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Interim Financial Statements

An Interim Financial Statement is a report for intervening time between set financial periods. An interim report is prepared at any time before the end of reporting period. An interim financial statement is a financial report covering a period of less than one financial year. Companies can prepare interim financial statements on monthly, quarterly, semi-annually, or at any time throughout the year.

1. Need of Interim Financial Statements

Strategic company decisions are made on the basis of data and information disclosed in Annual Financial Statements along with cash flows and projections. Annual data is not sufficient to evaluate developments in general economy, industry, company activities and making revise projections of earnings and financial position as a basis for strategic decisions. To make such decisions, current financial information along with cash flows and projections as on any required date should be available. It is thus always suggested that company should continuously measure and report its progress and provide information on a less than annual basis. This would benefit of top management to have a more timely look into  business’s operations. Interim Financial Statements are also required to fulfil certain legal requirements with Government bodies. Reliable quarterly reports can heighten stakeholders’ confidence in the company and investment capital overall. 

2. Regulations regarding Interim Financial Statements

As 25 Interim Financial Reporting issued by Accounting Standards Board of ICAI and Indian Accounting Standard 34, Interim Financial Reporting (Ind AS 34) notified under section 133 of the Companies Act, 2013 governs Interim Financial Reporting in India. 

The objectives of this standards is to prescribe the minimum content of an interim financial report and to prescribe the principles for recognition and measurement in a complete or condensed financial statements for an interim period. These standards however does not mandate which enterprises should be required to present interim financial reports, how frequently, or how soon after the end of an interim period. If an enterprise is required or elects to prepare and present an interim financial report, it should comply with these standards, as applicable.

3. Content of an Interim Financial Statement

In the interest of timeliness and cost considerations and to avoid repetition of information previously reported, an enterprise may be required to or may elect to present less information at interim dates as compared with its annual financial statements. Therefore, as a minimum, a set of condensed financial statements should be presented. The interim financial report containing condensed financial statements is intended to provide an update on the latest annual financial statements. Accordingly, it focuses on new activities, events, and circumstances and does not duplicate information previously reported.

If an enterprise prepares and presents a complete set of financial statements in its interim financial report, the form and content of those statements should conform to the requirements as applicable to annual complete set of financial statements.

An interim financial report should include, at a minimum, the following components:
  • condensed balance sheet;
  • condensed statement of profit and loss;
  • condensed cash flow statement; and
  • selected explanatory notes.
If an enterprise's annual financial report included the consolidated financial statements in addition to the parent's separate financial statements, the interim financial report includes both the consolidated financial statements and separate financial statements, complete or condensed.

The frequency of an enterprise's reporting (annual, half-yearly, or quarterly) should not affect the measurement of its annual results.

Our comments

Any enterprise who is in need of periodic financial data and projections should adopt the practice of Interim Financial Reporting. Unlike annual statements, interim statements do not have to be audited. Quarterly reports are famously used as Interim Financial Reporting. It is always better to measure performance periodically so that management can steer enterprise in the right direction. In presence of interim financial reports, there is no need to wait for annual reports to make modifications / upgradations in the strategic planning by the management of the company.

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