2. Meaning of Interim Reporting
Interim reporting is the reporting of the financial results of any period that is shorter than a fiscal year.
Periodic reporting at half yearly, quarterly and sometimes even monthly intervals between the dates of annual financial statements is known as interim reporting.
The basic objective of financial reporting is to provide information about an enterprise’s resources, obligations, earnings etc. useful to investors, creditors and other users in making sound investment decisions.

3. Objectives of Interim Reporting
FASB’s discussion memorandum has identified five possible objectives as under:
To estimate annual earnings.
To make projection.
To identify turning points.
To evaluate the management performance.
To supplement the annual report.

4. Difficulties in Interim Reporting
To develop interim reports, companies have to rely more upon estimates. Basically every company has two problems :
Conceptual
Problems
Accounting
Problems

5. 1. Accounting Problems
Problems of Inventories : In every business organisation inventories are main elements in the generation of income. The basic problem which every reporting entity faces is determination of quantity of inventory, valuation of inventory and adjustments of valuation in every report.
Extent of Disclosure Problem : In the absence of any regulatory frame work for interim reports, the interim disclosures practices vary from organisation to organisation. There is a problem of deciding the quantity and extent of disclosure while doing interim reporting.

6. c) Difficulty in Matching : Business activities are not similar and uniform throughout the accounting period. Because of various time lag relationships between costs and sales difficulties are created in matching costs and revenues. Interim accruals for various expenses that normally require companies to rely heavily on estimates, the problem is also multiplied due to the tendency of investors to project a full year’s results on the basis of data given in interim reports. Seasonal business also raises a problem about matching of revenues and expenses during the accounting period.

7. (b) Conceptual Problems:
The basic conceptual problem is related with period, i.e. whether the interim period is part of a long period (integral view) or is a period in itself (discrete view).
This problem further leads to have two opposing viewpoints :
Discrete
Approach
Integral

8. The FASB justifies the Combination Approach by stating:
Those who favour the Integral Approach view, “each interim period primarily as being an integral part of the annual period. Under this view deferrals, accruals, and estimates at the end of each interim period are affected by judgments made at the interim date as to the results of operations.”
Those who favour the Discrete Approach, view “each interim period as a basic accounting period and conclude that the results of operations for each interim period should be determined in essentially the same manner as if the interim period were an annual accounting period.”
The FASB justifies the Combination Approach by stating:
“The integral and discrete views may be seen to have both advantages and disadvantages. Therefore a more reasoned approach is to attempt to obtain the advantages and minimise the disadvantages of each of these views.”

9. Suggestions to Improve Interim Reporting
Monton Backer in his book “financial reporting for security investment and credit decisions” in 1970 has given following suggestions for improvement in interim reporting.
(A) Adopting Fiscal Period to Operating Cycles: Problems related with accounting can be minimized by having a close date which coincides with a time of low activity in company’s natural operating cycles. Businesses facing more than one business cycle during a year can improve the significance of period statements by reporting for seasonal cycles rather than for calendar years.

10. (B) Smoothing Income to Minimize Fluctuations: Accounting methods for smoothing interim income include accrual of anticipated expenses which relate to the whole year rather than reporting them when they arise.
(C) Allocating Annual Costs to Interim Periods on Basis of Sales:
Reported profits tends to vary with sales when costs of the year are allocated to interim periods on the basis of periods portion of total yearly sales.
(D) Disclosure to Aid Interpretations: Investment decisions are based on future expectations rather man past performances, a view of expectations of management by interim periods would seem to be helpful. Disclosures of the procedures followed may help the users to interpret the results more accurately.

11. Accounting Standard 25 : 'Interim Financial Reporting' OBJECTIVE
(issued by the Council of the Institute of Chartered Accountants of India)
If an enterprise is required or elects to prepare and present an interim financial report, it should comply with this Standard.
OBJECTIVE
The objective of this Statement is to prescribe :
The minimum content of an interim financial
The principles for recognition and measurement in a complete or condensed financial statements for an interim period.
Timely and reliable interim financial reporting improves the ability of investors, creditors, and others to understand an enterprise's capacity to generate earnings and cash flows, its financial condition and liquidity.

12. SCOPE 1. This Statement does not mandate -
Which enterprises should be required to present interim financial reports,
How frequently, or how soon after the end of an interim period
A statute governing an enterprise may require an enterprise to prepare and present certain information at an interim date which may be different in form and/or content as required by this Statement.
In such a case, the recognition and measurement principles as laid down in this Statement are applied in respect of such information, unless otherwise specified in the statute. 2
3. The requirements related to Cash Flow Statement, contained in this Statement are applicable where an enterprise prepares and presents a Cash Flow Statement for the purpose of its annual financial report.

