update the latest complete set of annual financial statements. Accordingly, condensed
financial statements avoid duplicating previously reported information and focus on
new activities, events, and circumstances. [IAS 34.6].
The standard requires disclosure of following events and transactions in interim
financial reports, if they are significant: [IAS 34.15B]
(a) write-down of inventories to net realisable value and the reversal of such a write-down;
(b) recognition of a loss from the impairment of financial assets, property, plant, and
equipment, intangible assets, assets arising from contracts with customers, or other
assets, and the reversal of such an impairment loss;
(c) reversal of any provisions for the costs of restructuring;
(d) acquisitions and disposals of items of property, plant, and equipment;
(e) commitments for the purchase of property, plant, and equipment;
(f) litigation
settlements;
(g) corrections
of
prior period errors;
Interim financial reporting 3059
(h) changes in the business or economic circumstances that affect the fair value of the
entity’s financial assets and financial liabilities, whether those assets or liabilities
are recognised at fair value or amortised cost;
(i) any loan default or breach of a loan agreement that is not remedied on or before
the end of the reporting period;
(j) related party transactions;
(k) transfers between levels of the fair value hierarchy used in measuring the fair value
of financial instruments;
(l)
changes in the classification of financial assets as a result of a change in the purpose
or use of those assets; and
(m) changes in contingent liabilities or contingent assets.
The standard specifies that the above list of events and transactions is not
exhaustive and the interim financial report should explain any additional events and
transactions that are significant to an understanding of changes in the entity’s
financial position and performance. [IAS 34.15, 15B]. Therefore, when information
relating to items not on the above list changes significantly, an entity should still
provide disclosure in the interim financial statements in sufficient detail to explain
the nature of the change and any changes in estimates. This would apply, for
example, when the values of non-financial assets and liabilities that are measured
at fair value change significantly.
4.1.1
Relevance of other standards in condensed financial statements
Whilst other standards specify disclosures required in a complete set of financial
statements, if an entity’s interim financial report includes only condensed financial
statements as described in IAS 34, then the disclosures required by those other
standards are not mandatory. However, if disclosure is considered to be necessary in
the context of an interim report, those other standards provide guidance on the
appropriate disclosures for many of these items. [IAS 34.15C]. For example, in meeting the
requirements of (g) above to disclose the impact of corrections of prior period errors,
the requirements of IAS 8 – Accounting Policies, Changes in Accounting Estimates and
Errors – would be relevant to consider (see Chapter 3 at 5.3).
In practice, entities exercise judgement to determine whether including the
disclosures required by other standards are material to an understanding of the entity
and will provide a benefit to users of the interim financial statements. [IAS 34.25]. For
example, the existence of acquisitions and disposal of items of property plant and
equipment does not automatically require the interim report to include a
reconciliation of the carrying amount at the beginning and end of the interim period.
[IAS 16.73(e)]. In many cases, a narrative disclosure would be sufficient, and in some
cases, the change may be immaterial, and therefore no disclosures are required.
However, in an interim period with material changes, as for instance when assets are
acquired by purchase, obtained in a business combination, and transferred to a
disposal unit as well as sold in the normal course of business, such a reconciliation
could be judged to be an appropriate way of presenting this information in the
interim financial statements.
