Objective
IAS 34 prescribes the minimum content of an interim financial report and the principles for recognition and measurement in such reports.
Its goal is to ensure timely and reliable financial information is available between annual reporting periods.
🧾 1. What is an Interim Financial Report?
An interim financial report is a financial report containing either:
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a complete set of financial statements (as in IAS 1), or
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a condensed set of financial statements for a shorter period than a full financial year (usually quarterly or half-yearly).
🗓️ 2. Frequency and Period Covered
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Entities may issue interim reports quarterly, half-yearly, or at other intervals (depending on law or regulation).
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Each interim period is part of a financial year — it does not stand alone.
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Comparatives are required for the same period of the previous year.
🧱 3. Minimum Components of a Condensed Interim Financial Report
IAS 34 requires at least the following:
| Component | Description |
|---|---|
| 1️⃣ Condensed Statement of Financial Position | As at the end of the current interim period and comparable prior year-end. |
| 2️⃣ Condensed Statement of Profit or Loss and Other Comprehensive Income | For the current interim period and year-to-date, with comparatives. |
| 3️⃣ Condensed Statement of Changes in Equity | For the year-to-date period, with comparatives. |
| 4️⃣ Condensed Statement of Cash Flows | For the year-to-date period, with comparatives. |
| 5️⃣ Selected Explanatory Notes | Explaining events and transactions significant to understanding changes. |
⚙️ 4. Recognition and Measurement Principles
IAS 34 uses the same recognition and measurement principles as annual financial statements (per IFRS).
However, materiality and timing considerations are adjusted for the shorter period.
Key rules:
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Use consistent accounting policies as in the most recent annual financial statements.
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Income and expenses are recognized when they occur, not when received or paid.
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Costs that benefit more than one period are allocated proportionately (e.g., insurance or depreciation).
📊 5. Materiality
Materiality for interim reporting is assessed in relation to interim data, not annual data.
👉 Example:
An expense of $50,000 may be immaterial for a full-year profit of $5 million,
but material for a 3-month profit of $100,000 — so it should be disclosed in the interim report.
🧮 6. Examples
Example 1 – Quarterly Report
Company ABC prepares quarterly financial reports.
At 30 June (Q2), ABC recognizes revenue of $2 million and expenses of $1.5 million → profit $0.5 million.
👉 IAS 34 requires:
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Condensed income statement for Q2 and 6-month cumulative period.
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Balance sheet as of 30 June and 31 December (prior year-end).
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Notes explaining key events (e.g., product launch, new loan, litigation).
Example 2 – Seasonal Business
A farming company earns most revenue in Q4.
During Q2, it incurs high planting expenses but little income.
IAS 34 says do not defer costs just because revenue comes later.
→ Report actual loss for Q2.
The interim report should explain that the business is seasonal.
Example 3 – Tax Expense Allocation
Income tax expense for interim periods should be estimated using the expected annual effective tax rate.
Example:
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Expected annual tax rate: 30%
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Q1 profit: $100,000
→ Interim tax expense = $30,000.
Example 4 – Impairment at Interim Date
At 30 June, indicators show asset impairment (e.g., decline in demand).
→ Recognize impairment loss now (cannot delay to year-end).
If at year-end the situation improves → reversal (if permitted under IAS 36).
🧾 7. Notes to Interim Financial Statements
The notes should explain:
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Significant changes in accounting policies or estimates.
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Seasonality or cyclicality of operations.
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Nature and amount of unusual items.
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Changes in contingent liabilities or assets.
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Dividends paid.
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Issuances or repayments of debt/equity instruments.
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Events after interim period affecting financial position.
👉 The interim report focuses on new information — not repetition from the annual report.
📅 8. Comparative Information Required
| Statement | Comparatives Required |
|---|---|
| Statement of Financial Position | End of current interim period and end of previous financial year |
| Statement of Profit or Loss and OCI | Current interim period & year-to-date vs same periods last year |
| Cash Flow Statement | Year-to-date vs same period last year |
| Statement of Changes in Equity | Year-to-date vs same period last year |
🧠 9. Consistency
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Use the same accounting policies and estimation methods as the annual statements.
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Any change in policy must comply with IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors).
📘 10. Disclosure Examples
Example:
During Q2 20X5, the company incurred restructuring costs of $1.2 million related to factory closure.
The restructuring is expected to be completed by December 20X5.
This is a non-recurring event and is disclosed separately in the interim financial statements.
Example:
Revenue in Q2 decreased by 30% compared to Q2 20X4 due to the COVID-related supply chain disruptions.
📊 11. Summary Table
| Topic | Requirement |
|---|---|
| Objective | Provide timely, reliable financial updates during the year |
| Minimum content | Condensed financial statements + notes |
| Measurement | Same principles as annual; estimated for interim |
| Tax expense | Based on expected annual rate |
| Seasonality | Report actual results; explain if seasonal |
| Comparatives | Required for all key statements |
| Policies | Consistent with annual statements |
🧾 12. Simple Example of Interim Report (Condensed)
Condensed Income Statement (for 6 months ended 30 June 20X5):
| Item | Amount ($) |
|---|---|
| Revenue | 2,000,000 |
| Cost of Sales | (1,400,000) |
| Gross Profit | 600,000 |
| Operating Expenses | (350,000) |
| Operating Profit | 250,000 |
| Income Tax (30%) | (75,000) |
| Net Profit | 175,000 |
Notes:
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No change in accounting policy since last annual report.
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Seasonal sales expected to increase in Q4.
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New short-term loan of $100,000 obtained in Q2.
🧭 13. Summary Flow
| Step | What to Do |
|---|---|
| 1️⃣ | Identify interim period (quarter, half-year, etc.) |
| 2️⃣ | Prepare condensed financial statements |
| 3️⃣ | Apply same accounting policies |
| 4️⃣ | Estimate items (tax, provisions) if needed |
| 5️⃣ | Focus on material events and new disclosures |
| 6️⃣ | Provide comparative data for prior periods |