Introduction
Interim financial reports
are usually associated with interim financial statements in form of quarterly
reports issued by public owned companies to their shareholders, the Securities
and Exchange Commission (sec), the public and the stock Exchange that list
their capital stock.
are usually associated with interim financial statements in form of quarterly
reports issued by public owned companies to their shareholders, the Securities
and Exchange Commission (sec), the public and the stock Exchange that list
their capital stock.
The Nigerian Securities and
Exchange Commission (SEC) formerly Capital Issues Commission requires public
owned companies to disclose their operating results half yearly, generally financial
statements are issued for the fiscal year of a business enterprise. However,
many enterprises can issue complete financial statements for interim accounting
period during the course of a fiscal year.
Exchange Commission (SEC) formerly Capital Issues Commission requires public
owned companies to disclose their operating results half yearly, generally financial
statements are issued for the fiscal year of a business enterprise. However,
many enterprises can issue complete financial statements for interim accounting
period during the course of a fiscal year.
Problems associated with interim financial reports
Some unresolved problems
inherent in interim financial reports include the following.:
inherent in interim financial reports include the following.:
1. Enterprise employs a wider variety of accounting practices
and estimating techniques for interim financial report than they used in the annual
financial reports audited by professional accountants. The enterprises implicit
view is that any misstatements interim financial reports would be corrected by auditor’s
adjustments for the annual financial statements.
and estimating techniques for interim financial report than they used in the annual
financial reports audited by professional accountants. The enterprises implicit
view is that any misstatements interim financial reports would be corrected by auditor’s
adjustments for the annual financial statements.
2. Seasonal fluctuations in revenue and irregular incurrence
of costs and expenses during the course of business enterprise fiscal year
limit the comparability of operating results for interim periods for the fiscal
year.
of costs and expenses during the course of business enterprise fiscal year
limit the comparability of operating results for interim periods for the fiscal
year.
Furthermore, time
constraints in the issuance of interim statements limit the available time to a
accumulate end – of – period data for inventories payable and related expenses.
constraints in the issuance of interim statements limit the available time to a
accumulate end – of – period data for inventories payable and related expenses.
3. Accounts hold two divergent views on the interim issues
underlying interim financial statements. These differing views are described
below:
underlying interim financial statements. These differing views are described
below:
(a) Under the discrete theory, each interim period is considered to
be a basic accounting period, thus the results of operations for each interim
period, thus the results of operations for each interim period are measured in
essentially the same manner as for an annual accounting period.
be a basic accounting period, thus the results of operations for each interim
period, thus the results of operations for each interim period are measured in
essentially the same manner as for an annual accounting period.
Under this theory,
deferrals, accruals and estimations at the end of each interim period are
determined by following essentially the same principles and estimates of
judgment that apply to annual periods.
deferrals, accruals and estimations at the end of each interim period are
determined by following essentially the same principles and estimates of
judgment that apply to annual periods.
(b) Under the integral theory, each interim period is considered to
be an integral part of the annual period. Under this theory, deferrals,
accruals, and estimates at the end of each interim period are affected by
judgment made at the interim date as to results of operations for the balance
of annual period.
be an integral part of the annual period. Under this theory, deferrals,
accruals, and estimates at the end of each interim period are affected by
judgment made at the interim date as to results of operations for the balance
of annual period.
Thus, an expense item that
might be considered as falling entirely within an annual period (no fiscal
year-end and accrual or deferred) could be allocated among interim periods
based on estimated time, sales volume, production volume, or some other basis.
might be considered as falling entirely within an annual period (no fiscal
year-end and accrual or deferred) could be allocated among interim periods
based on estimated time, sales volume, production volume, or some other basis.