3060 Chapter 37
4.2
Other disclosures required by IAS 34
In addition to disclosing significant events and transactions as discussed at 4.1 above,
IAS 34 requires an entity to include the following information in the notes to its
interim financial statements if not disclosed elsewhere in the interim financial report:
[IAS 34.16A]
(a) a statement that the same accounting policies and methods of computation are
followed in the interim financial statements as in the most recent annual financial
statements or, if those policies or methods have 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 items affecting assets, liabilities, equity, net income, or
cash flows that are unusual because of their nature, size, or incidence;
(d) the nature and amount of changes in estimates of amounts reported in prior
interim periods of the current year or changes in estimates of amounts reported in
prior years;
(e) issues,
repurchases, and repayments of debt and equity securities;
(f)
dividends paid (aggregate or per share) separately for ordinary shares and other shares;
(g) certain segment disclosures required by IFRS 8 – Operating Segments – as
discussed at 4.4 below;
(h) events after the interim period that are not reflected in the financial statements for
the interim period;
(i) the effect of changes in the composition of the entity during the interim period,
including business combinations, obtaining or losing control of subsidiaries and
long-term investments, restructurings, and discontinued operations. For business
combinations, the entity should disclose the information required under IFRS 3 –
Business Combinations (see Chapter 9 at 16);
(j) for financial instruments, certain fair value disclosures required by IFRS 7 –
Financial Instruments: Disclosures – and IFRS 13 – Fair Value Measurement – as
discussed at 4.5 below;
(k) for entities becoming, or ceasing to be, investment entities, as defined in IFRS 10
– Consolidated Financial Statements, the disclosures in IFRS 12 – Disclosure of
Interests in Other Entities – as required by paragraph 9B of that standard (see
Chapter 13 at 4.6.2); and
(l) the disaggregation of revenue from contracts with customers required by
paragraphs 114 and 115 of IFRS 15 – Revenue from Contracts with Customers. The
requirement to disclose disaggregated revenue in interim financial statements is
similar to the requirements applicable to annual financial statements. See
Chapter 28 at 11.4.1.A for illustrative examples of disclosures.
Interim financial reporting 3061
This information is disclosed on a financial year-to-date basis. [IAS 34.16A]. However, the
for those effected during the current interim period, but also to business combinations
after the reporting period but before the interim financial report is authorised for issue.
[IFRS 3.59(b), IFRS 3.B66]. An entity is not required to provide all of the disclosures for
business combinations after the reporting period, if the accounting for the business
combination is incomplete as at the date on which the financial statements are
authorised for issue. In this case, the entity should state which disclosures cannot be
made and the reasons why they cannot be made. [IFRS 3.B66].
IFRS 3 requires disclosures in aggregate for business combinations effected during the
reporting period that are individually immaterial. [IFRS 3.B65]. However, materiality is
assessed for the interim period financial data, [IAS 34.23], which implies that IAS 34 may
require detailed disclosures on business combinations that are material to an interim period,
even if they could be aggregated for disclosure purposes in the annual financial statements.
The list above also requires disclosure of the effect of changes in the composition of
the entity arising from disposals, discontinued operations and restructurings in the
interim period. [IAS 34.16A(i)].
If an entity has operations that are discontinued or disposed of during an interim period,
these operations should be presented separately in the condensed interim statement of
comprehensive income following the principles set out in IFRS 5 – Non-current Assets
Held for Sale and Discontinued Operations. In addition if an entity has non-current
assets or a disposal group classified as held for sale or distribution at the end of the
interim reporting period, then these should be measured in accordance with the
requirements of IFRS 5 and presented separately from other assets and liabilities in the
condensed interim statement of financial position.
An entity contemplating a significant restructuring that will have an impact on its
composition should follow the guidance in IAS 37 – Provisions, Contingent Liabilities and
Contingent Assets – for the recognition of any restructuring cost, [IAS 37.71], and IAS 19 –
Employee Benefits – for termination benefits. [IAS 19.165(b)]. In subsequent interim periods
any significant changes to provisions will require disclosure. [IAS 34.15B(c), 16A(d)].
The inclusion of the above disclosure requirements among the items required by the
standard to be given ‘in addition to disclosing significant events and transactions’,
[IAS 34.16A], distinguishes them from the items listed at 4.1 above, which are disclosed to
update information presented in the most recent annual financial report. [IAS 34.15].
Therefore, disclosure of the above information is required for each interim reporting
period, subject only to a materiality assessment in relation to that interim report, i.e. an
entity could consider it unnecessary to disclose the above information on the grounds
that it is not relevant to an understanding of its financial position and performance in
that specific interim period. [IAS 34.25]. In making that judgement care would need to be
taken to ensure any omitted information would not make the interim financial report
incomplete and therefore misleading.
3062 Chapter 37
4.2.1
Location of the specified disclosures in an interim financial report
IAS 34 defines an ‘interim financial report’ as ‘a financial report containing either a
complete set of financial statements... or a set of condensed financial statements... for
an interim period.’ [IAS 34.4]. Therefore, since an interim financial report contains the
interim financial statements, it is clear that these are two different concepts.
Accordingly, an entity is not required to disclose the information listed at 4.2 above in
the interim financial statements themselves (but rather, might include the disclosures in
the management commentary), as long as a cross-reference is provided from the
financial statements to the location of the information included in another part of the
interim financial report. [IAS 34.16A].
