Difference between Ind AS 34 on Interim Financial Reporting and existing AS 25 on Interim Financial Reporting

(i) Under the existing AS 25, if an entity is required or elects to prepare and present an interim financial report, it should comply with that standard. Ind AS 34 applies only if an entity is required or elects to prepare and present an interim financial report in accordance with Accounting Standards. Consequently, it is specifically stated in Ind AS 34 that the fact that an entity may not have provided interim financial reports during a particular financial year or may have provided interim financial reports that do not comply with the revised standard does not prevent the entity’s annual financial statements from conforming to Accounting Standards if they otherwise do so. (Paragraph 2 of Ind AS 34)

(ii) In Ind AS 34, the term ‘complete set of financial statements’ appearing in the definition of interim financial report has been expanded as compared to AS 25 as complete set of financial statements (as described in Ind AS 1, Presentation of Financial Statements). Accordingly, the said term includes balance sheet as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements. (Paragraph 5 of Ind AS 34)

(iii) As per the existing standard, the contents of an interim financial report include, at a minimum, a condensed balance sheet, a condensed statement of profit and loss, a condensed cash flow statement and selected explanatory notes. Ind AS 34 requires, in addition to the above, a condensed statement of changes in equity for the period which is presented as a part of the balance sheet. (Consequential to change in Ind AS 1)

(iv) Ind AS 34 prohibits reversal of impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. There is no such specific prohibition in the existing standard. Ind AS 34 includes Appendix A which addresses the interaction between the requirements of Ind AS 34 and the recognition of impairment losses on goodwill in Ind AS 36 and certain financial assets in Ind AS 39, and the effect of that interaction on subsequent interim and annual financial statements

(v) Under the existing standard, if an entity’s annual financial report included the consolidated financial statements in addition to the separate financial statements, the interim financial report should include both the consolidated financial statements and separate financial statements, complete or condensed. Ind AS 34 states that it neither requires nor prohibits the inclusion of the parent’s separate statements in the entity’s interim report prepared on a consolidated basis. (Paragraph 14 of revised AS 25)

(vi) The existing standard requires the Notes to interim financial statements, (if material and not disclosed elsewhere in the interim financial report), to contain a statement that the same accounting policies are followed in the interim financial statements as those followed in the most recent annual financial statements or, in case of change in those policies, a description of the nature and effect of the change. Ind AS 34 additionally requires the above information in respect of methods of computation followed. (Paragraph 16A(a) of Ind AS 34)

(vii) The existing standard requires furnishing information, in interim financial report, of dividends, aggregate or per share (in absolute or percentage terms), for equity and other shares. Ind AS 34 requires furnishing of information, in interim financial report, on dividends paid, aggregate or per share separately for equity and other shares. (Paragraph 16A(f) of revised Ind AS 34)

(viii) While the existing standard requires furnishing of information on contingent liabilities only, Ind AS 34 requires furnishing of information on both contingent liabilities and contingent assets, if they are significant. (Paragraph 15B(m) of Ind AS 34)

(ix) In comparison to AS 25, reference to extraordinary items (in the context of materiality) in the existing standard is deleted in Ind AS 34 in line with the Ind AS 1. (Paragraph 23 of existing AS 25)

(x) Ind AS 34 requires that, where an interim financial report has been prepared in accordance with the requirements of the revised standard, that fact should be disclosed. Further, an interim financial report should not be described as complying with Accounting Standards unless it complies with all of the requirements of Accounting Standards. (The latter statement is applicable when interim financial statements are prepared on complete basis instead of ‘condensed basis’). The existing standard does not contain these requirements. (Paragraph 19 of Ind AS 34)

(xi) Under the existing standard, a change in accounting policy, other than one for which the transitional provisions are specified by a new Standard, should be reflected by restating the financial statements of prior interim periods of the current financial year. Ind AS 34 additionally requires restatement of the comparable interim periods of prior financial years that will be restated in annual financial statements in accordance with Ind AS 8, subject to special provisions when such restatement is impracticable. (Paragraph 43 of Ind AS 34)

(xii) Convergence of all other standards with IFRSs also has impact on interim financial reporting. For example, treatment of constructive obligation in Ind AS 37, treatment of foreign exchange differences in Ind AS 21 etc. will have impact in interim financial reporting which could be different in the context of relevant existing standards. There are other consequential impacts also. For example, existing AS 20 requires EPS with and without extraordinary items. Since the concept of extraordinary items is no longer valid in the context of Ind AS 1 the question of EPS with and without extraordinary items does not arise in the context of Ind AS 33. This changed requirement of Ind AS 33 is equally applicable to interim financial reporting under Ind AS 34

(xiii) Illustration B to Ind AS 34 (not an integral part of the standard), inter alia, gives example of application of Accounting Standard on Financial Reporting in Hyperinflationary Economies to interim periods. Similar example was not given in the existing standard, there being no Indian standard on accounting in hyperinflationary economies. [In addition, Examples of applying the recognition and measurement principles and examples of the use of estimates given in Illustrations have been increased in Ind AS 34].

(xiv) Under the existing standard, when an interim financial report is presented for the first time in accordance with that Standard, an entity need not present, in respect of all the interim periods of the current financial year, comparative statements of profit and loss for the comparable interim periods (current and year-to-date) of the immediately preceding financial year and comparative cash flow statement for the comparable year-to-date period of the immediately preceding financial year. Ind AS 34 removes this transitional provision. (ICAI)