Sunday, July 5

What are Interim Financial Statements?

Definition: Interim financial statements are financials that just cover spans less than 1 year. The most typical kind of interim financial statements pay one month, 1 quarter, or even half an hour. Most firms create a set of general goal financial statements at the conclusion of every accounting period. These yearly reports work nicely for revealing the firm’s improvement from year to year, however they don’t really show how well the company is doing throughout the year.

What DoesInterim Financial Statements Mean?

That’s why interim statements are prepared. Investors and creditors need current information to help make decisions about the company. It would be crazy for an investor to base his estimated value a company on a 9-month-old balance sheet. The company could have sold off all of its stocks in that time frame.

Example

Interim financials are prepared at specific time periods to show investors and creditors the company performance at specific intervals during the accounting period. For instance, the SEC requires public companies to issue financial statements every quarter with their quarterly reports. This way investors can obtain a three-month view of what the company is doing and speculate on where it will be headed later in the year.

The process of preparing interim financial statements is similar to annual financials with a few exceptions. The entire accounting cycle is followed from recording transactions to closing accounts, but some due diligence year-end procedures are sometimes skipped. For example, many times non-public companies skip the physical inventory count because it’s too time-consuming and costly to perform on an interim bases. The actual count is usually only done at year-end. Instead, these companies use the retail inventory method to estimate the amount of ending inventory in the interim period.

All of the financial statements report the time frame reported in the heading. For instance, the income statement heading would read, “For The Three Months Ending March 31, 2017. “