Running Head: MILESTONE TWO 1
Milestone Two
MILESTONE TWO 2
B. Interim Reporting Requirements under GAAP and IFRS
1. Interim reporting refers to the reporting of financial results for a period that is shorter than a
fiscal period. The interim reporting requirement has been introduced for publicly traded
companies by the U.S. Securities and Exchange Commission (SEC). The statements that have
to be reported by the entities include balance sheet, income statement or profit or loss account
and cash flow statement. In comparison to annual reports of businesses, interim reports give
more precise and timely financial information to key stakeholders such as creditors and
investors.
According to ASC Topic 270 of the Financial Accounting Standards Board (FASB),
some of the details that must be integrated into interim financial information include data on
financial position during the specific fiscal year, operation results, comprehensive income, as
well as cash flows. The details pertaining to interim financial reporting that is followed under
IFRS is contained in IAS 34 (Tokar & Kumar, 2020). The minimum elements that need to be
incorporated in the interim financial statements include consolidated balance sheet,
comprehensive income statement and condensed cash flow statement.
2. The excel spreadsheet contains hypothetical financial statements for an organization.
3. There exist a number of differences in the guidelines that have been included in the Generally
Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards
(IFRS), relating to interim reporting of financial statements (Ahmed et al., 2020).
The table gives an insight into some of the chief differences in the interim reporting context. f
GAAP
IFRS
Guidelines
ASC 270 of FASB
IAS 34
MILESTONE TWO 3
Cost allocation during the
interim period
Interim periods are
considered to be vital parts of
the annual reporting periods
Every single interim period
is considered to be a unique
and distinctive reporting
period for an organization.
Only taxes are regarded to be
an integral component of the
annual reporting period.
Specific costs that derive
higher benefits than a single
period may be assigned to
other periods.
In case a specific cost derives
more benefits than one
period, then the specific cost
has to meet the asset
definition at the end of the
interim period. After this
requirement has been met, it
can be deferred. f f
Tax provision
In order to record the interim
tax provision of a business, it
is essential to adhere to an
annual worldwide tax rate.
In the case of IFRS, a
separate tax rate needs to be
used which must be
distinctive for every
jurisdiction and has to be
applied to the results for the
interim period.
C. Separate reporting of business segments
MILESTONE TWO 4
1. Publicly traded companies need to ensure that their financial reporting has been separated
into specific segments. According to ASC Topic 280 of the Financial Accounting Standards
Board, segment reporting provides an insight into diverse business activities and operations that
are undertaken by a company. A total of three tetes can be carried out for the purpose of
ascertaining operating segments and they are revenue test, asset test, and profit or loss test. Each
of these tests has distinctive purposes. The purpose of the revenue test is to ascertain whether a
specific segment generates over 10 % of the business revenue or not. For example, if the product
category of business helps to generate over 10 % revenue, a separate segment has to be
maintained for the same in financial reporting. The asset test is conducted to determine whether
a specific segment contributes to 10 % or more of the business assets. The profit or loss test
helps to ascertain whether a segment contributes to over 10 % of the profits or loss of the
business or not.
2. The practice of segment reporting is of paramount importance since it can support
transparency in financial reporting. When a business entity presents its financial reporting in
different segments, it is possible to get an in-depth ad detailed insight into the financial
activities. The reporting can enable diverse business stakeholders such as creditors and
investors to understand how the business performs. Due to the narrow focus, a transparent
climate is created and it is possible to assess the financial aspects of the form minutely. For
example, the insight into incurred expenses relating to a specific business segment can help to
understand its cash flow.
3. A number of improvement can be made in the segment reporting practice to sustain, promote
and foster transparency. f One of the fundamental methods is to ensure that a maximum number
of segments are captured in segment reporting which give a detailed insight into how the
business generates its revenue in the market. It is essential to maintain consistency when it
comes to segment disclosure so that the level of transparency and understandability can be
MILESTONE TWO 5
improved for the stakeholders of the business. Innovative approaches that involve technology
can be integrated into segment reporting to boost the level of transparency (G Baldarelli &
Nicolo, 2019). f
Reference
Ahmed, E., Bradford, B., & Bloch, R. (2020). Market Reaction to ADRs Quarterly Earnings:
The GAAP Effect. Journal of Business and Economic Studies, 24(1), 85-103.
G Baldarelli, M., & Nicolo, D. (2019). Toward an integrated segment reporting: between
tradition and innovation. International Journal of Advances in Management and
Economics, 8(06), 16-22.
Tokar, M., & Kumar, S. (2020, October). Applying IFRS Standards in 2020—impact of
COVID-19. In VI. Internacional Symposium on Accounting and Finance ISAF (Vol.
2021, p. 95).
