Interim Statement

Interim Statement is defined as the financial report covering a period of less than one year. Adjective interim means literally provisional or temporary. Statement in other words is pronouncement, affirmation or report.

Interim financial report. An interim financial report refers to either a complete set of financial statements for an interim period (prepared in accordance with the requirements of International Accounting Standards, IAS 1), or a set of condensed financial statements for an interim period (prepared in accordance with the requirements of IAS 34).

Interim period. A financial reporting period shorter than a full financial year (e.g., a period of three or six months).

Scope of Interim Report

Interim financial reports must include interim financial statements as follows:

• a balance sheet as at the end of the current interim period together with a comparative balance sheet as at the end of the immediately preceding financial year;
• a single statement of comprehensive income or a separate statement of income and comprehensive income for the current interim period and, where different, cumulatively for the current financial year to date with comparative single statement of comprehensive income or separate income statement and comprehensive income statement for the comparable interim period of the immediately preceding financial year;
• a statement of changes in equity cumulatively for the current financial year-to-date and a comparative statement for the comparable year-to-date of the immediately preceding financial year; and
• a cash flow statement which is prepared cumulatively for the current financial year-to-date with a comparative statement for the comparable year-to-date of the immediately preceding financial year.

Form and content

Form and content of interim financial statements:

1. IAS 34 mandates that if an entity chooses to present the complete set of (interim) financial statements instead of opting for the allowed method of presenting only condensed interim financial statements, then the form and content of those statements should conform to the requirements set by IAS 1 for complete set of financial statements.
2. However, if an entity opts for the condensed format approach to interim financial reporting, then IAS 34 requires that, at a minimum, those condensed financial statements include each of the headings and the subtotals that were included in the entity's most recent annual financial statements, along with selected explanatory notes, as prescribed by the standard.
3. IAS 34 requires disclosure of earnings per share (both basic Earnings per share EPS and diluted EPS) on the face of the interim statement of comprehensive income. This disclosure is mandatory whether condensed or complete interim financial statements are presented. However, since EPS is only required (by IAS 33) for publicly-held companies, it is likewise only mandated for interim financial statements of such reporting entities.
4. IAS 34 mandates that an entity should follow the same format in its interim statement showing changes in equity as it did in its most recent annual financial statements.
5. IAS 34 requires that an interim financial report be prepared on a consolidated basis if the entity's most recent annual financial statements were consolidated statements. Regarding presentation of separate interim financial statements of the parent company in addition to consolidated interim financial statements, if they were included in the most recent annual financial statements, this standard neither requires nor prohibits such inclusion in the interim financial report of the entity.

Examples of Interim Statement

• Quarterly Financial Statements: These financial statements are issued quarterly, and are used to report the performance of a business in terms of income, expenses, and other key financial metrics. The statement is usually released to shareholders and other stakeholders, and often serves as an interim report of the company's performance.
• Interim Financial Reports: Companies may also produce interim financial reports to provide updates on their performance since the last filing period. These reports are usually issued on a quarterly basis, but may also be released more or less frequently depending on the company's needs.
• Management Reports: Management reports are also commonly referred to as interim reports. These reports provide a summary of a company's performance during a specific period of time, such as a quarter or a year. They may include information about the company's financial performance, operations, and other key metrics.

Advantages of Interim Statement

Interim statement provides a number of advantages to the stakeholders of the business. These include:

• Increased visibility into the current financial situation of the business, which can provide valuable insights for management decisions and identify potential risks or opportunities.
• Improved ability to plan for the future, as interim statements help to provide a snapshot of the company’s financial health and direction.
• The interim statement can be used to compare current trends to prior ones, helping to identify and respond to any changes or discrepancies.
• Additional information can be provided, such as changes in inventory or accounts receivable, which can be used to inform future decision making.
• Interim statements can provide an early warning system to alert stakeholders of any potential issues or problems that the business may be facing.

Limitations of Interim Statement

Interim Statements have several limitations, including:

• Limited time period – Interim Statements cover a period of less than one year, and therefore, may not accurately represent the full financial picture of the company.
• Limited accuracy – Interim Statements are often estimates and projections, and can be subject to material revisions.
• Limited comparability – Interim Statements are often not comparable with other companies’ interim statements, as each company may have different accounting policies and procedures.
• Limited relevance – Interim Statements may not be an accurate representation of the company's current financial position, as the information can become outdated over time.
• Limited detail – Interim Statements may not provide the same level of detail as a full annual report, as they tend to focus on the most significant events of the period.

Other approaches related to Interim Statement

Interim Statement is commonly used in order to present the financial performance of a company for a period of less than one year. Other approaches related to Interim Statement include:

• Cash Flow Statements – this type of statement is used to provide information about the inflows and outflows of cash from the company. It shows how much cash is generated from operating activities, investing activities and financing activities.
• Financial Ratios – financial ratios are used to measure the performance of a company in relation to its competitors. Ratios such as Return on Equity, Return on Assets, Debt to Equity and Working Capital are examples of common financial ratios.
• Financial Forecasts – financial forecasts are used to predict the financial performance of a company in the future. They are based on assumptions about the future performance of the company, such as sales growth, cost of goods sold, capital expenditure and so on.

In summary, Interim Statement is used to present the financial performance of a company for a period of less than one year. Other approaches related to Interim Statement include Cash Flow Statements, Financial Ratios, and Financial Forecasts.

Footnotes

Interim Statement — recommended articles

Time period concept — Comparative statements — Account Analysis — Accrual method — Periodicity concept — Abridged accounts — Exceptional Item — Horizontal Analysis — Abbreviated accounts

References

• Collings S., (2016), UK GAAP Financial Statement Disclosures Manual, John Wiley & Sons Ltd, United Kingdom.
• Flood J. M., (2015), Wiley GAAP 2015: Interpretation and Application of Generally Accepted Accounting Principles, John Wiley & Sons Ltd, Connecticut.
• PKF International Ltd, (2015), Wiley IFRS 2015: Interpretation and Application of International Financial Reporting Standards, John Wiley & Sons, Inc., New Jersey.
• Robinson R. (ed.) (2015), International Financial Statement Analysis, John Wiley & Sons, Inc., New Jersey.

Author: Katarzyna Siedlarczyk