ICAI Notes- Unit 7: Presentation & Disclosures Based Accounting Standards | Advanced Accounting for CA Intermediate PDF Download

 Page 1


 
 
PRESENTATION & DISCLOSURES BASED 
ACCOUNTING STANDARDS 
 
    
v 
 
4.133 
 
 
UNIT 7: ACCOUNTING STANDARD  25 INTERIM 
FINANCIAL REPORTING 
 
 
After studying this unit, you will be able to comprehend  the following: 
? Objective and scope of AS 25 
? Content of an Interim Financial Report 
? Minimum Components of an Interim Financial Report 
? Form and Content of Interim Financial Statements 
? Selected Explanatory Notes 
? Periods for which Interim Financial Statements are required to be 
presented 
? Disclosure in Annual Financial Statements 
? Recognition and Measurement principles as per the Standard. 
7.1 INTRODUCTION 
AS 25 does not mandate which enterprises should be required to present interim 
financial reports, how frequently, or how soon after the end of an interim period.  
If an enterprise is required or elects to prepare and present an interim financial 
report, it should comply with this Standard. The standard prescribes the minimum 
contents of an interim financial report and requires that an enterprise which elects 
to prepare and present an interim financial report, should comply with this 
standard. It also lays down the principles for recognition and measurement in a 
complete or condensed financial statements for an interim period.  Timely and 
reliable interim financial reporting improves the ability of investors, creditors, 
lenders and others to understand an enterprise’s capacity to generate earnings and 
cash flows, its financial condition and liquidity. 
A statute governing an enterprise or a regulator may also require an enterprise to 
prepare and present certain information at an interim date which may be different 
LEARNING OUTCOMES 
© The Institute of Chartered Accountants of India
Page 2


 
 
PRESENTATION & DISCLOSURES BASED 
ACCOUNTING STANDARDS 
 
    
v 
 
4.133 
 
 
UNIT 7: ACCOUNTING STANDARD  25 INTERIM 
FINANCIAL REPORTING 
 
 
After studying this unit, you will be able to comprehend  the following: 
? Objective and scope of AS 25 
? Content of an Interim Financial Report 
? Minimum Components of an Interim Financial Report 
? Form and Content of Interim Financial Statements 
? Selected Explanatory Notes 
? Periods for which Interim Financial Statements are required to be 
presented 
? Disclosure in Annual Financial Statements 
? Recognition and Measurement principles as per the Standard. 
7.1 INTRODUCTION 
AS 25 does not mandate which enterprises should be required to present interim 
financial reports, how frequently, or how soon after the end of an interim period.  
If an enterprise is required or elects to prepare and present an interim financial 
report, it should comply with this Standard. The standard prescribes the minimum 
contents of an interim financial report and requires that an enterprise which elects 
to prepare and present an interim financial report, should comply with this 
standard. It also lays down the principles for recognition and measurement in a 
complete or condensed financial statements for an interim period.  Timely and 
reliable interim financial reporting improves the ability of investors, creditors, 
lenders and others to understand an enterprise’s capacity to generate earnings and 
cash flows, its financial condition and liquidity. 
A statute governing an enterprise or a regulator may also require an enterprise to 
prepare and present certain information at an interim date which may be different 
LEARNING OUTCOMES 
© The Institute of Chartered Accountants of India
 
 
 
