Standard 34: Interim Financial Reporting

Standard 34: Interim Financial Reporting · Complied AI

(e)

selected explanatory notes.

8A [Refer Appendix 1]

Form and content of interim financial statements

9 If an entity publishes a complete set of financial statements in its interim financial report, the form and content of those statements shall conform to the requirements of Ind AS 1 for a complete set of financial statements.

10 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.

11 In the statement that presents the components of profit or loss for an interim period, an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of Ind AS 33, Earnings per Share.

11A [Refer Appendix 1]

12 [Refer Appendix 1]

13 [Refer Appendix 1]

14 An interim financial report is prepared on a consolidated basis if the entity’s most recent annual financial statements were consolidated statements. The parent’s separate financial statements are not consistent or comparable with the consolidated statements in the most recent annual financial report. If an entity’s annual financial report included the parent’s separate financial statements in addition to consolidated financial statements, this Standard neither requires nor prohibits the inclusion of the parent’s separate statements in the entity’s interim financial report.

Significant events and transactions

15 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. Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report.

15A A user of an entity’s interim financial report will have access to the most recent annual financial report of that entity. Therefore, it is unnecessary for the notes to an interim financial report to provide relatively insignificant updates to the information that was reported in the notes in the most recent annual financial report.

15B The following is a list of events and transactions for which disclosures would be required if they are significant: the list is not exhaustive.

(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

21 For an entity whose business is highly seasonal, financial information for the twelve months up to the end of the interim period and comparative information for the prior twelve-month period may be useful. Accordingly, entities whose business is highly seasonal are encouraged to consider reporting such information in addition to the information called for in the preceding paragraph.

22 [Refer Appendix 1]

Materiality

23 In deciding how to recognise, measure, classify, or disclose an item for interim financial reporting purposes, materiality shall be assessed in relation to the interim period financial data. In making assessments of materiality, it shall be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data.

24 7 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.

25 While judgement is always required in assessing materiality, this Standard bases the recognition and disclosure decision on data for the interim period by itself for reasons of understandability of the interim figures. Thus, for example, unusual items, changes in accounting policies or estimates, and errors are recognised and disclosed on the basis of materiality in relation to interim period data to avoid misleading inferences that might result from non-disclosure. The overriding goal is to ensure that an interim financial report includes all information that is relevant to understanding an entity’s financial position and performance during the interim period.

Disclosure in annual financial statements

26 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.

27 Ind AS 8 requires disclosure of the nature and (if practicable) the amount of a change in estimate that either has a material effect in the current period or is expected to have a material effect in subsequent periods. Paragraph 16A(d) of this Standard requires similar disclosure in an interim financial report. Examples include changes in estimate in the final interim period relating to inventory write-downs, restructurings, or impairment losses that were reported in an earlier interim period of the financial year. The disclosure required by the preceding paragraph is consistent with the Ind AS 8 requirement and is intended to be narrow in scope—relating only to the change in estimate. An entity is not required to include additional interim period financial information in its annual financial statements.

Recognition and measurement

Same accounting policies as annual

28 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 statements. However, the frequency of an entity’s reporting (annual, half-yearly, or quarterly) shall not affect the measurement of its annual results. To achieve that objective, measurements for interim reporting purposes shall be made on a year-to-date basis.

29 Requiring that an entity apply the same accounting policies in its interim financial statements as in its annual statements may seem to suggest that interim period measurements are made as if each interim period stands alone as an independent reporting period. However, by providing that the frequency of an entity’s reporting shall not affect the measurement of its annual results, paragraph 28 acknowledges that an interim period is a part of a larger 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.

30 To illustrate:

(c)

income tax expense is recognised in each interim period based on the best estimate of the weighted average annual income tax rate expected for the full financial year. Amounts accrued for income tax expense in one interim period may have to be adjusted in a subsequent interim period of that financial year if the estimate of the annual income tax rate changes.

31 8 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.

32 For assets, the same tests of future economic benefits apply at interim dates and at the end of an entity’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 the end of an interim reporting period must represent an existing obligation at that date, just as it must at the end of an annual reporting period.

33 9 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.

34 In measuring the assets, liabilities, income, expenses, and cash flows reported in its financial statements, an entity 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 entity 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 16A(d) and 26 require, however, that the nature and amount of any significant changes in estimates be disclosed.

