Ind AS 34, Interim Financial Reporting | AS 25 Vs Ind AS 34

Ind AS 34

Ind AS 34, Interim Financial Reporting: The objective of Ind AS 34 is to prescribe the minimum content of an interim financial report and to prescribe the principles for recognition and measurement in complete or condensed financial statements for an interim period. Timely and reliable interim financial reporting improves the ability of investors, creditors, and others to understand an entity’s capacity to generate earnings and cash flows and its financial condition and liquidity.

Ind AS 34

This Standard applies if an entity is required or elects to publish an interim financial report in accordance with Indian Accounting Standards.

Interim financial report means a financial report containing either a complete set of financial statements (as described in Ind AS 1,  Presentation  of  Financial Statements, or a set of condensed financial statements  (as described in this Standard) for an interim period.

In the interest of timeliness and cost considerations and to avoid repetition of information previously reported, an entity may be required to or may elect to provide less information at interim dates as compared  with  its  annual  financial statements. This Standard defines the minimum content  of  an  interim financial report as including condensed financial statements and selected explanatory notes. The interim financial report is intended to provide an update on the latest complete set of annual financial statements. Accordingly, it focuses on new activities, events, and  circumstances  and  does not duplicate information previously reported.

Nothing in this Standard is intended to prohibit or discourage an entity from publishing a  complete set of financial statements (as described in  Ind AS 1)   in its interim financial report, rather than condensed financial statements and selected explanatory notes. 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.

An interim financial report shall include, at a minimum, the following components:

  • a condensed balance sheet ;
  • a condensed statement of profit and loss;
  • a condensed statement of changes in equity;
  • a condensed statement of cash flows; and
  • 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.

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.

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. To achieve that objective, measurements for interim reporting purposes shall be made on a year-to-date basis.

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.

There is an issue that whether 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. Appendix A of Ind AS 34 prescribes that an entity shall not reverse an impairment loss recognised in a previous interim period  in  respect  of goodwill.

Further this Appendix also prescribes that an entity shall not extend this accounting principle by analogy to other areas of potential  conflic t between Ind AS 34 and other Indian Accounting Standards

Difference Between AS 25 and Ind AS 34

AS 25 Ind AS 34
AS 25 does not provide any specific guidance on this issue. However, as per AS 28, it is possible to reverse the impairment loss recognised for goowill, but only in certain circumstances. Under Ind AS 34, if an entity has recognised impairment of:

  • goodwill  or
  • investment in an equity instrument or
  • any other financial asset

in one interim period, then it cannot be reversed in the subsequent interim period as well as in annual financial statements.

AS 25 becomes applicable if the entity prepares interim financial report, either suo moto or due to the requirement of statute or regulator. Ind AS 34 becomes applicable when the entity, either suo moto, or due to the requirement of statute or regulator, prepares the interim financial report in compliance with Accounting Standards.
As per AS 25, the contents of an interim financial report includes, at the minimum:

  • Condensed Balance Sheet
  • Condensed P&L
  • Condensed CFS and
  • Selected explanatory notes
In addition to these, Ind AS 34 requires a condensed statement of changes in equity for the period to be included in interim financial report.
AS 25 requires disclosure of information relating to contingent liabilities only. Ind AS 34 requires the disclosure of information relating to contingent liabilities as well as contingent assets.
AS 25 does not contain such requirement. Ind AS 34 states that if an interim financial report is prepared in compliance with the requirements of Ind AS 34, such fact should be disclosed.

An interim financial report is said to be complying with Ind AS 34, only  when it complies with all the requirement of Ind AS 34.

AS 25 exempts an entity to present comparative P&L Statement and Cash flow Statement, in case the entity is preparing the interim financial report for the first time, in accordance with AS 25. Ind AS 34 does not provide such relaxations.
As per AS 25, in case of change in accounting policy, the entity shall restate the financial statements of comparative prior interim periods of current financial year only. Ind AS 8 states that in case of change in accounting policy, the financial statements of earlier periods also need to be restated.

Consequently, Ind AS 34 requires restatement of comparative interim periods of prior financial years also, unless it is impracticable.

Reference to extraordinary items is still there. In line with Ind AS 1, references to extraordinary items have been deleted in Ind AS 34.
AS 25 requires the disclosure of :

  • agreegate dividend or
  • dividend per share

payable to equity and other types of shares outstanding.

Such disclosure can be made either in absolute terms or in % terms.

Ind AS 34 requires the disclosure of :

  • agreegate dividend or
  • dividend per share

paid to equity and other types of shares outstanding.

As per AS 25, in case the entity follows the practice of providing consolidated financial statements, along with separate financial statements, then the interim financial report should also include both these statements. Ind AS 34 states that if an entity’s most recent annual financial statements include consolidated financial statements along with separate financial statements, then interim financial report may, at the option of the entity, consist of consolidated financial statement only or of consolidated as well as separate financial statements.
As per AS 25, notes to interim financial statements shall contain a statement that the accounting policies, followed while preparing interim financial statements are same as those followed in preparation of the most recent annual financial statements.

In case the accounting policy followed in preparation of interim financial report are at variance from that followed while preparing most recent annual financial statements, a description of the nature and effect of change must be given.

Ind AS 34, in addition to the disclosure required by AS 25, requires the disclosure of methods of computation followed.
AS 25 does not address these issues separately. Under Ind AS 34, separate guidance is available for treatment of interim period manufacturing cost variance and foreign currency translation gains and losses

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