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TOA Lecture 6
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The single statement of comprehensive income (one statement approach) or the separate income
statement and the separate statement of comprehensive income (two statement approach) have to be
presented for the following periods (IAS 34.20b):
Current interim period
Cumulatively for the current financial year to date
Comparable periods (current and year-to-date) of the immediately preceding financial year
The statement of changes in equity and the statement of cash flows are presented 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 (IAS 34.20c and d).
3. MATERIALITY
In deciding how to recognize, measure, classify or disclose an item for interim financial reporting purposes,
materiality has to be assessed in relation to the interim period financial data. In making assessments of
materiality, it has to be recognized that interim measurements may rely on estimates to a greater extent than
measurements of annual financial data (IAS 34.23).
4. RECOGNITION AND MEASUREMENT
The recognition and measurement guidance of IAS 34 also applies to complete financial statements for an
interim period (i.e. to a comprehensive interim report) (IAS 34.7).
4.1 Discrete approach vs. integral approach
The same accounting policies are applied in an entitys interim financial statements as are applied in its
annual financial statements. Departures from these accounting policies are subject to the general rules of
IFRS (IAS 34.28 34.29). For example, initial application of a new Standard or of an amended version of an
existing Standard may lead to the application of a different measurement method in the entitys first quarterly
financial statements of the year (as at Mar 31, 02) than in its last annual financial statements (as at Dec. 31,
01).
Interim financial reporting according to IAS 34 is primarily based on a discrete view. By contrast, interim
financial reporting according to US GAAP (see among others: APB 28) is more based on an integral view:
Under the discrete approach (IAS 34) interim period profit or loss is measured by viewing each
interim period separately and not by anticipation of the annual financial statements. For assets, the
same tests of future economic benefits apply at interim dates as at the end of the financial year.
Costs that by their nature would not qualify as assets at the financial year-end would not qualify at
interim dates either. Similarly, a liability at the end of an interim period has to represent an existing
obligation at that date, just as it must at the end of an annual reporting period (IAS 34.32).
Under the integral approach, interim period profit or loss is measured by viewing each interim period
as an integral part of the corresponding annual period. The interim report is intended to enable
forecasts of the annual financial statements. For example, it may be the case that an entity performs
the day-to-day servicing for its machines during its off-season, which is the first quarter of the year.
The expenditures for this work do not qualify for capitalization in the entitys annual financial
statements as at Dec. 31. Under the discreet approach, the total of these expenditures would be
recognized in profit or loss in the entitys first quarterly financial statements as at Mar 31 (IAS 34.B2).
However, under the integral approach, an appropriate portion of these expenditures is allocated to
each interim period of the year.
TOA Lecture 6
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With regard to the price component, the IAS 34 is rather based on an integral view than on a
discrete view. If the price component depends on whether certain limits will be exceeded for the
whole year, the price that is recognized in the first quarters depends on an estimate of whether those
limits will be exceeded by the end of the year. An example is a contractually agreed volume rebate,
the percentage of which depends on the quantity purchased during the year (IAS 34.B23).
These considerations also apply when measuring interim income tax expense (IAS 34.30c and 34.B12
34.B16):
The tax base is the taxable profit for the interim period (quantity component in a broader sense).
In the case of a progressive tax system, the tax rate (price component) is determined on the basis of
the estimated amount of taxable profit for the year (estimated weighted average tax rate for the year).
Finally, the tax rate is multiplied with taxable profit for the interim period.
The estimate of the tax rate for the year may have to be adjusted as a result of the taxable profit for the
following interim period (IAS 34.B13).
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