INTERIM FINANCIAL REPORTING

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INTERIM FINANCIAL REPORTING BY KAUSHAL
KISHORE DECEMBER 20, 2005
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• ENVIRONMENT
• Listed companies
• Stock exchanges
• Stakeholders
• INVESTOR
• Investment options
• Risk assessment
• Risk Vs. return
• COMMUNICATION OF HEALTH
• Timely
• Useful
• Uniformity

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MISSION

• To provide an update on the latest annual
  financial statements

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ACCOUNTING LITERATURE

• DOES NOT MANDATE
• Which enterprise
• How frequently
• How soon

• If an enterprise is required
• or
• elects to prepare and present
• SHOULD COMPLY WITH STANDARD(S)

INDIA IFRS US GAAP
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PRIMARY APPLICATION

• APPLICABILITY CRITERIA BY
• National Govts.
• Security Regulators
• Stock Exchanges
• Accounting Bodies

• INDIA
• Listing Agreement Clause 41
• IFRS
• Country regulation
• US
• SEC Form 10-Q

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INTERIM FINANCIAL REPORTING

• FORM AND CONTENTS
• Per statute (say clause 41, Form 10Q)
• or
• Per Standard
• RECOGNITION AND MEASUREMENT
• Per Standard only

INDIA IFRS US GAAP
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INTERIM FINANCIAL REPORTING
STAKEHOLDERS VIEW
OBJECTIVE
CAPACITY TO GENERATE
ASSURANCE AS TO

• Financial condition
• Liquidity

• Earnings
• Cash flows

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INTERIM FINANCIAL REPORTING
GAAP
OBJECTIVE
MINIMUM CONTENTS
PRINCIPLES

• Recognition
• Measurement

• Complete
• Condensed

Ensure reliability and understanding
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INTERIM FINANCIAL REPORTING PROFESSIONAL
LITERATURE
ICAI AS(25) IASB IAS 34 APB APB
Opinion 28 FASB FIN 18
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INTERIM FINANCIAL REPORTING FORM AND CONTENTS

• COMPREHENSIVE
• CONDENSED

INDIA IFRS US GAAP
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CONDENSED FINANCIAL STATEMENTS MINIMUM
REQUIREMENTS
N
Unusual items
Earnings per share
Explanatory notes
Consolidated financial statements
Headings
IFRS and US GAAP
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SELECTED EXPLANATORY NOTES MINIMUM REQUIREMENTS
Contd..
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SELECTED EXPLANATORY NOTES MINIMUM REQUIREMENTS

• CHANGE IN COMPOSITION
• Amalgamations Disclose
• Change in subsidiaries Disclose
• Changes in long term investments Disclose
• Restructuring Disclose
• Discontinuing operations Disclose

Contd..
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SELECTED EXPLANATORY NOTES MINIMUM REQUIREMENTS

• ADDITIONAL ITEMS PER IAS 34
• Changes in contingent assets Disclose
• Related party transactions Disclose

Contd..
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ADDITIONAL DISCLOSURES CLAUSE 41

• Name change
• Non-promoter shareholding
• Audit qualifications
• Status if pre-operative stage
• Status of investor complaints

FORMAT SPECIFIED
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RECOGNITION AND MEASUREMENT
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INTERIM FINANCIAL REPORTING RECOGNITION AND
MEASUREMENT

• ACCOUNTING POLICIES
• UNEVENLY INCURRED COSTS
• USE OF ESTIMATES

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INTERIM FINANCIAL REPORTING INHERENT DIFFICULTIES

• Widely fluctuating revenues
• Heavy fixed cost
• Full year cost at infrequent intervals
• Certain cost leading to distorted picture
• Income tax relates to annual income
• Limited time available
• Detailed reviews not feasible
• Greater use of estimates

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INTERIM FINANCIAL REPORTING FUNDAMENTAL
RECOGNITION PRINCIPLES

• ASSET
• Future economic benefit
• LIABILITY
• An existing obligation
• INCOME
• Increase in future economic benefit..
• EXPENSE
• Decrease in future economic benefit

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INTERIM FINANCIAL REPORTING RECOGNITION AND
MEASUREMENT INDIA/IFRS Vs. US GAAP

• DISCRETE APPROACH
• INTEGRAL APPROACH

INDIA IFRS US GAAP likely convergence
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EXAMPLESMAJOR ANNUAL REPAIRS IN FIRST QUARTER
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GAAP COMPARISIONEXAMPLES
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GAAP COMPARISIONEXAMPLES
UNEVEN EXPENSES OTHER THAN PRODUCT COSTS
Contd..
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GAAP COMPARISIONEXAMPLES
UNEVEN EXPENSES OTHER THAN PRODUCT COSTS
Contd..
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GAAP COMPARISIONEXAMPLES
UNEVEN EXPENSES OTHER THAN PRODUCT COSTS
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INVENTORY VALUATIONEXCEPTIONS TO DISCRETE
APPROACH AS PER US GAAP

• GROSS PROFIT METHOD
• NET REALISABLE VALUE
• - TEMPORARY MARKET DECLINE
• STANDARD COSTS
• - TEMPORARY VARIANCES

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INTERIM FINANCIAL REPORTING RECOGNITION AND
MEASUREMENT INCOME-TAX

• Average annual effective rate
• Re-estimate on YTD basis
• Disclose significant change in estimate
• May apply weighted average rate

INDIA IFRS US GAAP
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INTERIM FINANCIAL REPORTING CHANGE IN ACCOUNTING
POLICY

• Re-state the prior interim periods (current year)
• Change to apply from beginning of the year
• Re-statement of previous years
• India No
• IFRS/US GAAP Yes

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INTERIM FINANCIAL REPORTING CHANGE IN ESTIMATE
IN FINAL INTERIM PERIOD

• Disclose
• Nature
• Amount

INDIA IFRS US GAAP
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THANK YOU