FINANCIAL

ACCOUNTING AND REPORTING

FAR26 Interim Reporting

26.1. Scope of PAS 34 and Key Definitions ................................................................. 1

26.2. Contents of an Interim Financial Report .......................................................... 1

26.3. General Guidelines of Interim Reporting ......................................................... 2

26.4. Other Considerations ................................................................................................ 2







FAR26 Interim Reporting

26.1. Scope of PAS 34 and Key Definitions
• PAS 34 does not mandate which entities should be required to publish interim financial reports, how
frequently, or how soon after the end of an interim period. However, governments, securities regulators,
stock exchanges, and accountancy bodies often require entities whose debt or equity securities are publicly
traded to publish interim financial reports. PAS 34 applies if an entity is required or elects to publish an
interim financial report in accordance with PFRSs.
• FRSC encourages publicly traded entities to provide interim financial reports that conform to the
recognition, measurement, and disclosure principles set out in this Standard. Specifically, publicly traded
entities are encouraged:
a. to provide interim financial reports at least as of the end of the first half of their financial year; and
b. to make their interim financial reports available not later than 60 days after the end of the interim
period.
• The following are the key definitions from the Standard:
a. Interim period – a financial reporting period shorter than a full financial year.
b. Interim financial report – a financial report containing either a complete set of financial
statements (as described in PAS 1) or a set of condensed financial statements (as described in PAS
34) for an interim period.


26.2. Contents of an Interim Financial Report
Complete set of financial Set of condensed financial
statements statements

a. a statement of financial position as at the
end of the period;
b. a statement of profit or loss and other
comprehensive income for the period;

c. a statement of changes in equity for the
a. a condensed statement of financial
period;
position;
d. a statement of cash flows for the period;
b. a condensed statement or condensed
e. notes, comprising significant accounting
statements of profit or loss and other
policies and other explanatory
Financial comprehensive income;
information;
statements c. a condensed statement of changes in
f. comparative information in respect of
equity;
the preceding period; and
d. a condensed statement of cash flows;
g. a statement of financial position as at the
and
beginning of the preceding period when
e. selected explanatory notes
an entity applies an accounting policy

retrospectively or makes a retrospective
restatement of items in its financial
statements, or when it reclassifies items
in its financial 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 conform to the requirements of PAS 1
Form and content shall be included if their omission would
for a complete set of financial statements
make the condensed interim financial

statements misleading.

Shall present basic and diluted earnings
per share for that period when the entity
is within the scope of PAS 33.

FAR26 INTERIM REPORTING 1

26.3. General Guidelines of Interim Reporting
a. Revenues from products sold or services rendered are generally recognized for interim reports on the
same basis as for the annual period.
b. Expenses associated directly with revenue are matched against revenue in those interim periods in which
the related revenue is recognized.
c. Expenses not associated with revenue are recognized in the interim periods as incurred or allocated over
the interim periods benefited.
d. Inventories are measured for interim financial reporting by the same principles as at financial year-end
(LCNRV). However full inventory taking may not be required at interim dates although it must be done at
financial year-end. It may be sufficient to make estimates at interim dates based on sales margin.
e. Inventory losses from permanent market declines are recognized in the interim period in which the decline
occurs. Recoveries of such losses on the same inventory in later interim period should be recognized as
gains in later interim periods.
f. Temporary market declines on inventories and recoveries at a later interim period are now recognized for
interim purposes.
g. Interim period income tax expense should reflect the same general principles of income tax accounting
applicable to annual reporting. Tax recognized based on weighted average annual income tax rate expected
for the full year. Tax rate changes during the year are adjusted in the subsequent interim period during the
year.
h. Gains or losses from, disposal of property, gains or losses from sale of discontinued operations and other
gains and losses should not be allocated over the interim periods.

26.4. Other Considerations

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 statements.
Accounting policies
However, the frequency of an entity’s reporting (annual, half-yearly, or quarterly)
shall not affect the measurement of its annual results. To achieve that objective,
measurements for interim reporting purposes shall be made on a year-to-date
basis.