4.134 
ADVANCED ACCOUNTING 
 
in form and/or content as required by this Standard. In such a case, the recognition 
and measurement principles as laid down in this Standard are applied in respect of 
such information, unless otherwise specified in the statute or by the regulator. 
7.2 DEFINITIONS OF THE TERMS USED UNDER 
THE ACCOUNTING STANDARD 
Interim period is a financial reporting period shorter than a full financial year. 
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. 
During the first year of operations of an enterprise, its annual financial reporting 
period may be shorter than a financial year. In such a case, that shorter period is 
not considered as an interim period.  
 7.3 CONTENT OF AN INTERIM FINANCIAL REPORT 
A complete set of financial statements normally includes Balance sheet, Statement 
of Profit & Loss, Cash flow statement and Notes including those relating to 
accounting policies and other statements and explanatory material that are an 
integral part of the financial statements.  
The benefit of timeliness of presentation may be partially offset by a reduction in 
detail in the information provided.  Therefore, this Standard requires preparation 
and presentation of an interim financial report containing, as a minimum, a set of 
condensed financial statements. Accordingly, it focuses on new activities, events, 
and circumstances and does not duplicate information previously reported. AS 25 
does not prohibit or discourage an enterprise from presenting a complete set of 
financial statements in its interim financial report, rather than a set of condensed 
financial statements.  The recognition and measurement principles set out in this 
Standard apply also to complete financial statements for an interim period, and 
such statements would include all disclosures required by this Standard as well as 
those required by other Accounting Standards. Minimum components of an Interim 
Financial Report includes condensed Financial Statement. 
© The Institute of Chartered Accountants of India
Page 3


 
 
PRESENTATION & DISCLOSURES BASED 
ACCOUNTING STANDARDS 
 
    
v 
 
4.133 
 
 
UNIT 7: ACCOUNTING STANDARD  25 INTERIM 
FINANCIAL REPORTING 
 
 
After studying this unit, you will be able to comprehend  the following: 
? Objective and scope of AS 25 
? Content of an Interim Financial Report 
? Minimum Components of an Interim Financial Report 
? Form and Content of Interim Financial Statements 
? Selected Explanatory Notes 
? Periods for which Interim Financial Statements are required to be 
presented 
? Disclosure in Annual Financial Statements 
? Recognition and Measurement principles as per the Standard. 
7.1 INTRODUCTION 
AS 25 does not mandate which enterprises should be required to present interim 
financial reports, how frequently, or how soon after the end of an interim period.  
If an enterprise is required or elects to prepare and present an interim financial 
report, it should comply with this Standard. The standard prescribes the minimum 
contents of an interim financial report and requires that an enterprise which elects 
to prepare and present an interim financial report, should comply with this 
standard. It also lays down the principles for recognition and measurement in a 
complete or condensed financial statements for an interim period.  Timely and 
reliable interim financial reporting improves the ability of investors, creditors, 
lenders and others to understand an enterprise’s capacity to generate earnings and 
cash flows, its financial condition and liquidity. 
A statute governing an enterprise or a regulator may also require an enterprise to 
prepare and present certain information at an interim date which may be different 
LEARNING OUTCOMES 
© The Institute of Chartered Accountants of India
 
 
 
4.134 
ADVANCED ACCOUNTING 
 
in form and/or content as required by this Standard. In such a case, the recognition 
and measurement principles as laid down in this Standard are applied in respect of 
such information, unless otherwise specified in the statute or by the regulator. 
7.2 DEFINITIONS OF THE TERMS USED UNDER 
THE ACCOUNTING STANDARD 
Interim period is a financial reporting period shorter than a full financial year. 
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. 
During the first year of operations of an enterprise, its annual financial reporting 
period may be shorter than a financial year. In such a case, that shorter period is 
not considered as an interim period.  
 7.3 CONTENT OF AN INTERIM FINANCIAL REPORT 
A complete set of financial statements normally includes Balance sheet, Statement 
of Profit & Loss, Cash flow statement and Notes including those relating to 
accounting policies and other statements and explanatory material that are an 
integral part of the financial statements.  
The benefit of timeliness of presentation may be partially offset by a reduction in 
detail in the information provided.  Therefore, this Standard requires preparation 
and presentation of an interim financial report containing, as a minimum, a set of 
condensed financial statements. Accordingly, it focuses on new activities, events, 
and circumstances and does not duplicate information previously reported. AS 25 
does not prohibit or discourage an enterprise from presenting a complete set of 
financial statements in its interim financial report, rather than a set of condensed 
financial statements.  The recognition and measurement principles set out in this 
Standard apply also to complete financial statements for an interim period, and 
such statements would include all disclosures required by this Standard as well as 
those required by other Accounting Standards. Minimum components of an Interim 
Financial Report includes condensed Financial Statement. 
© The Institute of Chartered Accountants of India
 
