Since 1977
FAR
FAR.2850-Interim Financial Reporting
DISCUSSION PROBLEMS
1. Interim financial report means a financial report
containing
a. A complete set of financial statements for an
interim period.
b. A set of condensed financial statements for an
interim period.
c. Either a or b.
d. Neither a nor b.
2. PAS 34 Interim Financial Reporting specifies
a. The content of an interim financial report that is
described as conforming to PFRS.
b. The entities required to publish interim financial
report.
c. The frequency of interim financial reporting.
d. How soon after the end of an interim period should
the entity publish interim financial report.
3. The IASB encourages publicly traded entities to
provide interim financial reports
a. At least at the end of the half year and within 60
days of the end of the interim period
b. Within a month of the half-year-end
c. On a quarterly basis
d. Whenever the entity wishes
4. PAS 34 states a presumption that anyone reading
interim financial reports will
a. Understand all International Financial Reporting
Standards
b. Have access to the records of the entity
c. Have access to the most recent annual report
d. Not make decisions based on the report
5. The interim financial report
a. Is intended to provide an update on the latest
complete set of annual financial statements.
b. Is intended to correct the information on latest
complete set of annual financial statements.
c. Focuses on prior year activities, events, and
circumstances.
d. Duplicates information previously reported.
6. If an entity does not prepare interim financial reports,
then
a. The year-end financial statements are deemed not
to comply with PFRS
b. The year-end financial statements' compliance with
PFRS is not affected
c. The year-end financial statements will not be
acceptable under the local legislation
d. Interim financial reports should be included in the
year-end financial statements
7. Interim financial reports should include as a minimum
a. A complete set of financial statements complying
with PAS 1
b. A condensed set of financial statements and
selected notes
c. A balance sheet and income statement only
d. A condensed balance sheet, income statement,
and cash flow statement only
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OCAMPO/CABARLES/SOLIMAN/OCAMPO
MAY 2020
8. Maddy Company is preparing interim financial
statements for the quarter ended 30 June 2020. Its
accounting year ends on 31 December each year.
Which of the following comparative statement is not
required?
a. Statement of financial position at 31 December 2019
b. Statement of profit or loss and other comprehensive
income for the quarter ended 30 June 2019
c. Statement of profit or loss and other comprehensive
income for the half year to 30 June 2019
d. Statement of changes in equity for the quarter
ended 30 June 2019
9. Which statement is incorrect regarding recognition and
measurement in interim financial reporting?
a. An entity shall apply the same accounting policies
in its interim financial statements as are applied in
its annual financial statements.
b. The frequency of an entity’s reporting shall not
affect the measurement of its annual results.
c. Measurements for interim reporting purposes shall
be made on a year-to-date basis.
d. The principles for recognizing asset and liabilities
for interim periods are the same as in annual
financial statements but not for income and
expenses.
10. An entity had the following transactions during the
quarter ended March 31:
• Advertising costs of P2 million were incurred on
March 1.
• Loss of P1 million from typhoon damage.
• Payment of P400,000 fire insurance premium for
the calendar year.
• Staff bonuses are paid at year-end based on sales.
Staff bonuses are expected to be around P20
million for the year; of that sum, P3 million would
relate to the period ending March 31.
The total amount to be recognized in the entity’s profit
or loss for the period ended March 31 is
a. P8.4 million c. P6.4 million
b. P8.1 million d. P6.1 million
11. On January 5 of the current year, Red Co. paid
P60,000 for insurance on its buildings for the calendar
year. In the first week of April, the company made
unanticipated major repairs to its equipment at a cost
of P240,000. These repairs benefited operations for
the remainder of the year. How should these expenses
be reflected in Red Co.'s quarterly income statements?
Three Months Ended
Mar. 31 Jun. 30 Sep. 30 Dec. 31
a. P15,000 P95,000 P95,000 P95,000
b. 60,000 240,000 - -
c. 75,000 75,000 75,000 75,000
d. 15,000 255,000 15,000 15,000
FAR.2850
EXCEL PROFESSIONAL SERVICES, INC.
12. Occidental Company’s P10,000,000 net income for the
quarter ended September 30, included the following
after-tax items
• A P1,200,000 gain realized on April 30 was
allocated equally to the second, third and fourth
quarters of the year.