36 An entity 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 16A(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 shall not be anticipated or deferred as of an interim date if anticipation or deferral would not be appropriate at the end of the entity’s financial year.

38 Examples include dividend revenue, royalties, and government grants. Additionally, some entities 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 entity’s financial year shall 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.

40 [Refer Appendix 1]

Use of estimates

41 The measurement procedures to be followed in an interim financial report shall 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 entity 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 [Refer Appendix 1]

Restatement of previously reported interim periods

43 A change in accounting policy, other than one for which the transition is specified by a new Ind AS, shall be reflected by:

(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.

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 Ind AS 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 Ind AS 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.

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.

10 Effective date and transition

46 *

47 *

48 *

49 *

50 *

51 *

52 *

53 *

54 *

55 As a consequence of issuance of Ind AS 115, Revenue from Contracts with Customers , paragraph 15B and 16A are amended. An entity shall apply those amendments when it applies Ind AS 115.

56-57 11 [Refer Appendix 1]

58 12 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.

59 13 Definition of Material (Amendments to Ind AS 1 and Ind AS 8) amended paragraph 24. An entity shall apply those amendments when it applies the amendments to the definition of material in paragraph 7 of Ind AS 1 and paragraphs 5 and 6 of Ind AS 8.

60 14 Disclosure of Accounting Policies , which amends Ind AS 1, amended paragraph 5. An entity shall apply that amendment for annual reporting periods beginning on or after 1 April 2023.

Appendix A

Interim Financial Reporting and Impairment

This appendix is an integral part of the Ind AS.

Background

1 An entity is required to assess goodwill for impairment at the end of each reporting period, and, if required, to recognise an impairment loss at that date in accordance with Ind AS 36. However, at the end of a subsequent reporting period, conditions may have so changed that the impairment loss would have been reduced or avoided had the impairment assessment been made only at that date. This appendix provides guidance on whether such impairment losses should ever be reversed.

2 The appendix addresses the interaction between the requirements of Ind AS 34 and the recognition of impairment losses on goodwill in Ind AS 36, and the effect of that interaction on subsequent interim and annual financial statements.

Issue

3 Ind AS 34 paragraph 28 requires an entity to apply the same accounting policies in its interim financial statements as are applied in its annual financial statements. It also states that ‘the frequency of an entity’s reporting (annual, half-yearly, or quarterly) shall not affect the measurement of its annual results. To achieve that objective, measurements for interim reporting purposes shall be made on a year- to-date basis.’

4 Ind AS 36 paragraph 124 states that ‘An impairment loss recognised for goodwill shall not be reversed in a subsequent period.’

5-6 [Refer Appendix 1]

7 The appendix addresses the following issue:

Should an entity reverse impairment losses recognised in an interim period on goodwill if a loss would not have been recognised, or a smaller loss would have been recognised, had an impairment assessment been made only at the end of a subsequent reporting period?

Accounting Principle

8 An entity shall not reverse an impairment loss recognised in a previous interim period in respect of goodwill.

9 An entity shall not extend this accounting principle by analogy to other areas of potential conflict between Ind AS 34 and other Indian Accounting Standards.

Appendix B

References to matters contained in other Indian Accounting Standards

This Appendix is an integral part of the Ind AS.

1 Appendix C, Levies , contained in Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets.

Appendix 1

Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 34 and the corresponding International Accounting Standard (IAS) 34, Interim Financial Reporting, and IFRIC 10, Interim Financial Reporting and Impairment, issued by the International Accounting Standards Board.

Comparison with IAS 34, Interim Financial Reporting , and IFRIC 10

1 With regard to preparation of statement of profit and loss, International Accounting Standard (IAS) 34, Interim Financial Reporting , provides option either to follow single statement approach or to follow two statement approaches. But, Ind AS 34 allows only single statement approach on the lines of Ind AS 1, Presentation of Financial Statements, which also allows only single statement approach. Paragraphs 8A and 11A of IAS 34 which provides the option are deleted. In order to maintain consistency with paragraph numbers of IAS 34, the paragraph numbers are retained in Ind AS 34.

