Understanding scope of Interim Financial Statements.

Understanding scope of Interim Financial Statements.

Interim financial statements include records of transactions of a period that is less than one full year. Let’s understand the need and importance of interim finance services in the process.

What is an Interim statement?

An interim financial statement or an interim financial report is adetailed report of accounting, which covers all the business activities within less than one financial year. Usually, companies generate interim reports/ statements on the basis of monthly, quarterly, semi-annually, or at any other time duration within one year.

With the help of these interim financial statements, businesses get an overview about the financial standings up to the current period before a particular financial year ends. For a small business owner, the interim reports help in determining the current cash flows and in evaluating the overall financial performance till the current period of the financial year.

Do not confuse interim statements with the annual financial statements that are prepared at the end of the year, such as an income statement, balance sheet, or cash flow statement.

Elements of Interim Statements

According to the International Accounting Standard 34(IAS 34), an Interim financial statement consists of either a complete set of financial statements as mentioned in the IAS Presentation of Financial Statements, or it should have a set of consolidated financial statements for a defined interim period. An independent auditor is free to express a negative assurance opinion on the review of interim financial information. Also, he/she can offer interim financial solutions based on the indications reflected by the interim financial statements.

Need for Interim accounting

With the help of annual data, to evaluate the latest developments becomes insufficient especially in the increased scope and complexity of business. Therefore, to make or revise projections of profits and calculation of financial position to determine the investment decisions, interim reporting is required. As the economic decisions of a company are dependent on the information disclosed through financial reports of the entire year. Apart from the company, even stakeholders such as investors, creditors, government, etc. make decisions as per the interim financial reports.

Conclusion:

In comparison to the annual statement, there might be some foundational differences between the two. But the use, relevance and impact of an interim financial statement is no less. It is equally important in the decision-making of the company and its shareholders. Many interim financial reporting services ensure that the above aspects are well taken care of. Also, to have an eye on the bigger picture, you must have a sharp instinct for the small tasks, that is what interim statements fulfil for a company and the ones who are related to it directly or indirectly.

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