Interim Financial Statements Definition

Some even may inquire about journal entries made by external auditors to adjust last year’s preliminary numbers to the results. Instead, interim account balances often reflect last year’s amounts or may be based on historic gross margins. And some companies save tedious bookkeeping procedures, such as physical inventory counts and updating depreciation schedules, until year-end. Midyear numbers also may omit estimates for bad-debt write-offs, accrued expenses, prepaid items, management bonuses or income taxes. When companies report only year-end results, it leaves investors, lenders and other stakeholders in the dark until the next year.

• For example, publicly held companies issue quarterly financial statements for their investors.
• Documentation is the principal record of the review procedures performed and the conclusions reached by the accountant in performing the review.34 Examples of documentation are review programs, analyses, memoranda, and letters of representation.
• The accountant should, however, consider the consistency of management’s responses in light of the results of other inquiries and the application of analytical procedures.
• Also, the nature of the restriction is assessed to determine whether the amount needs to be presented as an ‘other financial asset’ rather than as cash and cash equivalents.
• The following is an example of a review report on a condensed balance sheet as of March 31, 20X1, the related condensed statements of income and cash flows for the three-month periods ended March 31, 20X1 and 20X0, and a condensed balance sheet derived from audited financial statements as of December 31, 20X0, that were included in Form 10-Q.27

Illustrative condensed interim financial statements 2024

Impairment of non-financial assets Depending on the industry and the economic environment in which a company operates, external events could affect the recognition and measurement of companies’ assets, liabilities, income and expenses. (6) Financial statements of and disclosures about guarantors and issuers of guaranteed securities.

Such an understanding reduces the risk that either the accountant or the audit committee may misinterpret the needs or expectations of the other party. AS 1000, General Responsibilities of the Auditor in Conducting an Audit, requires that the auditor be independent, comply with independence and ethics requirements, be competent, and exercise due professional care, including professional skepticism. Amendments to paragraph .08 have been adopted by the PCAOB and approved by the U.S.

Other Matters

• Fn 8 Restrictions on the scope of the review may be imposed by a client or may be caused by such circumstances as the timing of the accountant’s work or an inadequacy in the accounting records.
• Throughout this website, “we”, “KPMG”, “us” and “our” refers to the KPMG global organization, to KPMG International Limited (“KPMG International”), and/or to one or more of the member firms of KPMG International, each of which is a separate legal entity.
• The auditor need not expand his or her report on the audited financial statements in the circumstances described in c and d if his or her separate review report, which refers to those circumstances, is presented with the information.
• The accountant should communicate any omitted or inadequately described matters to the audit committee.

15Information that might be disclosed is set forth in paragraph .10 of AS 2415, Consideration of an Entity’s Ability to Continue as a Going Concern. 6See paragraph .16 of QC sec. 20, System of Quality Control for a CPA Firm’s Accounting and Auditing Practice. 5AReference to the judgment of the auditor throughout this standard has the same meaning as “professional judgment” as described in AS 1000. 2AStatements on Standards for Accounting and Review Services provide guidance for review engagements for which this section is not applicable. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. Certain representations in this letter are described as being limited to matters that are material.

Therefore, any discussion of the accountant’s judgments about the quality, not just the acceptability, of the entity’s accounting principles as applied in its interim financial reporting would generally be limited to the impact of significant events, transactions, and changes in accounting estimates considered by the accountant in performing the procedures in paragraphs .13 through .19. If a company recognises or reverses a material impairment loss on non-financial assets, then it provides in its interim financial statements an explanation of and an update to the relevant information included in the last annual financial statements. If changes in circumstances have made significant disclosures in the last annual financial statements less relevant, then a company needs to consider providing additional supplementary disclosures in its interim financial statements. Also, there may be significant or unusual transactions occurring during the interim period under review for which the auditing procedures that would need to be performed for purposes of the audit of the annual financial statements could be performed, to the extent practicable, at the time of the interim review, for example, business combinations, restructurings, or significant revenue transactions.

