Definition: Interim financial statements are financials that only cover periods less than one year. The most common form of interim financial statements cover one month, one quarter, or six months. Most companies generate a set of general purpose financial statements at the end of each accounting period. These annual reports work well for showing the company’s progress from year to year, but they don’t really show how well the company is doing throughout the year.
What Does Interim Financial Statements Mean?
That’s why interim statements are prepared. Investors and creditors need current information to help make decisions about the company. It would be crazy for an investor to base his estimated value a company on a 9-month-old balance sheet. The company could have sold off all of its assets in that time frame.
Interim financials are prepared at specific time periods to show investors and creditors the company performance at specific intervals during the accounting period. For instance, the SEC requires public companies to issue financial statements every quarter with their quarterly reports. This way investors can get a three month view of what the company is doing and speculate on where it will be headed later in the year.
The process of preparing interim financial statements is similar to annual financials with a few exceptions. The entire accounting cycle is followed from recording transactions to closing accounts, but some due diligence year-end procedures are sometimes skipped. For example, many times non-public companies skip the physical inventory count because it’s too time consuming and costly to perform on an interim bases. The actual count is usually only done at year-end. Instead, these companies use the retail inventory method to estimate the amount of ending inventory in the interim period.
All of the financial statements report the time frame reported in the heading. For instance, the income statement heading would read, “For the Three Months Ending March 31, 2017.”