International Accounting Standard 34 Requirements

International Accounting Standard 34 (IAS 34) establishes the minimum content for an interim financial report, which provides financial data for a period shorter than a full fiscal year. The goal is to offer timely and reliable information to investors, creditors, and other stakeholders. The standard provides an update on the latest annual financial statements, focusing on new activities and events rather than duplicating previously reported information. This approach helps users understand a company’s financial trajectory between annual reporting dates.

Scope and Applicability of the Standard

The application of IAS 34 is conditional. The standard itself does not mandate which entities must publish interim financial reports or their frequency. These requirements are typically imposed by national governments, securities regulators, and stock exchanges that oversee publicly traded companies.

If an entity is required by a regulatory body to publish an interim report following International Financial Reporting Standards (IFRS), then it must adhere to IAS 34. Similarly, if a company voluntarily chooses to prepare an interim report that claims compliance with IFRS, it is also bound by the standard’s requirements.

IAS 34 encourages publicly traded entities to provide interim financial reports covering at least the first half of their financial year. It also suggests these reports be issued no later than 60 days after the end of the interim period.

Required Components of an Interim Financial Report

When an entity prepares an interim financial report under IAS 34, it can present either a complete set of financial statements, per IAS 1, or a condensed set. The condensed format is the minimum requirement and includes a condensed statement of financial position, comprehensive income, changes in equity, and cash flows. “Condensed” means the statements present major headings and subtotals instead of every line item from the annual report.

The report must include comparative information. The statement of financial position is compared to the statement from the end of the last full financial year. The statement of comprehensive income is compared with the same interim period from the prior year.

The statement of cash flows and the statement of changes in equity require a year-to-date comparison against the same year-to-date period of the preceding financial year. For entities that fall under the scope of IAS 33, basic and diluted earnings per share must be presented for the interim period.

Recognition and Measurement Principles

A primary principle of IAS 34 is the consistent application of accounting policies. An entity must use the same accounting policies in its interim financial statements as it uses in its annual financial statements. If a new accounting policy is adopted after the last annual statements, it must be implemented in the interim report if it is to be reflected in the next annual statements.

Measurements for interim reporting are made on a year-to-date basis. This prevents the frequency of reporting from distorting the measurement of the entity’s annual performance. For example, revenues that are received seasonally within a financial year should not be anticipated or deferred at an interim date if doing so would not be appropriate at the end of the entity’s financial year.

Costs incurred unevenly during the financial year should be anticipated or deferred for interim reporting only if it is also appropriate to do so at the end of the financial year. The preparation of interim reports often requires a greater use of estimates than annual reports.

Income tax expense for an interim period is recognized based on the best estimate of the weighted average annual income tax rate expected for the full financial year. This estimated annual rate is then applied to the pre-tax income of the interim period.

Selected Explanatory Notes and Disclosures

IAS 34 mandates selected explanatory notes to explain significant events and transactions that have occurred since the last annual reporting date. The notes must state that the same accounting policies from the most recent annual statements were followed. If accounting policies have changed, the nature and effect of those changes must be disclosed.

Other required disclosures include:

• Explanations of the seasonality or cyclicality of interim operations.
• The nature and amount of items affecting assets, liabilities, equity, net income, or cash flows that are unusual because of their nature, size, or incidence.
• Information on dividends paid, and on issuances or repurchases of debt and equity securities.
• Segment revenue and profit for primary reportable segments.
• Material events that occurred after the interim period ended but before the report was authorized for issue.