The Accountant’s Knowledge of the Entity’s Business and Its Internal Control

The accountant may find the guidance in section 329, Analytical Procedures, useful in performing a review of interim financial information. Another characteristic of interim financial information is its relationship to annual financial information. The characteristics of interim financial information necessarily affect the nature, timing, and extent of procedures that the accountant applies in conducting a review of that information. The benefits of uniting financial reporting, sustainability, and audit and risk management all in one platform add up. Annual and interim financial reporting work spans multiple teams.

How to generate interim financial reports

Other entities may voluntarily include in documents containing audited financial statements the selected quarterly financial data specified in item 302(a) of SEC Regulation S-K. The reporting guidance in paragraph .43 is appropriate if the independent accountant has not performed such a review. Based on information furnished us by management, we believe that the company has excluded from property and debt in the accompanying balance sheet certain lease obligations that should be capitalized to conform with generally accepted accounting principles.

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In performing the procedures in paragraphs .13 through .19, the accountant also should consider whether any of the matters described in section 380, Communication With Audit Committees, as they relate to the interim financial information, have been identified. A review of interim financial information may bring to the accountant’s attention significant changes in accounting practices or in the nature or volume of the client’s business activities. Performing some of the work earlier in the interim period also permits early consideration of significant accounting matters affecting the interim financial information.

Interim Financial Information Accompanying Audited Financial Statements

Although not required, the accountant may wish to emphasize such matters in a separate paragraph of the report. We have reviewed the accompanying describe the statements or information reviewed of ABC Company and consolidated subsidiaries as of September 30, 20X1, and for the three-month and nine-month periods then ended. In performing the procedures in paragraphs .13 through .19, the accountant may become aware of matters relating to internal control that may be of interest to the audit committee.

The accountant ordinarily would not obtain corroborating evidential matter of management’s responses to the accountant’s inquiries in performing a review of interim financial information. To perform a review of interim financial information, the accountant needs to have sufficient knowledge of a client’s internal control as it relates to the preparation of both annual and interim financial information to— A review may bring to the accountant’s attention significant matters affecting the interim financial information, but it does not provide assurance that the accountant will become aware of all significant matters that would be disclosed in an audit. Therefore, a characteristic of interim financial information is interim financial statements that many revenues, costs, and expenses are estimated to a greater extent than for annual reporting purposes. For purposes of this section, the term interim financial information or statements means financial information or statements for less than a full year or for a twelve-month period ending on a date other than the entity’s fiscal year end. If, in any filing, the issuer states that interim financial statements have been reviewed by an independent public accountant, a report of the accountant on the review must be filed with the interim financial statements.

Fn 4 Additional considerations of the accountant when unaudited interim financial information is presented or incorporated by reference in a filing under the Securities Act of 1933 are described in section 711, Filings Under Federal Securities Statutes. In those circumstances, an accountant may make a review and, if so, should refer to the guidance in Statements on Standards for Accounting and Review Services (SSARSs) for the standards, procedures, and form of report applicable to such an engagement. The company has not presented the selected quarterly financial data, specified by item 302(a) of Regulation S-K, that the Securities and Exchange Commission requires as supplementary information to the basic financial statements.

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Nevertheless, if the accountant has become aware of material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principles, such matters should be communicated pursuant to paragraphs .29 through .31 of this section. Certain auditing procedures may be performed concurrently with the review of interim financial information. See Appendix A paragraph .54 of this section for examples of analytical procedures an accountant may consider performing when conducting a review of interim financial information.

6 Interim financial reporting considerations for private companies

In addition, interim reporting can sometimes be misleading for seasonal businesses. Financial statements present a company’s financial condition at one point in time. These statements are often unaudited, that is, there is no review by an independent auditor and no audit opinion.

In this brief article, we look at ways in which interim financial statements differ from annual financial statements, why you should regularly review yours and how to easily generate them. Fn 6 When an accountant acts as principal auditor (see section 543,Part of Audit Performed by Other Independent Auditors) and makes use of the work or reports of other auditors in the course of the annual audit of the client’s financial statements, the accountant ordinarily will be in a similar position in connection with a review of interim financial information. Fn 17 If the independent accountant has audited the financial statements of annual periods for which selected quarterly financial data specified by Regulation S-K are required to be presented, he or she should apply the review procedures specified in paragraphs .13 through .19 to the selected quarterly financial data.

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