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Recognition and
measurement
Same accounting policies as
annual
28. An enterprise should apply
the same accounting policies in its interim financial
statements as are applied in its 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. However,
the frequency of an enterprise's reporting (annual,
half-yearly, or quarterly) should not affect the measurement
of its annual results. To achieve that objective, measurements
for interim reporting purposes should be made on a
year-to-date basis.
29. Requiring that an enterprise
apply the same accounting policies in its interim financial
statements as in its annual statements may seem to suggest
that interim period measurements are made as if each interim
period stands alone as an independent reporting period.
However, by providing that the frequency of an enterprise's
reporting should not affect the measurement of its annual
results, paragraph 28 acknowledges that an interim period is a
part of a larger financial year. Year-to-date measurements may
involve changes in estimates of amounts reported in prior
interim periods of the current financial year. But the
principles for recognising assets, liabilities, income, and
expenses for interim periods are the same as in annual
financial statements.
30. To illustrate:
(a) the principles for
recognising and measuring losses from inventory write-downs,
restructurings, or impairments in an interim period are the
same as those that an enterprise would follow if it prepared
only annual financial statements. However, if such items are
recognised 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 recognised amount;
(b) a cost that does not meet the
definition of an asset at the end of an interim period is not
deferred on the balance sheet 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; and
(c) income tax expense is
recognised in each interim period based on the best estimate
of the weighted average annual income tax rate expected for
the full financial year. Amounts accrued for income tax
expense in one interim period may have to be adjusted in a
subsequent interim period of that financial year if the
estimate of the annual income tax rate changes.
31. Under the framework for the
preparation and presentation of financial statements (the
framework), recognition is the "process of incorporating in
the balance sheet or income statement an item that meets the
definition of an element and satisfies the criteria for
recognition". The definitions of assets, liabilities, income,
and expenses are fundamental to recognition, both at annual
and interim financial reporting dates.
32. For assets, the same tests of
future economic benefits apply at interim dates and at the end
of an enterprise's financial year. Costs that, by their
nature, would not qualify as assets at financial year end
would not qualify at interim dates either. Similarly, a
liability at an interim reporting date must represent an
existing obligation at that date, just as it must at an annual
reporting date.
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