• A P3,000,000 cumulative loss resulting from a
change in inventory valuation method was
recognized on August 2.
In addition, Occidental paid P600,000 on February 1
for the calendar-year property tax. Of this amount,
P150,000 was allocated to the third quarter. For the
quarter ended September 30, Occidental should report
net income of
a. P12,600,000 c. P11,800,000
b. P12,750,000 d. P 9,600,000
13. The terms and conditions of employment with The
Pleasing Company include entitlement to share in the
staff bonus system, under which 5% of the profits for
the year before charging the bonus are allocated to the
bonus pool, provided the annual profits exceed P50
million. The profits (before accrual of any bonus) for
the first half of the year amount to P40 million and the
latest estimate of the profits (before accrual of any
bonus) for the year as a whole is P60 million.
How much should be recognized in profit or loss in
respect of the staff bonus for the first half of the year,
according to PAS 34?
a. Nil c. P2.0 million
b. P3.0 million d. P1.5 million
14. Which statement is incorrect regarding recognition and
measurement for interim financial reporting purposes?
a. The principles for recognizing and measuring
losses from inventory write-downs, restructurings,
or impairments in an interim period are different as
those that an entity would follow if it prepared only
annual financial statements.
b. If losses from inventory write-downs are
recognized and measured in one interim period
and the estimate changes in a subsequent interim
period of that financial year, the original estimate
is changed in the subsequent interim period either
by accrual of an additional amount of loss or by
reversal of the previously recognized amount.
c. A cost that does not meet the definition of an asset
at the end of an interim period is not deferred in
the statement of financial position either to await
future information as to whether it has met the
definition of an asset or to smooth earnings over
interim periods within a financial year.
d. Income tax expense is recognized in each interim
period based on the best estimate of the weighted
average annual income tax rate expected for the
full financial year.
DO-IT-YOURSELF (DIY) DRILL
1. Under PAS 34, interim financial reports should be
published
a. Once a year at any time in that year
b. Within a month of the half year end
c. On a quarterly basis
d. Whenever the entity wishes
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15. The Philippians Company's profit before tax for the first
half of the year was P5 million. However, the business
is seasonal and profit before tax for the second half of
the year is almost certain to be P9 million. Profit before
tax equals taxable profit for this company. Philippians
operates in a country where income tax on companies is
at a rate of 30% if annual profits are below P11 million
and a rate of 35% where annual profits exceed P11
million. These tax rates apply to the entire profit for the
year.
In accordance with PAS 34, what should be the income
tax expense in Philippians' interim financial statements
for the first half of the year?
a. P1.75 million c. P1.50 million
b. P2.10 million d. P2.45 million
16. An entity prepares quarterly interim financial reports in
accordance with PAS 34. The entity sells electrical
goods, and normally 5% of customers claim on their
warranty. The provision in the first quarter was
calculated as 5% of sales to date, which was
P20,000,000. However, in the second quarter, a
design fault was found and warranty claims were
expected to be 10% for the whole year. Sales in the
second quarter were P30,000,000. What would be the
provision charged in the second quarter’s interim
income statement?
a. P3,000,000 c. P2,250,000
b. P4,000,000 d. P5,000,000
Use the following information for the next two questions.
On January 1, Lessor Company signed a 1-year rental with
quarterly payments of P100,000 due at the end of each
quarter. In addition, the lessee must pay contingent rent
of 5% of all sales in excess of P10,000,000. The
contingent rent is paid in one payment on December 31.
The same lessee has used the building for the past 5
years, and in each of those years the lessee reached the
contingent rent threshold of P10,000,000 in sales. Sales
of the lessee for the first two quarters are as follows:
Quarter ended Amount
March 31 P3,200,000
June 30 3,000,000
17. What amount of rent income should be reflected in
Lessor’s quarterly income statement for the three
months ended June 30?
a. P100,000 c. P130,000
b. P125,000 d. P160,000
18. What amount of rent expense should be reflected in
Lessee’s quarterly income statement for the three
months ended June 30?
a. P100,000 c. P130,000
b. P125,000 d. P160,000
- now do the DIY drill -
2. Conceptually, interim financial statements can be
described as emphasizing
a. Timeliness over reliability.
b. Reliability over relevance.
c. Relevance over comparability.
d. Comparability over neutrality.
