Neither Gaap Nor Ifrs Require Companies To Prepare Interim

1617 WordsFeb 20, 20177 Pages
Neither GAAP nor IFRS require companies to prepare interim financial statements. However, the Securities and Exchange Commission requires all publicly traded companies to file interim financial statements quarterly, in addition to their audited annual financial statements (Hoyle, J., Schaefer, T., & Doupnik, T., 2015). The statements do not require an audit and can be presented in a condensed form. Both FASB and IFRS present direction in this matter via ASC 270 and IAS 34 respectively. According to the standard issued for GAAP reporting, FASB requires companies to consider interim periods as integral parts of the annual period (FASB). While interim reports contain less information than the annual financial statements, there is guidance…show more content…
al, p. 366). LIFO liquidation issues arise when the liquidated inventories at the date of the interim period is expected to be replaced at the end of the annual reporting period (See Exhibit A). FASB 270-10-45 instructs companies that “inventory at the interim reporting date shall not give effect to the LIFO liquidation, and cost of sales for the interim reporting period shall include the expected cost of replacement of the liquidated LIFO base” (FASB). Standard costing of inventory and cost of goods sold will be adjusted depending on the effect it has on the year-end reporting period. If variances in an interim period exist, FASB does not require an adjustment to inventory and COGS if the variance is absorbed in the year-end reporting. In contrast, if an interim period variance is not absorbed when year-end is reported, FASB tells us that the interim period should be reported in the same manner as the annual reporting. Some entities use estimated gross profit rates to determine the cost of goods sold during interim periods or use other methods different from those used at annual inventory dates. These entities shall disclose the method used at the interim date and any significant adjustments that result from reconciliations with the annual physical inventory. If a cost cannot be traced to revenue, it should be recorded in the interim period it is incurred. On the other hand, if the cost can be traced, the cost should be allocated in the appropriate

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