 
PRESENTATION & DISCLOSURES BASED 
ACCOUNTING STANDARDS 
 
    
v 
 
4.135 
 
Note: Interim financial report may contain a complete set of financial statements 
or condensed financial statements. If the entity opted for a complete set of financial 
statements, it will be like annual set of financial statements. The condensed 
financial statements would include the limited information as required by this 
standard. 
7.4 FORM AND CONTENT OF INTERIM FINANCIAL 
STATEMENTS 
If an enterprise prepares and presents a complete set of financial statements in its 
interim financial report, the form and content of those statements should conform 
to the requirements as applicable to annual complete set of financial statements.  
If an enterprise prepares and presents a set of condensed financial statements in 
its interim financial report, those condensed statements should include, at a 
minimum, each of the headings and sub-headings that were included in its most 
recent annual financial statements and the selected explanatory notes as required 
by this Statement.  
Additional line items or notes should be included if their omission would make the 
condensed interim financial statements misleading.  
If an enterprise presents basic and diluted earnings per share in its annual financial 
statements in accordance with AS 20 then it has to present basic and diluted 
earnings per share as per AS 20 on the face of Statement of Profit and Loss 
complete or condenses for an interim period also. 
7.5 SELECTED EXPLANATORY NOTES 
An enterprise should include the following information, as a minimum, in the notes 
to its interim financial statements, if material and if not disclosed elsewhere in the 
interim financial report:  
(a) A statement that the same accounting policies are followed in the interim 
financial statements as those followed in the most recent annual financial 
statements or, if those policies have been changed, a description of the 
nature and effect of the change. 
© The Institute of Chartered Accountants of India
Page 4


 
 
PRESENTATION & DISCLOSURES BASED 
ACCOUNTING STANDARDS 
 
    
v 
 
4.133 
 
 
UNIT 7: ACCOUNTING STANDARD  25 INTERIM 
FINANCIAL REPORTING 
 
 
After studying this unit, you will be able to comprehend  the following: 
? Objective and scope of AS 25 
? Content of an Interim Financial Report 
? Minimum Components of an Interim Financial Report 
? Form and Content of Interim Financial Statements 
? Selected Explanatory Notes 
? Periods for which Interim Financial Statements are required to be 
presented 
? Disclosure in Annual Financial Statements 
? Recognition and Measurement principles as per the Standard. 
7.1 INTRODUCTION 
AS 25 does not mandate which enterprises should be required to present interim 
financial reports, how frequently, or how soon after the end of an interim period.  
If an enterprise is required or elects to prepare and present an interim financial 
report, it should comply with this Standard. The standard prescribes the minimum 
contents of an interim financial report and requires that an enterprise which elects 
to prepare and present an interim financial report, should comply with this 
standard. It also lays down the principles for recognition and measurement in a 
complete or condensed financial statements for an interim period.  Timely and 
reliable interim financial reporting improves the ability of investors, creditors, 
lenders and others to understand an enterprise’s capacity to generate earnings and 
cash flows, its financial condition and liquidity. 
A statute governing an enterprise or a regulator may also require an enterprise to 
prepare and present certain information at an interim date which may be different 
LEARNING OUTCOMES 
© The Institute of Chartered Accountants of India
 
 
 
