Interim financial statements cover a period of less than one year and include balance sheets, cash flow statements, and profit and loss statements. They are often issued quarterly or monthly to keep investors informed and assess the company’s performance. The frequency of issuance varies by location and industry. Interim statements are not as authoritative as annual statements due to lack of auditing and the full impact of seasonal effects.
Interim financial statements are documents that cover the financial activity of a company or other entity for a period of less than one calendar year. Often this type of statement is issued to cover a three-month period of activity, although some companies choose to issue a monthly or semi-annual statement. Although the structure of the reports included in such a return will follow generally accepted accounting principles, the information is generally not audited, as the audit is typically done just before the annual return is issued.
Interim financial statements, like their annual counterparts, generally include three types of reports. These three are the balance sheet, the statement of cash flows, and the statement of profit and loss. Some organizations also include an owner’s equity report as a fourth resource.
It is not unusual for organizations to issue interim financial statements. For companies, issuing quarterly financial statements is often about keeping investors informed about the company’s performance. Some companies prefer to issue monthly financial statements that not only help keep investors informed, but also serve as a tool to assess the current operating state of the company. This use of the document makes it possible to initiate changes in the policies of the procedures that are likely to improve the profitability of the business in the next accounting period.
The frequency of interim financial statement issuance is often influenced by location and what is considered standard within a given industry. In the United States, three-month statements are common; In the UK, semi-annual returns are often the norm. However, even taking location into account, organizations may choose to issue statements based on what others in the same industry routinely do. For example, if a major retailer chooses to issue monthly interim financial statements, many of the smaller retailers that directly compete with the larger retailer will also issue monthly statements.
While useful, interim financial statements are generally not considered as authoritative as annual statements. There are many reasons for this. First, while many interim statements do account for seasonal effects with the aid of a footer disclosure, the full impact of those effects may not be seen until the following month or quarter. In addition, the data for these returns is taken directly from the accounting books and has not been audited prior to the preparation of the returns. This is in contrast to annual statements, which present a more complete picture of an organization’s finances, and which have generally been audited and qualified before details are published.
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