1. Interim Financial Reporting: IAS 34
Wiecek and Young
IFRS Primer
Chapter 28

2. Interim Financial Reporting
Related standards
IAS 34
Current GAAP comparisons
Looking ahead
End-of-chapter practice

3. Related Standards
APB 28 Interim Financial Reporting

4. IAS 34 – Overview Objective and scope
Content of an interim financial report
Disclosure in annual financial statements
Recognition and measurement
Restatement of previously reported interim periods

5. IAS 34 – Objective and Scope
Annual reporting
Often supplemented with interim or quarterly reports
Interim reporting
Reports provide more relevant and timely information
Often mandated by securities regulators, governments, and stock exchanges
IASB encourages entities whose shares are publicly traded to provide interim information
At least as of the end of the first half of the year and issue it within 60 days of this date
Standard does not address how often nor how soon after the period entities should produce interim reports

6. IAS 34 – Objective and Scope
Choice by the entity
May choose not to prepare interim financial statements at all
May choose to prepare them in accordance with IFRSs
if they do and they describe the financial statements to be in compliance with IFRSs, the standard applies
According to IAS 34, an interim financial report is defined as follows:
. . . a financial report containing either a complete set of financial statements or a set of condensed financial statements for an interim period
Appendices A, B, and C
Accompany the standard
Give numerous examples and clarifications
However, they are not technically part of the standard itself

7. IAS 34 – Content of an Interim Financial Report
Goal of interim reporting
To provide information about new events and circumstances and other changes
Not just replicate the information given in the annual financial statements
The standard does not prohibit including a complete set of financial statements
Minimum requirements mandated by the standard
Minimum components of an interim financial report
Form and content of interim financial statements
Selected explanatory notes
Disclosure of compliance with IFRSs
Periods for which interim financial statements are required to be presented
Materiality

8. IAS 34 – Content of an Interim Financial Report
Minimum components of an interim financial report
Required condensed statements
• Statement of financial position
• Statement of comprehensive income
-Presented as a single statement or a separate income statement plus a statement of comprehensive income
• Statement of changes in equity
• Statement of cash flows
In addition, selected explanatory notes must accompany the above

9. IAS 34 – Content of an Interim Financial Report
Form and content of interim financial statements
If the entity presents a full set of statements
Follow IAS 1
If it presents condensed statements
Entity must present at a minimum the headings and subtotals that were presented in the annual statements
Basic and diluted earnings per share
Presented when the entity is covered by IAS 33
Interim financial statements
Based on consolidated statements where the most recent annual statements were prepared on a consolidated basis

10. IAS 34 – Content of an Interim Financial Report
Selected explanatory notes
Relevant notes unchanged from the annual report
Not included
Repetitive
Can obscure the new and more relevant information
Information is normally presented on a year-to-date basis
Material disclosures
• Statement that the accounting policies follows the annual report
• Explanatory comments about the seasonality/cyclicality of the business
• Any unusual items
• Nature and amount of changes in estimates

11. IAS 34 – Content of an Interim Financial Report
(continued list)
• Changes in debt and equity securities (issue, repurchase, repayment)
• Dividends paid
• Segmented information including
Intersegment revenues
Segment profit/loss
• Material subsequent events
• Changes in contingent assets/liabilities
Disclosure of compliance with IFRSs
If the financial statements are prepared in compliance with IFRSs, this should be stated and the interim statements must also be in compliance with all IFRSs

12. IAS 34 – Content of an Interim Financial Report
Periods for which interim financial statements are required to be presented
Which statements are required to be presented?

13. IAS 34 – Content of an Interim Financial Report
Materiality
Discussed in IAS 1 and 8
Although there is no specific quantitative guidance
IAS 34 notes that materiality for interim statements should be assessed based on the interim period
Note that interim financials statements may have additional estimates
Therefore the numbers may be a bit softer

14. IAS 34 – Disclosure in Annual Financial Statements
Situations may arise where estimates are changed in the last quarter or final interim period
Where final interim period statements are not separately presented and where the change is significant
Nature and amount of change in estimate should be disclosed in the annual statements
The standard goes on to cross reference and link this to IAS 8
Requires disclosure of the nature and amount of material changes in estimates

15. IAS 34 – Recognition and Measurement
Same accounting policies as annual
Entity is required to use the same accounting policies as in the year-end statements
Encourages consistency
Where there has been a subsequent change in accounting policies, the entity would use the newer policy
Discrete versus integral
The discrete approach
Treats the interim period as a separate and self-standing period
The integral approach
Treats it as part of the annual period (i.e., as a portion of a larger period)

16. IAS 34 – Recognition and Measurement

17. IAS 34 – Recognition and Measurement
Applying the Recognition and Measurement Principles

18. IAS 34 – Recognition and Measurement
Revenues received seasonally, cyclically, or occasionally
Recognized when they occur or are earned, notwithstanding their cyclical or seasonal nature
May result in more revenues being recognized in one period than in another
Reflects the underlying reality
Supports the discrete approach
Costs incurred unevenly during the financial year
Costs are recognized when incurred
Only capitalized when they meet the definition of an asset
Also supports the discrete approach

19. IAS 34 – Recognition and Measurement
Use of estimates
Due to necessity, more estimates need to be made in an interim period
An entity needs to communicate this and must take care to ensure that the information is relevant and reliable

20. IAS 34 – Restatement of Previously Reported Interim Periods
Where there is a change in accounting policy, the comparative interim information must be restated
Where it is impracticable to determine the cumulative impact, the change would be applied from the earliest date practicable

21. Current GAAP Comparisons
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22. Current GAAP Comparisons
IAS 34 contemplates providing a condensed set of financial statements and does not require the presentation of a cash flow statement for the current interim period, only for the cumulative period
IAS 34 precludes deferral of manufacturing cost variances expected to be absorbed by year end
IAS 34 treats initial recognition of previously unrecognized taxes as an adjustment to annual effective rate used in determining the interim taxes
Minimum Components of an Interim Financial Report:
Section 1751 of Canadian GAAP and IAS 34 are converged, except that IAS 34 contemplates providing a condensed set of financial statements and does not require the presentation of a cash flow statement for the current interim period, only for the cumulative period.
Periods For Which Interim Statements are Required:
Section 1751 requires cash flow statement for current interim period including comparatives as noted above.
Same Accounting Policies as Annual:
With respect to interim reporting – revenue and expense recognition, IFRS views the interim period as a discrete reporting period (with certain exceptions), while US GAAP views the interim period as an integral part of an annual period (with certain exceptions).
Discrete Versus Integral Approach:
Section 1751 of Canadian GAAP and IAS 34 are converged, except that IAS 34 precludes the deferral, in interim periods, of manufacturing cost variances that are expected to be absorbed by year end.
As well, IAS 34 treats the initial recognition of a previously unrecognized income tax asset as an adjustment to the estimated average annual effective income tax rate used in determining interim period tax expense, rather than as a separate item of the income tax expense.

23. Looking Ahead
This topic will be dealt with in Phase C of the Financial Statement Presentation project, which has not yet begun
Topics to be discussed by FASB
1. Which financial statements should be required in an interim financial report
2. Whether entities should be allowed to present the financial statements in an interim financial report in a condensed format
3. What comparative periods should be required or allowed in interim financial reports
4. Whether guidance for non-public companies should differ from guidance for public companies

24. End-of-Chapter Practice

25. End-of-Chapter Practice

26. End-of-Chapter Practice

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