Skip to content

CA Intermediate · Advanced Accounting · AS 25 Interim Financial Reporting

Godavari Pharma Ltd. reports quarterly. During the second quarter, it changed its accounting policy for inventory valuation from weighted average to FIFO, which is a change permitted under the standards. Under AS 25, how should the change be reflected in interim reports?

The new policy should be applied in the interim reports and the prior interim periods of the current financial year should be restated where practicable, with disclosure of the nature and effect of the change. AS 25 requires consistent policies across interim periods of the year.

  1. AApply the new policy only to the third and fourth quarters, leaving earlier quarters unchanged
  2. BApply the new policy from the second quarter only, without restating the first quarter
  3. CApply the new policy in the interim reports using the same accounting policies as the annual financial statements, and restate prior interim periods of the current year where practicableCorrect
  4. DDisclose the change only in the annual report, not in interim reports

Explanation

AS 25 requires the same accounting policies in interim reports as in the latest annual statements, except for changes made after the latest annual statements which will be reflected in the next annual statements. A change in policy is reflected by restating prior interim periods of the current financial year where practicable, with disclosure of the nature and effect. Options A, B and D do not follow this.

Did you get it right without looking?

One question tells you little. A timed set on AS 25 Interim Financial Reporting shows your real accuracy, how long you take and where you lose marks.

Practise AS 25 Interim Financial ReportingFree diagnostic mock

More AS 25 Interim Financial Reporting questions