to at (b) above should be presented using the same format as the entity’s annual financial
statements. Accordingly, if an entity presents a separate statement of profit or loss in its
annual financial statements, then it should present a separate statement in the interim
financial report as well. Similarly, if a combined statement of profit or loss and other
comprehensive income is presented in the annual financial statements, the same format
must be adopted in the interim financial report. [IAS 34.8A].
As a minimum, the condensed financial statements should include each of the headings
and subtotals that were included in the entity’s last annual financial statements.
[IAS 34.10]. However, the condensed financial statements do not need to look exactly like
the year-end financial statements. Whilst IAS 34 requires ‘headings and subtotals’ to be
the same, there is no similar requirement for the ‘line items’ under those headings
referred to in IAS 1. [IAS 1.54, 82].
A literal reading could mean that an entity is only required to present non-current
assets, current assets, etc., on an interim statement of financial position. However, one
of the purposes of an interim report is to help the users of the financial statements to
understand the changes in financial position and performance of the entity since the
previous annual reporting period. [IAS 34.15]. To that end, IAS 34 also requires additional
line items or notes to be included if their omission makes the condensed financial
3054 Chapter 37
statements misleading. [IAS 34.10]. In addition, the overriding goal of IAS 34 is to ensure
that the interim report includes all information necessary to understand the financial
position and the performance during the interim period. [IAS 34.25]. Therefore, the
aggregation of information to this extent would be inconsistent with the objectives of
IAS 34 and judgement is required to determine which line items provide useful
information for decision-makers, and are presented, accordingly.
Inclusion of most of the line items in the annual financial statements has the benefit of
providing the most information to help users of the financial statements understand the
changes since the previous year-end. Nonetheless, entities may aggregate line items
used in the annual financial statements, if doing so does not render the information
misleading or prevent users of the financial statements from performing meaningful
trend analysis. In response to a submission relating to the presentation and content of
the condensed statement of cash flows, the Interpretations Committee expressed a
view that a three-line condensed statement of cash flows showing only a total for each
of operating, investing and financing cash flows would generally not meet the
requirements of IAS 34 as set out above.1
Consideration should also be given to regulatory requirements, for example, where a
regulator requires an entity to present certain line items using some form of materiality
criteria (e.g. in terms of amount, percentage relative to headings, or percentage change
from prior periods).
The following example illustrates one possible way in which an entity might choose to
combine line items presented separately in the annual financial statements when
preparing a condensed set of interim financial statements. However, such presentation
is at the discretion of management, based on facts and circumstances, including
materiality (as noted above), regulatory environment, and the overarching goal of
IAS 34 to provide relevant information. [IAS 34.25]. Accordingly, other presentations may
be appropriate.
Example 37.1: Presenting the same headings and sub-totals in condensed
interim financial statements
Annual financial
Condensed interim
Statement of financial position
statements
financial statements
Assets
Non-current assets
Intangible assets
●
●
Property, plant and equipment
●
●
Deferred tax assets
●
●
Investments in associates and joint ventures
○
Equity instruments at FVOCI
○
Other non-current assets
○
○
Total non-current assets
●
●
Current assets
Inventories
○
Trade and other receivables
●
●
Customer contract assets
○
Current income tax assets
○
Other current assets
○
○
Interim financial reporting 3055
Cash and cash equivalents
●
●
Total current assets
●
●
Total assets
●
●
Liabilities
Current liabilities
Trade and other payables
●
●
Customer contract liabilities
○
Current income tax liabilities
○
Borrowings
●
●
Provisions
○
Other current liabilities
○
○
Total current liabilities
●
●
Non-current liabilities
Borrowings
●
●
Pension obligations
●
●
Deferred tax liabilities
●
●
Other non-current liabilities
○
○
Provisions
○
Total non-current liabilities
●
●
Total liabilities
●
●
Equity
Share capital
●
●
Other reserves
●
●
Retained earnings
●
●
Total equity
●
●
● Included same line item in annual and interim financial statements
○ Denotes line items that have been combined in the interim financial statements
Statement of profit or loss and other
Annual financial
Condensed interim
comprehensive income
statements
financial statements
Revenue from contracts with customers
○
Rental income
○
Total revenue
○
○
Cost of goods
●
●
Cost of services
●
●
Gross profit
●
●
Selling costs
○
General and administrative costs
○
Impairment losses on financial assets
○
Other operating expenses
○
Total operating expense
s
○
○
Operating profit
●
●
Finance costs
●
●
Share of profit of associates and joint ventures
●
●
Profit before tax
●
●
Income tax expense
●
●
Profit for the period
●
●
3056 Chapter 37
Annual financial
Condensed interim
statements
financial statements
Other comprehensive income to be reclassified to
profit or loss in subsequent periods
Translation of foreign operations
○
Net gain on hedge of net investment
○
Related income tax expense
○
Net other comprehensive income to be reclassified
○
○
to profit or loss in subsequent periods
Other comprehensive income that will not be
reclassified subsequently to profit or loss
Actuarial losses on defined benefit plans
○
Revaluation of equity instruments at FVOCI
○
Related income tax credit
○
Net other comprehensive income that will not be
○
○
reclassified subsequently to profit or loss