FAR.2850
EXCEL PROFESSIONAL SERVICES, INC.

3. PAS 34 indicates that First Quarter Third Quarter

a. All companies that issue an annual report should
issue interim financial reports.
b. The integral view is the most appropriate approach
to take in preparing interim financial reports.
c. The complete set of financial statements should be
presented each time an interim period is reported
upon.
d. The same accounting principles used for the annual
report should be employed for interim reports.
4. Accounting policies are modified for the following at
interim dates.
Revenue Losses
a. Yes Yes
b. Yes No
c. No Yes
d. No No
5. On June 30, Sasa Corp. incurred a P200,000 net loss
from disposal of a business segment. Also, on June
30, Sasa paid P80,000 for property taxes assessed for
the calendar year. What amount of the foregoing
items should be included in the determination of Sasa’s
profit or loss for the 6-month interim period ended
June 30?
a. P280,000 c. P180,000
b. P240,000 d. P140,000
6. On March 15, Anda Co. paid property taxes of
P120,000 on its factory building for the calendar year.
On April 1, Anda made P240,000 in unanticipated
repairs to its plant equipment. The repairs will benefit
operations for the remainder of the calendar year.
What total amount of these expenses should be
included in Anda’s quarterly income statement for the
3 months ended June 30?
a. P 60,000 c. P150,000
b. P110,000 d. P270,000
7. Aldivinco Corp. experienced a P50,000 decline in value
of its inventory in the first quarter of its fiscal year.
Aldivinco had expected this decline to reverse in the
third quarter, and in fact, the third quarter recovery
exceeded the previous decline by P10,000. Aldivinco’s
inventory did not experience any other declines in
value during the fiscal year. What amounts of loss or
gain should Aldivinco report in its interim financial
statements for the first and third quarters?
a. P0 P0
b. P0 P10,000 gain
c. P50,000 loss P50,000 gain
d. P50,000 loss P60,000 gain
8. During the third quarter of 2020, the accountant at the
Bonifacio Company discovered that a machine
purchased January 2, 2018 for P600,000 had been
erroneously charged against first quarter net income in
2018. The machine should have been depreciated at a
rate of P10,000 per month. The correction of this error
should include
a. A charge of P330,000 to income before taxes of
the third quarter of 2020.
b. An adjustment of P240,000 to the previously
declared income before taxes of the first quarter of
2020.
c. An adjustment of P270,000 to the previously
declared income before taxes of the first quarter of
2020.
d. An adjustment of P30,000 to the previously
declared income before taxes of the first quarter of
2020.
9. Davao Corp. expects to sustain an operating loss of
P1,000,000 for the full year ending December 31, its
first year of operations. It operates entirely in one
jurisdiction where the tax rate is 40%. Tax credits for
the year total P100,000. No permanent differences
are expected. Realization of the full tax benefit of the
expected operating loss and of the anticipated tax
credits is more likely than not. Thus, Davao expects to
recognize the full tax benefit at year-end as a deferred
tax asset with a valuation allowance of P0. For the
quarter ended March 31, Davao reports an operating
loss of P200,000. How much of a tax benefit should
Davao report for the interim period ended March 31?
a. P 0 c. P100,000
b. P80,000 d. P125,000
10. An entity owns a number of harvest produce
seasonally. Approximately 80% of the entity's sales
are in the period August to October. Because the
entity's business is seasonal, PAS 34 suggest
a. Additional notes be written in the interim reports
about the seasonal nature of the business
b. Disclosure of financial information for the latest
and comparative 12-month period in addition to
the interim report
c. Additional disclosure in the accounting policy note
d. No additional disclosure

- done -

LECTURE NOTES
SUMMARY OF PAS 34
INTERIM FINANCIAL REPORTING
Objective
The objective of PAS 34 is to prescribe the minimum
content of an interim financial report and to prescribe the
principles for recognition and measurement in financial
statements presented for an interim period.
Key definitions
Interim period is a financial reporting period shorter than a
full financial year.
Interim financial report means a financial report containing
either a complete set of financial statements or a set of
condensed financial statements for an interim period.
