FAR, Financial Accounting and Reporting
Sources for Interim Financial Reporting
Last reviewed
The standards and authorities behind PocketCPA's FAR lessons on Interim Financial Reporting. The topic rests on ASC 270.
About this topic
A quarter is not a small year.
That single sentence is the whole of ASC 270, and every rule in the Topic is a consequence of it. Three cases make the point. A company that pays its annual property tax in January has not had a terrible first quarter and three good ones. A company whose effective tax rate falls once income clears a threshold has not become more profitable in the fourth quarter. A retailer earning most of its margin in December is not failing for nine months of the year.
Key points
- Interim periods are integral parts of the annual period, not standalone reporting periods.
- The estimated annual effective tax rate is applied to year-to-date income each quarter; revisions self-correct in the quarter of change.
- LIFO liquidations expected to be replaced by year-end are not recognized at interim dates.
- Revenues are recognized as earned; costs directly tied to revenue follow matching, while other costs follow normal recognition rules.
What the lessons cover
- The integral view (ASC 270-10-45-1 and 45-8)
- Income taxes: the estimated annual effective rate (ASC 740-270)
- Costs that benefit more than one interim period (ASC 270-10-45-9)
- Temporary LIFO liquidations (ASC 270-10-45-6)
- Changes in estimate, changes in principle, and error corrections (ASC 270-10-45-13, 45-14 and 45-16)
- The fourth quarter, and what must be disclosed (ASC 270-10-45-10)
- Condensed presentation, seasonality and disclosure (ASC 270-10-50-1)
Authoritative references
Where these requirements sit in the literature.
- ASC 270-10-45-1, the integral view of an interim period.
- ASC 270-10-45-8, the objective of fairly measuring annual results.
- ASC 270-10-45-6, temporary LIFO liquidations expected to be replaced by year end.
- ASC 270-10-45-9, allocation of costs benefiting more than one interim period.
- ASC 270-10-45-10, disclosure of year-end adjustments when the fourth quarter is not separately reported.
- ASC 270-10-45-13, changes in accounting principle in an interim period, reported under ASC 250.
- ASC 270-10-45-14, changes in accounting estimate in an interim period.
- ASC 270-10-45-16, materiality of interim error corrections measured against the estimated annual result and the trend of earnings.
- ASC 270-10-50-1, condensed interim presentation and summarized disclosures.
- ASC 740-270, the estimated annual effective tax rate applied to year-to-date ordinary income.
- ASC 250, accounting changes and error corrections, which supplies the retrospective mechanics referenced by ASC 270-10-45-13.
How PocketCPA uses these sources
Every lesson is written in original words and cites the paragraph each rule comes from. No standard's text is reproduced. How lessons and questions are written and checked is set out in our methodology.