Additionally, for a cross-reference to be acceptable, the information given ‘elsewhere
in the interim financial report’ needs to both satisfy the disclosure requirements in
IFRSs and be available on the same terms as the interim financial statements, i.e. users
should have access to the referenced material (for example, the management
commentary or a risk report) on the same basis and at the same time as they have for
accessing the condensed financial statements from which the reference is made.
The cross-reference should identify the specific part that includes the required
disclosure to allow the reader to easily navigate within the interim financial report.
4.3
Illustrative examples of disclosures
The extracts below show examples of disclosures required by IAS 34.
4.3.1
Inventory write-down and reversals
In the extract below, BP discloses write-downs of its inventories and reversals in the
current and corresponding periods. [IAS 34.15B(a)].
Extract 37.2: BP p.l.c. (Third quarter and nine months 2017)
Notes [extract]
Note 10.
Inventory valuation
A provision of $501 million was held at 30 September 2017 ($635 million at 30 June 2017 and $509 million at
30 September 2016) to write inventories down to their net realizable value. The net movement credited to the income
statement during the third quarter 2017 was $131 million (second quarter 2017 was a charge of $132 million and
third quarter 2016 was a credit of $178 million).
4.3.2 Impairment
In Extract 37.3 below, as part of its note on intangible assets, Roche discloses the
impairment charges on its intangible assets during the reporting period and provides a
breakdown by division and further background to those impairments. [IAS 34.15B(b)].
Interim financial reporting 3063
Extract 37.3: Roche Holding Ltd (interim ended June 2017)
Notes to the Roche Group Interim Consolidated Financial Statements [extract]
8. Intangible
assets [extract]
Impairment charges – 2017 [extract]
Pharmaceuticals Division. Impairment charges totalling CHF 1,475 million were recorded related to:
•
A charge of CHF 978 million for the partial impairment of the product intangible in use acquired as part of the
InterMune acquisition. The asset concerned was written down to its estimated recoverable value of CHF
3,961 million as at 30 June 2017. The main factor leading to this was lower-than-expected sales of Esbriet in the
first half of 2017 relative to the most recent long-term forecasts. The next long-term forecasts will be prepared in
the second half of 2017 and, depending upon any revised estimates for Esbriet in those forecasts, the intangible asset
may require further testing for impairment or reversal of impairment in the 2017 Annual Financial Statements. In
the meantime the intangible asset continues to be amortised over its remaining estimated useful life of four years.
•
A charge of CHF 195 million due to the launch of a competitor product for the compound acquired as part of
t
he Trophos acquisition. The asset concerned, which was not yet being amortised, was written down to its
estimated recoverable value of CHF 99 million.
•
A charge of CHF 149 million due to the decision to stop development of one compound with an alliance partner
following an assessment of clinical and non-clinical data. The asset concerned, which was not yet being
amortised, was fully written down.
•
A charge of CHF 74 million due to the decision to stop development of one compound acquired as part of the
Dutalys acquisition. The asset concerned, which was not yet being amortised, was fully written down.
•
A charge of CHF 47 million due to the decision to stop development of one compound acquired as part of the
Santaris acquisition following a clinical data assessment. The asset concerned, which was not yet being
amortised, was fully written down.
•
A charge of CHF 23 million due to the decision to stop development of one compound with an alliance partner.
The asset concerned, which was not yet being amortised, was fully written down.
•
A charge of CHF 9 million following a clinical data assessment. The asset concerned, which was not yet being
amortised, was fully written down.
4.3.3
Reversal of restructuring provisions
Among the various items that have impacted its other operating income for its 2014
interim period, Deutsche Post DHL provides the following narrative to explain the
reversal of a restructuring provision. [IAS 34.15B(c)].
Extract 37.4: Deutsche Post DHL (interim ended September 2014)
Selected Explanatory Notes [extract]
Basis of preparation [extract]
Income Statement Disclosures [extract]
5 Other operating income [extract]
Income from the reversal of provisions increased mainly because of a change in the assessment of settlement payment
obligations assumed in the context of the restructuring measures in the USA. The probability that this obligation will
occur has declined to the point where the provision was reversed and the potential obligation disclosed as a contingent
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 606