13. DEFINITIONS
4. The following terms are used in this Statement with the meanings specified: Interim period is a financial reporting period shorter than a full financial year. Interim financial report means a financial report containing either a complete set of financial statements or a set of condensed financial statements (as described in this Statement) for an interim period.
5. During the first year of operations of an enterprise, its annual financial reporting period may be shorter than a financial year. In such a case, that shorter period is not considered as an interim period.

14. Content of an Interim Financial Report
6. A complete set of financial statements normally includes: (a) balance sheet; (b) statement of profit and loss; (c) cash flow statement; and (d) notes including those relating to accounting policies and other statements and explanatory material that are an integral part of the financial statements.
7. An enterprise may be required to present less information at interim dates as compared with its annual financial statements :
In the interest of timeliness and cost considerations
To avoid repetition of information previously reported
The interim financial report focuses on new activities, and circumstances and does not duplicate information previously reported. 

15. 8. This Statement does not prohibit or discourage an enterprise
From presenting a complete set of financial statements in its interim financial report.
From including, in condensed interim financial statements , more than the minimum line items or selected explanatory notes as set out in this statement.
The recognition and measurement principles set out in this Statement apply also to complete financial statements for an interim period.

16. Minimum Components of an Interim Financial Report
9. An interim financial report should include , the following :
Condensed balance sheet; 
Condensed statement of profit and loss;
Condensed cash flow statement; and 
Selected explanatory notes.

17. Form and Content of Interim Financial Statements
10. Complete set of financial statements : Form and content should conform to the requirements as applicable to annual complete set of financial statements. 11. Set of condensed financial statements: Each of the headings and sub-headings that were included in its most recent annual financial statements and the selected explanatory notes as required by this Statement.
12. Earning per share : Presented in accordance with AS 20 on the face of the statement of profit and loss, complete or condensed, for an interim period.
13. The consolidated financial statements in addition to the parent’s separate financial statements

18. Selected Explanatory Notes
15. Explanation of events: Significant to an understanding of the changes in financial position and performance of the enterprise since the last annual reporting date is more useful.
16. An enterprise should include the following information:
a statement that the same accounting policies are followed;
explanatory comments about the seasonality of interim operations;
the nature and amount of items affecting assets, liabilities, equity, net income, or cash flows

19. Changes in estimates of amounts reported in prior financial years, if those changes have a material effect in the current interim period
Issuances, buy-backs, repayments and restructuring of debt, equity and potential equity shares;
Dividends, aggregate or per share (in absolute or percentage terms), separately for equity shares and other shares;
Restructurings, and discontinuing operations; and
Material changes in contingent liabilities since the last annual balance sheet date. The above information should normally be reported on a financial year - to - date basis.

20. Periods for which Interim Financial Statements are required to be presented
17. Interim reports should include interim financial statements for periods as follows:
Balance sheet : as of the end of the current interim period and a comparative balance sheet as of the end of the immediately preceding financial year;
Statements of profit and loss: for the current interim period with comparative statements of profit and loss for the comparable interim periods (current and year-to-date) of the immediately preceding financial year;
Cash flow statement: cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year.

21. 18. Seasonal Business: financial information for the twelve months ending on the interim reporting date. 19. Materiality
INVESTMENT ALLOWANCE TO BIG MANUFACTURING COMPANY (SECTION 32AC) [w.e.f. A.Y ]
Section 32AC was inserted by Finance Act,2013 w.e.f. A.Y to provide a tax incentive by way of investment allowance to encourage huge investment in plant and machinery

22. As per section 32AC(1), a manufacturing company is entitled to of aggregate investment in new Plant and machinery if it is – (a) engaged in the business of manufacture of an article or thing (b) invests a sum of more than Rs.100 crores in new plant and machinery during the period beginning from 1st April,2013 and ending on 31st March ,2015 Such plant and machinery must be ready for use by The newly acquired asset must not be transferred within a period of 5 years.

23. Amount of deduction
For A.Y % of aggregate amount of actual cost of new assets acquired and installed during the financial year
For A.Y % of aggregate amount of actual cost of new assets acquired and installed during the period beginning on and ending on as reduced by the deduction allowed, if any, for A.Y
For example, manufacturing company E Ltd invest in new plant and machinery in P.Y of Rs. 105 crores and Rs. 15 crores in P.Y Compute the admissible deduction.
For A.Y crores * 15% = crores
For A.Y crores * 15% = 18 crores crores (deduction already allowed) = 2.25 crores.