Revenues received
Shall not be anticipated or deferred as of an interim date if anticipation or
seasonally, cyclically
deferral would not be appropriate at the end of the entity’s financial year
or occasionally


Costs incurred Shall be anticipated or deferred for interim reporting purposes if, and only if, it is
unevenly during the also appropriate to anticipate or defer that type of cost at the end of the financial
financial year year


While measurements in both annual and interim financial reports are often based
Use of estimates on reasonable estimates, the preparation of interim financial reports generally will
require a greater use of estimation methods than annual financial reports.


a. statement of financial position as of the end of the current interim period (e.g.
September 30, 2019) and a comparative statement of financial position as of the
end of the immediately preceding financial year (e.g. December 31, 2018)
b. statements of profit or loss and other comprehensive income for the current
interim period (e.g. July to September 2019) and cumulatively for the current
financial year to date (e.g. January to September 2019), with comparative
statements of profit or loss and other comprehensive income for the comparable
Periods to be
interim periods (current and year-to-date) of the immediately preceding
presented
financial year
c. statement of changes in equity 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
d. statement of cash flows 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

FAR26 INTERIM REPORTING 2

Quizzer – Problem 1
1. Bonvin Company experienced a P500,000 decline in the market value of its inventory at the end of the first quarter.
The entity had expected this decline to reverse in the second quarter, and in fact, the second quarter recovery
exceeded the previous decline by P100,000. What amount of gain or loss should be reported in the interim
statements for the first and second quarters?
First quarter Second quarter
A. P500,000 loss P500,000 gain
B. P500,000 loss P600,000 gain
C. P500,000 loss P100,000 gain
D. P0 P0

2. Kenneth Company's P6,000,000 net income for the quarter ended September 30, 2019, included the following after-
tax items:
• A P900,000 gain realized in May 2019 was allocated equally to the second, third and fourth quarters of 2019.
• A P500,000 cumulative effect loss resulting from a change in inventory valuation method was recognized on
August 31, 2019.
• In addition, the entity paid P200,000 on February 1, 2019, for 2019 calendar-year real property tax. Of this
amount, P50,000 was allocated to the third quarter of 2019.

What is the net income for the quarter ended September 30, 2012?
A. P6,200,000
B. P6,500,000
C. P6,150,000
D. P5,700,000

3. Sherald Company prepares quarterly interim financial reports. The entity sells electrical goods, and normally 5%
of customers claim on their warranty. The provision in the first quarter was calculated as 5% of sales to date, which
was P10,000,000. However, in the second quarter, a design fault was found, and warranty claims were expected to
be 10% for the whole year. Sales in the second quarter were P15,000,000. What would be the provision charged in
the second quarter’s interim financial statements?
A. P2,000,000
B. P1,250,000
C. P1,500,000
D. P750,000

4. Shearilynn Company, a calendar-year corporation, has the following income before tax provision and estimated
effective annual tax rates for the first three quarters of 2019:
Quarter Income before income tax Effective annual tax rate
First 6,000,000 40%
Second 7,000,000 40%
Third 4,000,000 45%

What is the income tax provision in the interim income statement for the third quarter?
A. P1,800,000
B. P2,450,000
C. P2,550,000
D. P7,650,000

Quizzer – Theory 1
1. Which of the following entities are required under PAS 34 to prepare and present interim financial reports?
A. listed entities C. a and b
B. financial institutions D. none of these

2. PAS 34 shall be applied by
A. entities which are required by the government or other entities to provide interim financial reports
B. those who choose to provide interim financial reports
C. a and b
D. all reporting entities who are adopting the full PFRSs

3. PAS 34 applies to a
A. condensed set of financial statements C. either a or b
B. complete set of financial statements D. neither a nor b

4. Which of the following expenses is recognized immediately in the interim period and not allocated to the other
interim periods?
A. Annual depreciation of equipment that benefits the entire annual period
B. Real property tax
C. 13th month pay of employees
D. Impairment of assets

FAR26 INTERIM REPORTING 3

5. Which of the following income is recognized immediately in the interim period and not allocated to the other
interim periods?
A. Gain on changes in fair value of investments C. Receipt of dividend income from investments
B. Gain on disposal of property D. All of these

6. Interim financial reports shall be published
A. Once a year at any time in that year C. On a quarterly basis
B. Within a month of the half year-end D. Whenever the entity wishes

7. Publicly traded entities are encouraged to provide interim financial reports
A. At least at the end of the half year and within 60 days at the end of the interim period
B. Within a month of the half year-end
C. On a quarterly basis
D. When the entity wishes

8. Interim financial reports should include as a minimum
A. A complete set of financial statements
B. A condensed set of financial statements and selected notes
C. A statement of financial position and income statement only
D. A condensed statement of financial position, income statement and statement of cash flows only

9. Which of the following statements is true?
I. An interim financial report may consist of a complete set of financial statements.
II. An interim financial report may consist of a condensed set of financial statements.
A. I only C. Both I and II
B. II only D. Neither I nor II

10. If an entity does not prepare interim financial reports
A. The year-end financial statements are deemed not to comply with PFRS.
B. The year-end financial statements' compliance with PFRS is not affected.
C. The year-end financial statements will not be acceptable under local legislation.
D. Interim financial reports should be included in the year-end financial statements.