4.134 
ADVANCED ACCOUNTING 
 
in form and/or content as required by this Standard. In such a case, the recognition 
and measurement principles as laid down in this Standard are applied in respect of 
such information, unless otherwise specified in the statute or by the regulator. 
7.2 DEFINITIONS OF THE TERMS USED UNDER 
THE ACCOUNTING STANDARD 
Interim period is a financial reporting period shorter than a full financial year. 
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. 
During the first year of operations of an enterprise, its annual financial reporting 
period may be shorter than a financial year. In such a case, that shorter period is 
not considered as an interim period.  
 7.3 CONTENT OF AN INTERIM FINANCIAL REPORT 
A complete set of financial statements normally includes Balance sheet, Statement 
of Profit & Loss, Cash flow statement and Notes including those relating to 
accounting policies and other statements and explanatory material that are an 
integral part of the financial statements.  
The benefit of timeliness of presentation may be partially offset by a reduction in 
detail in the information provided.  Therefore, this Standard requires preparation 
and presentation of an interim financial report containing, as a minimum, a set of 
condensed financial statements. Accordingly, it focuses on new activities, events, 
and circumstances and does not duplicate information previously reported. AS 25 
does not prohibit or discourage an enterprise from presenting a complete set of 
financial statements in its interim financial report, rather than a set of condensed 
financial statements.  The recognition and measurement principles set out in this 
Standard apply also to complete financial statements for an interim period, and 
such statements would include all disclosures required by this Standard as well as 
those required by other Accounting Standards. Minimum components of an Interim 
Financial Report includes condensed Financial Statement. 
© The Institute of Chartered Accountants of India
 
 
PRESENTATION & DISCLOSURES BASED 
ACCOUNTING STANDARDS 
 
    
v 
 
4.135 
 
Note: Interim financial report may contain a complete set of financial statements 
or condensed financial statements. If the entity opted for a complete set of financial 
statements, it will be like annual set of financial statements. The condensed 
financial statements would include the limited information as required by this 
standard. 
7.4 FORM AND CONTENT OF INTERIM FINANCIAL 
STATEMENTS 
If an enterprise prepares and presents a complete set of financial statements in its 
interim financial report, the form and content of those statements should conform 
to the requirements as applicable to annual complete set of financial statements.  
If an enterprise prepares and presents a set of condensed financial statements in 
its interim financial report, those condensed statements should include, at a 
minimum, each of the headings and sub-headings that were included in its most 
recent annual financial statements and the selected explanatory notes as required 
by this Statement.  
Additional line items or notes should be included if their omission would make the 
condensed interim financial statements misleading.  
If an enterprise presents basic and diluted earnings per share in its annual financial 
statements in accordance with AS 20 then it has to present basic and diluted 
earnings per share as per AS 20 on the face of Statement of Profit and Loss 
complete or condenses for an interim period also. 
7.5 SELECTED EXPLANATORY NOTES 
An enterprise should include the following information, as a minimum, in the notes 
to its interim financial statements, if material and if not disclosed elsewhere in the 
interim financial report:  
(a) A statement that the same accounting policies are followed in the interim 
financial statements as those followed in the most recent annual financial 
statements or, if those policies have been changed, a description of the 
nature and effect of the change. 
© The Institute of Chartered Accountants of India
 
 
 
4.136 
ADVANCED ACCOUNTING 
 
(b) Explanatory comments about the seasonality of interim operations. 
(c) The nature and amount of items affecting assets, liabilities, equity, net 
income, or cash flows that is unusual because of their nature, size, or 
incidence as per AS 5. 
(d) The nature and amount of changes in estimates of amounts reported in prior 
interim periods of the current financial year or changes in estimates of 
amounts reported in prior financial years, if those changes have a material 
effect in the current interim period. 
(e) Issuances, buy-backs, repayments and restructuring of debt, equity and 
potential equity shares. 
(f) Dividends, aggregate or per share (in absolute or percentage terms), 
separately for equity shares and other shares. 
(g) Segment revenue, segment capital employed (segment assets minus segment 
liabilities) and segment result for business segments or geographical 
segments, whichever is the enterprise's primary basis of segment reporting 
(disclosure of segment information is required in an enterprise's interim 
financial report only if the enterprise is required, in terms of AS 17, Segment 
Reporting, to disclose segment information in its annual financial 
statements). 
(h) The effect of changes in the composition of the enterprise during the interim 
period, such as amalgamations, acquisition or disposal of subsidiaries and 
long-term investments, restructurings, and discontinuing operations and 
(i) Material changes in contingent liabilities since the last annual balance sheet 
date.  
The above information should normally be reported on a financial year-to-date 
basis. However, the enterprise should also disclose any events or transactions that 
are material to an understanding of the current interim period. 
  
