shall apply those amendments for annual periods beginning on or after 1 April 2021. An entity shall apply the amendments to Ind AS 34 retrospectively in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors. However, if an entity determines that retrospective application would be impracticable or would involve undue cost or effort, it shall apply the amendments to Ind AS 34 by reference to paragraphs 43–45 of this Standard and paragraphs 23–28, 50–53 and 54F of Ind AS 8.”;
(iv) in Appendix 1,for paragraph 7, the following shall be substituted, namely:-
“7 Paragraphs 46-54 and 56-57 related to effective date have not been included in Ind AS 34 as these are not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IAS 34, these paragraph numbers are retained in Ind AS 34.”;
(Republished with Amendments)