Same Accounting Policies as AnnualSame Accounting Policies as Annual

Same Accounting Policies as Annual

28 An entity shall 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 entity’s reporting (annual, half-yearly, or quarterly) shall not affect the measurement of its annual results. To achieve that objective, measurements for interim reporting purposes shall be made on an annual reporting period-to-date basis.

29 Requiring that an entity 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 entity’s reporting should not affect the measurement of its annual results, paragraph 28 acknowledges that an interim period is a part of a larger annual reporting period. Annual reporting period-to-date measurements may involve changes in estimates of amounts reported in prior interim periods of the current annual reporting period. 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 entity 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 annual reporting period, 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 in the statement of financial position either to await future information as to whether it has met the definition of an asset or to smooth earnings over interim periods within an annual reporting period; 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 annual reporting period. Amounts accrued for income tax expense in one interim period may have to be adjusted in a subsequent interim period of that annual reporting period if the estimate of the annual income tax rate changes.

31 Under the Framework for the Preparation and Presentation of Financial Statements (the Framework) (as identified in AASB 1048 Interpretation of Standards), 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, at the end of both annual and interim financial reporting periods.