© The Institute of Chartered Accountants of India
Page 5


 
 
PRESENTATION & DISCLOSURES BASED 
ACCOUNTING STANDARDS 
 
    
v 
 
4.133 
 
 
UNIT 7: ACCOUNTING STANDARD  25 INTERIM 
FINANCIAL REPORTING 
 
 
After studying this unit, you will be able to comprehend  the following: 
? Objective and scope of AS 25 
? Content of an Interim Financial Report 
? Minimum Components of an Interim Financial Report 
? Form and Content of Interim Financial Statements 
? Selected Explanatory Notes 
? Periods for which Interim Financial Statements are required to be 
presented 
? Disclosure in Annual Financial Statements 
? Recognition and Measurement principles as per the Standard. 
7.1 INTRODUCTION 
AS 25 does not mandate which enterprises should be required to present interim 
financial reports, how frequently, or how soon after the end of an interim period.  
If an enterprise is required or elects to prepare and present an interim financial 
report, it should comply with this Standard. The standard prescribes the minimum 
contents of an interim financial report and requires that an enterprise which elects 
to prepare and present an interim financial report, should comply with this 
standard. It also lays down the principles for recognition and measurement in a 
complete or condensed financial statements for an interim period.  Timely and 
reliable interim financial reporting improves the ability of investors, creditors, 
lenders and others to understand an enterprise’s capacity to generate earnings and 
cash flows, its financial condition and liquidity. 
A statute governing an enterprise or a regulator may also require an enterprise to 
prepare and present certain information at an interim date which may be different 
LEARNING OUTCOMES 
© The Institute of Chartered Accountants of India
 
 
 
4.134 
ADVANCED ACCOUNTING 
 
in form and/or content as required by this Standard. In such a case, the recognition 
and measurement principles as laid down in this Standard are applied in respect of 
such information, unless otherwise specified in the statute or by the regulator. 
7.2 DEFINITIONS OF THE TERMS USED UNDER 
THE ACCOUNTING STANDARD 
Interim period is a financial reporting period shorter than a full financial year. 
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. 
During the first year of operations of an enterprise, its annual financial reporting 
period may be shorter than a financial year. In such a case, that shorter period is 
not considered as an interim period.  
 7.3 CONTENT OF AN INTERIM FINANCIAL REPORT 
A complete set of financial statements normally includes Balance sheet, Statement 
of Profit & Loss, Cash flow statement and Notes including those relating to 
accounting policies and other statements and explanatory material that are an 
integral part of the financial statements.  
The benefit of timeliness of presentation may be partially offset by a reduction in 
detail in the information provided.  Therefore, this Standard requires preparation 
and presentation of an interim financial report containing, as a minimum, a set of 
condensed financial statements. Accordingly, it focuses on new activities, events, 
and circumstances and does not duplicate information previously reported. AS 25 
does not prohibit or discourage an enterprise from presenting a complete set of 
financial statements in its interim financial report, rather than a set of condensed 
financial statements.  The recognition and measurement principles set out in this 
Standard apply also to complete financial statements for an interim period, and 
such statements would include all disclosures required by this Standard as well as 
those required by other Accounting Standards. Minimum components of an Interim 
Financial Report includes condensed Financial Statement. 
© The Institute of Chartered Accountants of India
 
