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15.21 Interim financial reporting—allocation of costs
Publication date: 28 Feb 2022
us IFRS & US GAAP guide
IFRS requires entities to account for interim financial statements via the discrete-period method. The spreading of costs that affect the full year is not appropriate. This could result in increased volatility in interim financial statements under IFRS as compared to US GAAP.
However, under both frameworks, the interim tax provision is based on an estimate of the annual effective tax rate applied to the interim results plus or minus the income tax effects of certain discrete transactions during the quarter in which they occur. See SD 8.16 for related discussion.
US GAAP | IFRS |
US GAAP views interim periods primarily as integral parts of an annual cycle. As such, it allows entities to allocate among the interim periods certain costs that benefit more than one of those periods. On the other hand, an entity may not record an accrual of cost at an interim period if one is not needed at year end, for example, for a vacation accrual.
| Interim financial statements are prepared via the discrete-period approach, wherein the interim period is viewed as a separate and distinct accounting period, rather than as part of an annual cycle. Regardless of whether an accrual is needed at year end, if the entity has an obligation at an interim period, it should be recorded.
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