Minimum content of an interim financial report
PAS 34 specifies the content of an interim financial report
that is described as conforming to PFRS. However, PAS 34
does not mandate:
• which enterprises should publish interim financial
reports,
• how frequently, or
• how soon after the end of an interim period.

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EXCEL PROFESSIONAL SERVICES, INC.
The minimum components specified for an interim financial
report are:
• a condensed statement of financial position,
• a condensed statement of comprehensive income,
• a condensed statement of changes in equity,
• a condensed statement of cash flows and
• selected explanatory notes.
If a complete set of financial statements is published in the
interim report, those financial statements should be in full
compliance with PFRS.
If the financial statements are condensed, they should
include, at a minimum, each of the headings and sub-
totals included in the most recent annual financial
statements and the explanatory notes required by PAS 34.
Additional line-items should be included if their omission
would make the interim financial information misleading. If
the annual financial statements were consolidated (group)
statements, the interim statements should be group
statements as well.
Periods covered
If the company's business is highly seasonal, PAS 34
encourages disclosure of financial information for the
latest12 months, and comparative information for the prior
12-month period, in addition to the interim period financial
statements.
Note Disclosures
The explanatory notes required are designed to provide an
explanation of events and transactions that are significant
to an understanding of the changes in financial position
and performance of the enterprise since the last annual
reporting date. PAS 34 states a presumption that anyone
who reads an enterprise's interim report will also have
access to its most recent annual report. Consequently,
PAS 34 avoids repeating annual disclosures in interim
reports.
Examples of specific disclosure requirements
Examples of events and transactions for which disclosures
are required if they are significant
• write-down of inventories
• recognition or reversal of an impairment loss
• reversal of provision for the costs of restructuring
• acquisitions and disposals of property, plant and
equipment
• commitments for the purchase of property, plant and
equipment
• litigation settlements
• corrections of prior period errors
• changes in business or economic circumstances
affecting the fair value of financial assets and
liabilities
• unremedied loan defaults and breaches of loan
agreements
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• transfers between levels of the 'fair value hierarchy' or
changes in the classification of financial assets
• changes in contingent liabilities and contingent assets.
Examples of other disclosures required
• changes in accounting policies
• explanation of any seasonality or cyclicality of interim
operations
• unusual items affecting assets, liabilities, equity, net
income or cash flows
• changes in estimates
• issues, repurchases and repayment of debt and equity
securities
• dividends paid
• particular segment information (where PFRS 8
Operating Segments applies to the entity)
• events after the end of the reporting period
• changes in the composition of the entity, such as
business combinations, obtaining or losing control of
subsidiaries, restructurings and discontinued
operations
• disclosures about the fair value of financial
instruments
Accounting Policies
The same accounting policies should be applied for interim
reporting as are applied in the enterprise's annual financial
statements, except for accounting policy changes made
after the date of the most recent annual financial
statements that are to be reflected in the next annual
financial statements.
A key provision of PAS 34 is that an enterprise should use
the same accounting policy throughout a single financial
year. If a decision is made to change a policy mid-year,
the change is implemented retrospectively, and previously
reported interim data is restated.
Measurement
Measurements for interim reporting purposes should be
made on a year-to-date basis, so that the frequency of the
enterprise's reporting does not affect the measurement of
its annual results.
Several important measurement points:
• Revenues that are received seasonally, cyclically or
occasionally within a financial year should not be
anticipated or deferred as of the interim date, if
anticipation or deferral would not be appropriate at the
end of the financial year.
• Costs that are incurred unevenly during a financial
year should be anticipated or deferred for interim
reporting purposes if, and only if, it is also appropriate
to anticipate or defer that type of cost at the end of
the financial year.
• Income tax expenses should be recognized based on
the best estimate of the weighted average annual
income tax rate expected for the full financial year.
An appendix to PAS 34 provides guidance for applying the
basic recognition and measurement principles at interim
dates to various types of asset, liability, income, and
expense.
Materiality
In deciding how to recognize, classify, or disclose an item
for interim financial reporting purposes, materiality is to be
assessed in relation to the interim period financial data,
not forecasted annual data.
J - end of FAR.2850 - J
FAR.2850