11. There is a presumption that anyone reading interim financial reports will
A. Understand all PFRSs C. Have access to the most recent annual report
B. Have access to the records of the entity D. Not make decisions based on the report

12. An entity owns a number of farms that harvest produce seasonally. Approximately 80% of the sales are in the period
August to October. What is the disclosure requirement if the business is seasonal?
A. Additional notes should be written in the interim reports about the seasonal nature of business.
B. Disclosure of financial information for the latest and comparative 12-month period in addition to the interim
report.
C. Additional disclosure in the accounting policy note.
D. No additional disclosure.

13. Which is incorrect concerning presentation of comparative interim financial statements?
A. Statement of financial position as of the end of the current interim period and comparative statement of
financial position as of the end of the immediately preceding fiscal year.
B. Income statements for the current interim period and cumulatively for the current financial year to date with
comparative income statement for the immediately preceding year.
C. Statement of changes in equity cumulatively for the current fiscal year to date with comparative statement for
the comparable year to date period of the immediately preceding year.
D. Statement cash flows cumulatively for the current financial year to date with comparative statement for the
comparable year to date period of the immediately preceding year.

14. An interim financial report shall include, at a minimum, all of the following components, except
A. 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 PAS 1 for a complete set of financial statements.
B. If the financial statements are condensed, they should include, at a minimum, each of the headings and sub-
totals included in the most recent annual financial statements and the explanatory notes required by PAS 34.
C. Additional line-items should be included if their omission would make the interim financial information
misleading. If the annual financial statements were consolidated (group) statements, the interim statements
should be group statements as well.
D. In the statement that presents the components of profit or loss for an interim period, an entity need not present
basic and diluted earnings per share for that period when the entity is within the scope of PAS 33.

FAR26 INTERIM REPORTING 4

15. An entity shall include all of 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, except
A. a statement that the same accounting policies and methods of computation are followed in the interim financial
statements as compared with the most recent annual financial statements or, if those policies or methods have
been changed, a description of the nature and effect of the change
B. explanatory comments about the seasonality or cyclicality of interim operations
C. 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
D. segment information even if PFRS 8 does not require that entity to disclose segment information in its annual
financial

16. The following are examples of the kinds of disclosures required by PAS 34, except
A. the write-down of inventories to net realizable value and the reversal of such a write-down
B. recognition of a loss from the impairment of property, plant and equipment, intangible assets, or other assets,
and the reversal of such an impairment loss
C. acquisitions and disposals of items of property, plant and equipment
D. extraordinary items

Use the following information for the next four questions:
The entity's financial year ends at December 31 (calendar year). The entity will present the following financial
statements (condensed or complete) in its half-yearly interim financial report as of June 30, 20x1:

17. Statement of financial position
A. At June 30, 20x1; December 31, 20x0
B. At June 30, 20x1; June 30, 20x0
C. At June 30, 20x1; June 30, 20x0; December 31, 20x0
D. At June 30, 20x1; June 30, 20x0

18. Statement of profit or loss and other comprehensive income
A. 6 months ending June 30, 20x1; June 30, 20x0; Year ended December 31, 2000
B. 6 months ending June 30, 20x1; June 30, 20x0
C. 3 months ending June 30, 20x1; June 30, 20x0
D. 6 months ending June 30, 20x1; June 30, 20x0

19. Statement of changes in equity
A. 6 months ending June 30, 20 x1; June 30, 20x0
B. 6 months ending 30 June 20 x1 30 June 20x0
C. 3 months ending 30 June 20 x1 30 June 20x0
D. 6 months ending June 30, 20 x1; June 30, 20x0; Year ended December 31, 20x0

20. Statement of cash flows
A. 6 months ending June 30, 20x1; June 30, 20x0
B. 6 months ending 30 June 20x1; June 30, 20x0
C. 3 months ending 30 June 20x1; June 30, 20x0
D. 6 months ending June 30, 20x1; June 30, 20x0; Year ended December 31, 20x0

FAR26 INTERIM REPORTING 5