 
PRESENTATION & DISCLOSURES BASED 
ACCOUNTING STANDARDS 
 
    
v 
 
4.135 
 
Note: Interim financial report may contain a complete set of financial statements 
or condensed financial statements. If the entity opted for a complete set of financial 
statements, it will be like annual set of financial statements. The condensed 
financial statements would include the limited information as required by this 
standard. 
7.4 FORM AND CONTENT OF INTERIM FINANCIAL 
STATEMENTS 
If an enterprise prepares and presents a complete set of financial statements in its 
interim financial report, the form and content of those statements should conform 
to the requirements as applicable to annual complete set of financial statements.  
If an enterprise prepares and presents a set of condensed financial statements in 
its interim financial report, those condensed statements should include, at a 
minimum, each of the headings and sub-headings that were included in its most 
recent annual financial statements and the selected explanatory notes as required 
by this Statement.  
Additional line items or notes should be included if their omission would make the 
condensed interim financial statements misleading.  
If an enterprise presents basic and diluted earnings per share in its annual financial 
statements in accordance with AS 20 then it has to present basic and diluted 
earnings per share as per AS 20 on the face of Statement of Profit and Loss 
complete or condenses for an interim period also. 
7.5 SELECTED EXPLANATORY NOTES 
An enterprise should include the following information, as a minimum, in the notes 
to its interim financial statements, if material and if not disclosed elsewhere in the 
interim financial report:  
(a) A statement that the same accounting policies are followed in the interim 
financial statements as those followed in the most recent annual financial 
statements or, if those policies have been changed, a description of the 
nature and effect of the change. 
© The Institute of Chartered Accountants of India
 
 
 
4.136 
ADVANCED ACCOUNTING 
 
(b) Explanatory comments about the seasonality of interim operations. 
(c) The nature and amount of items affecting assets, liabilities, equity, net 
income, or cash flows that is unusual because of their nature, size, or 
incidence as per AS 5. 
(d) The nature and amount of changes in estimates of amounts reported in prior 
interim periods of the current financial year or changes in estimates of 
amounts reported in prior financial years, if those changes have a material 
effect in the current interim period. 
(e) Issuances, buy-backs, repayments and restructuring of debt, equity and 
potential equity shares. 
(f) Dividends, aggregate or per share (in absolute or percentage terms), 
separately for equity shares and other shares. 
(g) Segment revenue, segment capital employed (segment assets minus segment 
liabilities) and segment result for business segments or geographical 
segments, whichever is the enterprise's primary basis of segment reporting 
(disclosure of segment information is required in an enterprise's interim 
financial report only if the enterprise is required, in terms of AS 17, Segment 
Reporting, to disclose segment information in its annual financial 
statements). 
(h) The effect of changes in the composition of the enterprise during the interim 
period, such as amalgamations, acquisition or disposal of subsidiaries and 
long-term investments, restructurings, and discontinuing operations and 
(i) Material changes in contingent liabilities since the last annual balance sheet 
date.  
The above information should normally be reported on a financial year-to-date 
basis. However, the enterprise should also disclose any events or transactions that 
are material to an understanding of the current interim period. 
  
© The Institute of Chartered Accountants of India
 
 
PRESENTATION & DISCLOSURES BASED 
ACCOUNTING STANDARDS 
 
    
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7.6 PERIODS FOR WHICH INTERIM FINANCIAL 
STATEMENTS ARE REQUIRED TO BE 
PRESENTED 
Interim reports should include interim financial statements (whether condensed or 
complete) for the periods listed in the following table: 
Statement Current period Comparative period 
Balance sheet End of current 
interim period 
End of immediately preceding 
financial year 
Statement of profit and 
loss 
Current interim 
period and 
cumulatively for the 
year-to-date 
Comparable interim period 
and year-to-date of 
immediately preceding 
financial year 
Cash flow statement Cumulatively for the 
current financial 
year-to-date 
Comparable year-to-date of 
immediately preceding 
financial year 
 7.7 MATERIALITY 
In deciding how to recognise, measure, classify, or disclose an item for interim 
financial reporting purposes, materiality should be assessed in relation to the 
interim period financial data.  
In making assessments of materiality, it should be recognised that interim 
measurements may rely on estimates to a greater extent than measurements of 
annual financial data.  
For reasons of understandability of the interim figures, materiality for making 
recognition and disclosure decision is assessed in relation to the interim period 
financial data.  
Thus, for example, unusual or extraordinary items, changes in accounting policies 
or estimates, and prior period items are recognised and disclosed based on 
materiality in relation to interim period data. 
© The Institute of Chartered Accountants of India