MFRS 134

INTERIM FINANCIAL
REPORTING
Prof Dr Erlane K Ghani
Fakulti Perakaunan
Universiti Teknologi MARA Selangor
Malaysia
 Introduction
•A financial report for a period shorter than a full
financial year which can be complete or condensed
set of Financial Statement.
•Can be issued semi-annually, quarterly or bi-
monthly.
•Bursa Malaysia requires all entities whose debt or
equity securities are publicly traded to publish
interim financial reports.
•MFRS134 prescribes the minimum content
including disclosures, and identifies the recognition
and measurement principles that should be applied
in interim financial reports.
 Reasons
1. To provide investors and others users with
more timely or current information
2. To enable users to evaluate entity’s
financial position, performance and cash
flows on continual basis.
 Basis of Preparation

Basis

Integral method Discrete method

Interim report is Annual values x Reports are

Interim period is
a fraction of the fraction of the prepared on a
a separate period
annual report reporting period periodic basis
 Example
•A company incurs all is advertising expenses amount
RM12,000 in the first quarter of a financial year, but none in
the subsequent three quarters of the financial year

Discrete Integral
1st quarter RM12,000 RM3,000
2nd quarter - RM3,000
3rd quarter - RM3,000
4th quarter - RM3,000
 Minimum Component of Interim
Financial Report
Entities can choose to either present:
a) Complete set of financial statements (as prescribed in
MFRS 101); OR
b) Condensed set of financial statements
It should include at a minimum, the following component:
1. Condensed statement of financial position;
2. Condensed statement of profit or loss and other
comprehensive income;
3. Condensed statement of changes in equity;
4. Condensed statement of cash flows; and
5. Selected explanatory notes
 Form and Content of Interim Financial
Statements
• If entity publishes a set of condensed financial statements
in its interim financial report, the condensed statement
shall, include, as a minimum:
i. Each of the headings and subtotals that was included in its most
recent annual financial statements
ii. Selected explanatory notes as required by the standards
iii. Basic and diluted earnings per share on the face of the statement
of profit or loss and other comprehensive income:
● Basic EPS = (PAT – PS dividend) / No. of Shares
outstanding
● Diluted EPS = (PAT – PS dividend ) / (Shares
outstanding + convertible instruments)
 • In condensed financial statements, certain line items
may be aggregated such that the content is usually less
detail than the complete set of financial statements.
• Example: to aggregate:
• Trade receivables and other receivables
• Cash, bank and deposits may be aggregated and
present as cash and cash equivalent
• Detail classification of expenses by function or
nature may aggregated as operating expenses
 Selected Explanatory Notes
• Disclosure of accounting policies is not required because the
presumption is that users would have assess to most recent FSs
• Focus on significant updates and changes in financial position and
performance since last reporting date.
• As a minimum, the following information, if material should be
disclosed:
1. A statement the same accounting policies and methods of
computation are followed in the interim financial statement as
compared with the most recent annual financial statement. If
changed, describe the nature and effect of the change
2. If audit report of the preceding annual financial statement was
qualified – disclosure of the qualification and the current status
3. Comments on the seasonality or cyclicality if interim operation
4. The nature and amount of items affecting assets, liabilities,
equity, net income, or cash flows that are unusual.
1. The nature and amount of changes in estimates of amount
reported in prior interim periods of the current financial year
2. Issuance, cancellations, repurchases, resale and repayments of
debts and equity securities
3. Dividend paid (aggregate or per share) separately for OS and
other shares
4. Segment revenue, to external customers and intersegment
revenues, segment results, and other information
5. Material events subsequent to the end of the interim period
6. The effect of changes in the composition of the entity during the
interim period
7. Changes in contingent liabilities or contingent assets since the last
annual reporting period
 Reporting period for Interim FS
•Generally can be half-yearly OR quarterly
report.
•The reports cover the:
•Current period
•Year to date
•Comparatives
•MFRS 134 prescribes that interim reports
shall include interim FSs for the period as
follows:
1. SOFP as of the end of the current interim
period, and a comparative SOFP as of the
end of the immediately preceding year
1. SOCIE cumulatively for the current financial
year to date, with a comparative statement for
the comparable year to date of immediately
preceding financial year
2. SOCF cumulatively for the current financial
year to date, with a comparative statement for
the comparable year to date period of
immediately preceding financial year
 Example

ABC Bhd has a financial year ending on 31 December.

