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CA Intermediate · Advanced Accounting · AS 25 Interim Financial Reporting

Sundaram Textiles Ltd, a listed company, prepares quarterly interim financial reports. In the quarter ended 30 June, it incurred Rs 4,80,000 on a repair that benefits only the quarter in which it was incurred, and paid an annual insurance premium of Rs 2,40,000 on 1 April covering the full financial year. As per AS 25, how much expense should be recognised in the quarter ended 30 June for these two items together?

The quarter's expense is Rs 5,40,000. The repair of Rs 4,80,000 relates wholly to the quarter, while the annual insurance premium of Rs 2,40,000 is allocated equally across four quarters, giving Rs 60,000. Adding the two gives Rs 5,40,000, consistent with treating each interim period as discrete under AS 25.

  1. ARs 5,40,000Correct
  2. BRs 7,20,000
  3. CRs 4,80,000
  4. DRs 6,00,000

Explanation

AS 25 applies the same recognition principles as for annual statements, and each interim period is treated as a discrete period. The repair of Rs 4,80,000 is an expense of the quarter. The annual premium of Rs 2,40,000 is spread over four quarters, so Rs 60,000 falls in this quarter. Total = 4,80,000 + 60,000 = Rs 5,40,000. Rs 7,20,000 wrongly expenses the whole premium.

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