Interim Financial Statements

Question 1

What is the integral view in an Interim Financial Statement?

Answer 1

“Interim period is a part of the annual period - GAAP

Gross profit method may be used to estimate COGS and inventory

Temporary declines in inventory aren’t recognized”

Question 2

How are discontinued operations & extraordinary items reported in Interim Financial Statements?

Answer 2

“Aren’t prorated

Fully recognized in Interim Period as incurred

If it occurs in Q3 - it’s recognized in Q3”

Question 3

How are cumulative gains and losses reported in Interim Financials?

Answer 3

Reported as if they occurred in the first quarter

Question 4

How is inventory valuation handled in Interim Financials?

Answer 4

“If inventory experiences a decline in value during an interim period - the loss is recognized in the interim period

If the loss is expected to be only temporary - no loss is recognized”

Question 5

What is one of the primary problems with interim reporting?

Answer 5

The matching principle gets messed up - Expenses incurred in one period may benefit future periods