Skip to content

CA Intermediate · Advanced Accounting · AS 25 Interim Financial Reporting

Nilgiri Foods Ltd (April–March year) publishes quarterly reports. In the quarter ended 31 December 2026 it changes its inventory valuation from FIFO to weighted average cost, effective 1 April 2026. Cumulative nine-month profit as reported under FIFO is ₹90 lakh. The change reduces profit by ₹4 lakh in the first quarter, ₹6 lakh in the second quarter and ₹5 lakh in the third quarter (all current-year effects). Under AS 25, the cumulative profit for the nine months ended 31 December 2026 shown in the third-quarter report is:

Cumulative nine-month profit is ₹75 lakh. AS 25 requires a change in accounting policy to be applied by restating earlier interim periods of the current year. The total reduction is 4 + 6 + 5 = ₹15 lakh, which takes the FIFO-based ₹90 lakh down to ₹75 lakh.

  1. A₹80 lakh, adjusting only the first two quarters
  2. B₹90 lakh, because the old figures stay unchanged and the change applies prospectively
  3. C₹75 lakh, after restating the first two quarters on the new policy and including the third quarter on the new policyCorrect
  4. D₹85 lakh, adjusting only the third quarter

Explanation

AS 25 requires a change in accounting policy within the year to be reflected by restating the financial statements of prior interim periods of the current financial year. All three quarters therefore reflect the new policy. Cumulative profit = 90 − 4 − 6 − 5 = ₹75 lakh. Adjusting only the later quarter (₹85 lakh) or only the earlier ones (₹80 lakh) leaves the periods inconsistent.

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