Total other comprehensive income
●
●
Comprehensive income for the period
●
●
● Included same line item in annual and interim financial statements
○ Denotes line items that have been combined in the interim financial statements
Annual financial
Condensed interim
Statement of cash flows
statements
financial statements
Operating activities
Profit before tax
●
●
Non-cash adjustments:
Depreciation and amortisation
○
Gain on disposal of property
○
Finance
cost
○
Impairment
losses
on financial assets
○
Share of net profit of associate
○
Movements in pensions
○
Total non-cash adjustments
●
○
Working capital adjustments:
Trade and other receivables
○
Inventories
○
Customer contract assets and liabilities
○
Trade and other payables
○
Total working capital adjustments
●
○
Net cash flows generated from operations
●
●
Income taxes paid
●
●
Acquisition expenses paid
●
●
Net cash flows from operating activities
●
●
Investing activities
Interest received
●
●
Proceeds from sale of property
●
●
Purchases of property
●
●
Purchase of intangible assets
●
●
Proceeds from sale of equity instruments at
●
●
FVOCI
Net cash flows from investing activities
●
●
Interim financial reporting 3057
Financing activities
Proceeds from borrowings
●
●
Repayment of borrowings
●
●
Interest paid
●
●
Dividends paid
●
●
Net cash flows from financing activities
●
●
Net increase in cash and cash equivalents
●
●
Net foreign exchange difference
●
●
Cash and cash equivalents at beginning of year
●
●
Cash and cash equivalents at end of year
●
●
● Included same line item in annual and interim financial statements
○ Denotes line items that have been combined in the interim financial statements
For reasons of space, a statement of changes in equity is not presented in this example.
3.3
Requirements for both complete and condensed interim
financial information
The general principles for preparing annual financial statements are equally applicable
to condensed interim financial statements. These principles include fair presentation,
going concern, the accrual basis of accounting, materiality and aggregation, and
offsetting. [IAS 1.4, 15-35]. (See Chapter 3 at 4.1).
Furthermore, the following requirements apply irrespective of whether an entity
provides complete or condensed financial statements for an interim period:
• if applicable, basic and diluted earnings per share should be presented on the face
of the statement that presents items of profit or loss for an interim period. [IAS 34.11].
If the entity presents items of profit or loss in a separate statement in its annual
financial statements, it should present basic and diluted earnings per share on the
face of that separate statement in the interim financial report; [IAS 34.11A] and
• if the last annual financial statements were consolidated financial statements, the
interim financial report should also be prepared on a consolidated basis. [IAS 34.14].
If the entity’s last annual financial report included the parent’s separate financial statements
and consolidated financial statements, IAS 34 neither requires nor prohibits the inclusion of
the parent’s separate financial statements in the interim financial report. [IAS 34.14].
3.4 Management
commentary
A management commentary is not explicitly required by IAS 34, but frequently
included by entities in their interim financial reports along with the interim financial
statements. In most cases the requirement for a narrative review comes from local stock
market regulations and the entities should, therefore, follow the relevant guidance
issued by those regulators.
IAS 34 allows information required under the standard to be presented outside the
interim financial statements, i.e. in other parts of interim financial report. Thus some of
the required disclosures may be included in a management commentary (see 4.2.1
below). The standard itself does not establish specific requirements for the content of
a management commentary beyond what should be contained in (or cross-referred
from) the interim financial statements.
3058 Chapter 37
4
DISCLOSURES IN CONDENSED FINANCIAL STATEMENTS
IAS 34 combines a number of disclosure principles:
• Entities should provide information about events and transaction
s in the interim
period that are significant to an understanding of the changes in financial position
and performance since the last annual reporting period. In this context it is not
necessary to provide relatively insignificant updates to information reported in the
last annual financial statements (see 4.1 below). [IAS 34.15, 15A].
• In addition to information to explain significant changes since the last annual
reporting period, a number of specific disclosures are required to be given, if not
disclosed elsewhere in the interim financial report. [IAS 34.16A]. In this case the
decision to disclose is subject to a materiality assessment (see 4.2 below).
• The materiality assessment for disclosure is based on the interim period by itself,
to ensure all information is provided that is relevant to understanding the entity’s
financial position and its performance during the interim period (see 6 below).
[IAS 34.25].
Overall, applying those disclosure principles requires the exercise of judgement by the
entity regarding what information is significant and relevant. The practice of interim
reporting confirms that entities take advantage of that room for judgement, both for
disclosures provided in the notes to the financial statements and outside.
4.1
Significant events and transactions
IAS 34 presumes that users of an entity’s interim financial report also have access to its
most recent annual financial report. [IAS 34.15A]. On that basis, an interim financial report
should explain events and transactions that are significant to an understanding of the
changes in financial position and performance of the entity since the previous annual
reporting period and provide an update to the relevant information included in the
financial statements of the previous year. [IAS 34.15, 15C]. The inclusion of only selected
explanatory notes is consistent with the purpose of an interim financial report, to
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 605
