Interim Financial Reporting

Milestone Two
Interim Reporting Requirement
Under generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS), interim financial reporting provides periodic financial information for a shorter duration, typically covering a quarter or half-year, rather than the entire fiscal year.
Interim financial reporting under GAAP is primarily governed by the Accounting Standards Codification (ASC) Topic 270, "Interim Reporting." GAAP does not universally mandate quarterly reporting for all companies, but the Securities and Exchange Commission (SEC) requires public companies to report quarterly. Interim financial statements under GAAP consist of condensed versions of the balance sheet, income statement, and cash flow statement. These condensed statements offer a summary of financial performance, financial position, and cash flows for the reporting period and cumulative year-to-date period. GAAP allows companies to use estimates in interim financial reporting for items such as revenue recognition, inventory valuation, and income tax provisions if the estimates are based on reasonable and supportable assumptions. Additionally, GAAP requires disclosures in the interim financial statements to provide additional information necessary for a fair presentation, including significant accounting policies, changes in accounting estimates, and subsequent events.
Interim financial reporting under International Financial Reporting Standards (IFRS) is guided by IAS 34, "Interim Financial Reporting." IFRS requires companies to present a condensed balance sheet, income statement, statement of changes in equity, cash flow statement, and selected explanatory notes in their interim financial statements. These statements provide a summary of financial performance, financial position, and cash flows for the reporting period and cumulative year-to-date period. Unlike GAAP, IFRS does not permit the use of estimates in the preparation of interim financial statements, and the recognition and measurement of items should align with the principles applied in the annual financial statements. IFRS places significant emphasis on adequate disclosures in interim financial statements, including significant events and transactions, changes in accounting policies, and any other information necessary for a comprehensive understanding of the interim financial statements.
The interim reporting requirements are similar but not identical under GAAP and IFRS. While both frameworks require companies to provide interim financial statements, there are differences in certain aspects. GAAP allows the use of estimates in interim financial reporting, whereas IFRS does not permit the use of estimates. According to a study by Liu et al. (2014), this difference can lead to variations in reported earnings between GAAP and IFRS interim financial statements. The study found that companies applying GAAP with estimate-based interim reporting tend to exhibit higher volatility in earnings compared to those applying IFRS without estimate-based interim reporting.
Segment Reporting
The process used to identify which business segments to report separately is determined by ASC Topic 280 for GAAP and IFRS 8 for IFRS. A segment is reportable if it meets o...