2 Different terminology is used in Ind AS 34 eg, the term ‘ balance sheet’ is used instead of ‘Statement of financial position’ and ‘Statement of Profit and Loss’ is used instead of ‘Statement of comprehensive income’ or ‘Statement of profit or loss and other comprehensive income’.

3 Last sentence of paragraph 1 of IAS 34 is deleted in Ind AS 34 since it is felt that the requirement to present interim financial report should be governed by the relevant law or regulation and not by way of an encouragement through an Accounting Standard.

4 The following paragraph numbers appear as ‘Deleted’ in IAS 34. In order to maintain consistency with paragraph numbers of IAS 34, the paragraph numbers are retained in Ind AS 34:

(i)

paragraph 13

(ii)

paragraph16

(iii)

paragraphs17-18

(iv)

paragraphs 5-6 of Appendix A

5 Paragraph 12 of IAS 34 making reference to Implementation Guidance included in IAS 1 has been deleted in Ind AS 34, as Implementation Guidance is not an integral part of IAS 1. In order to maintain consistency with paragraph numbers of IAS 34, the paragraph number is retained in Ind AS 34.

6 Following paragraphs making references to Illustrative examples which are not integral part of IAS 34 have been deleted in Ind AS 34. The paragraph numbers have been retained in Ind AS 34 in order to maintain consistency with paragraph numbers of IAS 34:

(i)

Paragraph 22 making reference to Illustration A of ‘Illustrative Examples’ illustrating the periods required to be presented by an entity that reports half yearly and an entity that reports quarterly.

(ii)

Paragraph 40 making reference to Illustration B of ‘Illustrative Examples’ illustrating the general recognition and measurement principles set out in paragraphs 28-39.

(iii)

Paragraph 42 making reference to Illustration C of ‘Illustrative Examples’ illustrating the use of estimates in interim periods.

7 15 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.

Footnotes

Notes, amendments & references (17)

# This Ind AS was notified vide G.S.R. 111(E) dated 16th February, 2015 and was amended vide Notification No. G.S.R. 365(E) dated 30th March, 2016, G.S.R. 310(E) dated 28th March, 2018, G.S.R. 463(E) dated 24th July, 2020, G.S.R. 419(E) dated 18th June, 2021 and G.S.R. 242(E) dated 31st March, 2023.

1 Unaudited Financial Results required to be prepared and presented under Clause 41 of Listing Agreement with stock exchanges is not an ‘Interim Financial Report’ as defined in paragraph 4 of this Standard

2 Substituted vide Notification No. G.S.R. 365(E) dated 30th March, 2016 and, thereafter, substituted vide Notification No. G.S.R. 242(E) dated 31st March, 2023.

3 Substituted vide Notification No. G.S.R. 365(E) dated 30th March, 2016 and, thereafter, substituted vide Notification No. G.S.R. 310(E) dated 28th March, 2018.

4 Substituted vide Notification No. G.S.R. 365(E) dated 30th March, 2016.

5 Here 'ordinary' shares refer to 'equity' shares

6 Sub-paragraph (l) omitted vide Notification No. G.S.R. 365(E) dated 30th March, 2016 and, thereafter, inserted vide Notification No. G.S.R. 310(E) dated 28th March, 2018.

7 Substituted vide Notification No. G.S.R. 463(E) dated 24th July, 2020.

8 Substituted vide Notification No. G.S.R. 419(E) dated 18th June, 2021.

9 Substituted vide Notification No. G.S.R. 419(E) dated 18th June, 2021.

10 Heading and paragraphs 46-55 inserted vide Notification No. G.S.R. 310(E) dated 28th March, 2018.

* Refer Appendix 1

11 Inserted vide Notification No. G.S.R. 463(E) dated 24th July, 2020.

12 Inserted vide Notification No. G.S.R. 463(E) dated 24th July, 2020 and thereafter, substituted vide Notification No. G.S.R. 419(E) dated 18th June, 2021.

13 Inserted vide Notification No. G.S.R. 463(E) dated 24th July, 2020.

14 Inserted vide Notification No. G.S.R. 242(E) dated 31st March, 2023.

15 Inserted vide Notification No. G.S.R. 310(E) dated 28th March, 2018 and, thereafter, substituted vide Notification No G.S.R. 463(E) dated 24th July, 2020 and G.S.R. 419(E) dated 18th June, 2021.