24. INVESTMENT ALLOWANCE TO MEDIUM SIZED AND A BIG MANUFACTURING COMPANY [SECTION 32AC(1A)] [w.e.f. A.Y ]
As per section 32AC(1A), a manufacturing company is entitled to of aggregate investment in new Plant and machinery if it is :
(a) engaged in the business of manufacture of an article or thing
(b) invests a sum of more than Rs.25 crores in new plant and machinery during the period beginning from 1st April,2014 and ending on 31st March ,2017
The newly acquired asset must not be transferred within a period of 5 years

25. Forfeiture of deduction u/s 32AC (1) and u/s 32AC (1A)
Period of deduction :
The deduction is available for 3 A.Y.s i.e. assessment years to
Forfeiture of deduction u/s 32AC (1) and u/s 32AC (1A)
If any new asset acquired and installed by the assessee is sold or otherwise transferred within a period of 5 years from the date of installation, deduction allowed shall be deemed to be income of the assessee chargeable U/H profit and gains of B & P of the P.Y. in which such new asset is sold or otherwise transferred.
Capital gain arising on such new asset shall also be taxable.

26. ADDITIONAL INVESTMENT ALLOWANCE IN CASE NEW UNDERTAKING IS SET UP IN NOTIFIED BACKWARD AREAS OF ANDHRA PRADESH, TELANGANA, BIHAR AND WEST BENGAL
[SECTION 32AD]
Finance Act,2015 has inserted new section 32AD to provide an additional investment allowance of an amount equal to 15% of the cost of new plant and machinery

27. Conditions :
Assessee sets up an undertaking for manufacturing or production of any article or thing on after in any notified backward areas in the state of Andhra Pradesh, Telangana, Bihar And West Bengal
The new assets are acquired and installed during the period beginning from to
Deduction u/s 32AD shall be allowed once and above the existing deduction already allowable u/s 32AC.
The new plant and machinery on which such deduction has been claimed cannot be transferred for a period of 5 years.

28. TEA, COFFEE AND RUBBER DEVELOPMENT ACCOUNT [SECTION 33AB]
Eligible assessee : In case the assessee is engaged in the business of growing and manufacturing tea, coffee, or rubber and it deposits a certain amount in a “special account” shall be allowed a deduction provided deposit is made within specified time-limit.
RATE OF DEDUCTION {33AB(i)}
Amount deposited in a special account with National Bank or
40% of profits from such business , Whichever is less
In case assessee has claimed a deduction-
In respect of a deposit in one previous year it will not be allowed in any subsequent years
By the firm , it shall not be allowed to its partners again.

29. Withdrawal of amount [Section 33AB(3)]
WHEN TO DEPOSIT
Amount has to be deposited :
Before the expiry of six months from close of previous year ; or
Before date of furnishing of return;
whichever is earlier.
Withdrawal of amount [Section 33AB(3)]
Withdrawal from this account will not be allowed except on :
Closure of business
Death of business
Partition of HUF
Dissolution of firm
Liquidation of company

30. DEEMED PROFIT
Asset acquired is sold/transferred before expiry of 8 succeeding previous years, the amount of cost which was met out, amount released from special account shall be deemed to be profit and gain from the business [33 AB(8)]
NO DEDUCTION
No deduction shall be allowed in respect of any amount utilized for the purpose of:
Any p&m installed in office premises, residential houses;
Any office appliances (except computers);
Any p&m whose full actual cost has been allowed as deduction;
Any new p&m installed for production of an article specified in 11th schedule [33AB(4)]

31. SITE RESTORATION FUND [SECTION 33ABA]
Eligible assessee
Assessee is carrying business of prospecting for or extraction or production of petroleum or natural gas or both in India;
There is an agreement between such assessee and the Central govt.[33ABA(1)]
Rate of deduction
a) Amount deposited in a special account to be opened with State Bank of India; or deposited in an account named Site Restoration Account;
b) 20% of profits from such business ,Whichever is less

32. Conditions
In case this deduction is claimed by firm, A.O.P. or B.O.I., the partners or members cannot claim this deduction from their individual income.
In case a deduction for amount deposited in special account or site restoration account is claimed , no deduction can be claimed for such amount under any other section.
In case any interest is credited to such account, the account so credited shall be deemed to be a deposit.
To claim this deduction it is compulsory to get the accounts audited and such audit report must accompany the return.

33. Withdrawal of amount
Allowed only for the purpose of extraction or production of petroleum or natural gas or both in India
Deemed income
Unutilized amount in the account
Asset acquired is transferred or sold before expiry of 8 succeeding previous years.
Central govt. has the power to withdraw this benefit at any time by notifying it in Gazette

34. RESERVE FOR SHIPPING BUSINESS [SECTION 33AC]
No deduction under this section shall be allowed for any A.Y. commencing on or after
Deduction is now given under Chapter XII-G of Income Tax Act ,1961