The Hindu Business Line : A quick check on AS-25

GENERAL users of financial statements would like to know the progress of the enterprises from time to time to take timely decisions affecting their portfolios. The users might be shareholders, financial institutions, collaborators, and so on.

The primary purposes of interim reporting are to provide information which is more timely than is available in annual reports, and to highlight business turning points which could be "buried" in annual reports.

Here are some objective type questions on AS 25 (Interim Financial Reporting).

1) What is an interim period in interim financial reporting? a) quarterly;

b) half-yearly; c) monthly; and d) a period shorter than a full financial year.

2) If the first year of operation is less than a full 12 months what is an interim period? a) every month; b) every three months; c) such shorter period of accounting year can never be considered as interim period; d) every six months.

3) Interim period reporting is applicable from: a) the quarter beginning April 1, 2002; b) the accounting period commencing on or after April 1, 2002; c) the half-year beginning April 1, 2002; d) the quarter ending March 31, 2002.

4) IFR accounting standards are applicable to: a) all enterprises; b) enterprises elects or required to interim financial reporting by any other statute or regulation; c) enterprises having an annual turnover of Rs 50 crore and above; d) enterprises having subsidiary and associate companies.

5) What is the objective of this AS? a) prescribing the minimum content of IFR; b) prescribing the principles of recognition and measurement in IFR

c) both (a) and (b); d) prescribing the frequency of reporting IFR.

6) IFR means a financial report containing either: a) a complete set of financial statements or a set of condensed financial statements of an interim period; b) only complete set of financial statements; c) only condensed financial statement; d) only important events during the interim period.

7) Condensed financial statement content shall have: a) updation of latest annual financial statement; b) flash results of the latest happenings of the enterprise; c) 12 months ending IP involving all financial and non financial aspects of the enterprise; and d) according to the choice of the enterprise.

8) IFR should be viewed primarily in the form and content when it presents a complete set of financial statements, in which of the following ways? a) as useful only if activity is spread evenly throughout the year; b) as if the interim period were an annual accounting period; c) as reporting for an integral part of an annual period; d) as information for the stock market.

9) If the enterprise is expected to present EPS and diluted EPS as part of financial statement, should IFR contain? a) annualised EPS and diluted EPS on estimated basis; b) no EPS and diluted EPS are required as they relate only for annual statements; c) actual EPS and diluted EPS for the period ending IP; d) convey latest financial years' EPS and diluted EPS.

10) If the enterprise has to prepare both consolidated and separate financial statements, should the enterprise prepare as part of IFR:

a) only consolidated financial statement on condensed basis; b) only separate financial statement on complete basis; c) both consolidated financial and separate financial statement either on condensed basis or on complete basis; and d) only separate financial statement on condensed basis.

11) For an enterprise having April to March financial year, IFR is not required for the following quarter ending if the enterprise is expected to report quarterly frequency: a) 30.6; b) 30.9; c) 31.12; d) 31.3

12) LM Co Ltd for the financial year ending March 31, 2004, had Rs 60,000 extraordinary gain by April 19, 2003 (related to 2001-02 but then it was uncertain of recovery now realised) was allocated as follows:

a) Rs 15,000 to all the four quarters; b) Rs 60,000 only in the first quarter; c) not considered during 2003-04 because the contingent income is related to 2001-02; d) to be spread for three years from 2001-02, 2002-03 and 2003-04.

13) Major planned period maintenance expenditure, such as overhaul, can be:

a) spread to all quarters; b) to be considered to the extent incurred in the relevant IP; c) not an item to be considered IP; d) to be capitalised with the asset.

14) Year-end bonuses shall be considered in an IP:

a) on an estimated basis taken on pro rata calculation; b) not to be considered at all; c) to be considered only when payment is made in the next accounting year; d) to be considered only when annual financial statements are prepared.

Verify your answers

1(d) Para 4 of the AS defines IP as a period shorter than a full financial year.

2(c) Para 5 highlights that when the first financial period is less than a full financial year, then such shorter period can never be taken as interim period.

3(b) Introduction of AS specifies that this AS comes into effect in respect of accounting period commencing on or after April 1, 2002.

4(b) Once again the introductory paragraph states about the applicability of the accounting standard to the enterprises.

It never states any attributes of the enterprise for the applicability.

5(c) The objective of the AS is to specify the minimum content and the principles of recognition and measurements of items in IFR.

6(a) The choice of either condensed or complete is left to the discretion of the enterprise.

7(a) Para 7 of the standard conveys that IFR on condensed basis shall provide an update on the latest annual financial statements. It never intends to duplicate information previously reported.

8(b) Para 10 states that each IR period shall be considered as an annual period.

9(c) Para 12 specifies that EPS and diluted EPS shall be computed for the IP would mean actual EPS and diluted EPS.

10(c) Para 13 suggests either complete or condensed statement with separate and consolidated financial statement.

11(d) Para 24 assigns the reason that the final IP ending would the year ending requiring the fullest preparation of financial statement and IFR would have no meaning.

12(b) Para 36 prescribes the principle of recognising contingent gains only in the IP they occur.

13(b) Unless there is a obligation on the part of the enterprise, such expenditure should be considered only in the relevant IP.

14(a) If it is obligatory to effect payment, it shall be spread.

Not to be considered if no obligation is associated. It would automatically be considered in the yearly annual financial statements on an estimated basis.

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