It is preparing the interim report for the 2nd quarter
ended 30 June 2016

Required:

Indicate the periods for which interim FSs are required

to be presented
 ABC Bhd
Interim SOFP as at 30 June 2016
As at 30/6/16 As at 31/12/2015
RM’000 RM’000
Line items xxx xxx

ABC Bhd
Interim SPOCI for the quarter ended30 June 2016
Quarter Quarter 6-month 6-month
ended ended ended ended
30/6/16 30/6/15 30/6/16 30/6/15
RM’000 RM’000 RM’000 RM’000
Line items xxx xxx xxx xxx
 ABC Bhd
Interim SOCIE for the period ended 30 June 2016
6-month ended 6-month ended 30/6/
30/6/16 2015
RM’000 RM’000
Line items xxx xxx

ABC Bhd
Interim SOCF for the quarter ended 30 June 2016
6-month ended 30/6/16 6-month ended 30/6/15
RM’000 RM’000
Line items xxx xxx
 Materiality
•MFRS 134 states that “in deciding how to recognize,
measure, classify or disclose an item for interim
financial reporting purposes, materiality shall be
assessed in relation to the interim period financial
data”
•The goal is that an interim report includes all
information that is relevant to understanding an
entity’s financial position and performance during
the interim period.
Recognition and Measurement Principles

1. Same accounting policies as annual:

• The accounting policies applied in the interim
FS have to be the same as that applied in the
annual FS.
• If the are changes in the accounting policies
after the date of the most recent annual FS, then
the new policies should be applied in the
interim FS.
A change in accounting policy (except when the
change is brought about by a new standard or
interpretation), is to be accounted for as follows:
1. The FS of prior interim periods of the current
financial year and the comparative interim
periods of prior financial years to be restated.
2. When it is impracticable to determine the
cumulative effect at the beginning of the
financial year to all prior periods, the financial
statements of the prior interim periods of the
current financial year and comparative interim
periods of prior financial years are to be
adjusted prospectively from the earliest date
practicable.
 Example

If the change in policy is made in the 3rd quarter

of the current financial year and the change will
also be reflected for the current annual financial
statement, the financial statement of the 1st and
2nd quarters shall be restated as if the new policy
had been reflected at the beginning of the 1st
quarter
 2. Seasonal, Cyclical or Occasional Revenue and Cost
• There could be seasonal fluctuation in revenue earned
• Revenue earned in a particular period is recognized in that
period
• There should not be deferral or anticipation of revenue
• Can recognized cost if its incurred and not otherwise
• Example:
• If significant revenues are anticipated in the final
quarter of the current financial year, those revenue
shall not be recognized by an accrual in the first three
quarters but to be recognized in the final quarter
• If significantly more revenues are earned in the
current quarter, the revenues shall not be deferred to
the subsequent quarters
 3. Costs incurred unevenly during the financial year
• Costs incurred unevenly during an entity’s financial
year shall be anticipated or deferred if it appropriate to
anticipate or defer that type of cost at the end of
financial year
• Example:
• An insurance premium paid in the first quarter but
which provide protection for the entire financial
year, shall be recognized ratably over the four
quarters by a deferment in prepayment
 4. Use of estimate
• The preparation of interim financial reports
generally will require a greater use of estimation
method than annual financial reports
• The measurement procedures to be followed in an
interim financial reports shall be design to ensure
the resulting information is reliable and all material
information that is relevant is appropriately
disclosed
 Example
1. Income and expenses
•Recognized and measured in accordance with the
framework
•If the reported income or expenses in an interim
report is different then the changes are
accommodated in the following interim FS
•Revenue earned in a particular period is recognized
in that period.
◦ Entity can only recognize the cost if it is incurred
and not otherwise
◦ Example:
• Q - A Bhd makes donations to its favourite
charities just before year end.
• S - The donations will be recognize in the last
interim reporting period, that is, when the
 Example
2. Inventory
•At the end of each interim period, need to determine
inventory quantities
•however, full stock taking not required (use estimates
based on sales margin).
•Apply the FRS102 of Inventory = stated at the lower of
cost and NRV. If at a subsequent interim period the NRV
has changed, a reversal of a write down is done only if it is
appropriate to do so at the end of financial year.
3. Impairment
•review & estimate changed need to be taken in current
period
 Example
4. Depreciation
•based on asset owned during that period
5. Research and Development
•Capitalizing development costs has to be done at the end
of each interim period.
•The costs are not deferred to await future information as
to determine if costs incurred meet the definition of
assets
6. Tax Expenses
•Tax expense is based on the estimate of the weighted
average annual income tax rate expected for the full
financial year.
 Example
7. Foreign currency translation gains and losses
•Measured at the interim reporting period
•Should not be deferral of gains or losses in anticipation
of changes in future exchange rate
8. Major Planned Periodic Maintenance or overhaul
oSeasonal expenditure that is expected to occur late in
the year is not anticipate for interim reporting purposes
unless an event has caused the entity to have legal or
constructive obligation
9. Provision
•Entity should applies the same criteria for recognizing
and measuring a provision at an interim date as it
would at the end of its financial year
•For example a provision for warranties is recognized
for products sold during the interim period