In Hong Kong, interim reports are typically prepared to illustrate a company’s performance by the end of a financial year or on a semi-annual basis. An interim report presents many useful insights about the company to enhance its transparency towards its respective stakeholders. Throughout this article, we will look at what an interim report is.
What Is an Interim Report?
An interim report is also known as an interim statement. It is a financial report that Hong Kong companies prepare before the annual report. The duration for these reports can be weekly, monthly, or on an ad hoc basis. Companies who prepare interim reports in Hong Kong must include all the financial information of these interim reports. Some examples are Balance Sheet, Income Statement, and Cash Flows Statement.
The sole purpose of an interim report is to establish a connection between business and the public. It provides minute-to-minute information about the firm to help the investors. Along with better communication among all the stakeholders’ team members, the interim public report makes the business even more transparent for them.
Benefits of Having an Interim Report
Let’s now look at some of the benefits an interim report can offer Hong Kong Businesses.
- It provides a transparent financial report of the company that includes all financial statements showcasing the stability of the company.
- It helps to discover any loopholes that might cause problems in the future.
- It helps in evaluating the current condition of the company so that investors can plan their investment plans.
- Interim reports are helpful in determining the current market value and status of the company.
- Large-scale businesses can maintain track and prepare a long-term strategy for future endeavours.
When Is an Interim Report Obligatory?
Presenting an Interim report is obligatory in two situations, first is when it is a requirement due to the law of the country where the company is registered. Secondly, if the company would like to receive a precise result and overview of the company’s growth at the financial year-end, an interim report can be handy.
Although, an interim report obligation is not a must for every company. It allows businesses to understand their financial position and problems that may exist.
As per the rules in Hong Kong, if the company is listed in the Main Board or Growth Enterprise Market (GEM) of the stock exchange, then, by law, it is obligatory to send reports regularly.
Why Do Small Businesses Benefit From Preparing an Interim Report?
As mentioned earlier, an interim report is not compulsory for all types of businesses. Instead, it is a requirement for only a specific industry. However, we have witnessed that many large-scale business owners use these interim reports for their companies. The report offers insights into your business that may be beneficial to look at regardless of the organisation’s size.
Especially for a Small Business Enterprise in Hong Kong, here’s a list of benefits you can enjoy if you choose to prepare an interim report.
- You can gain a lot of suggestions to cope-up with losses.
- You can also try to expand your business in new markets.
- An interim report helps in learning upward and downward trends in the industry or field.
- If you wish to attract investors and lenders for your small or medium-scale business, in that case, an interim report can help you have a better view of the company’s finances.
An interim report is also beneficial for such small-scale businesses that do not have enough resources to come out from a bad financial year or quarter.
What Does an Interim Report Show?
It is required for all of us to know the actual content of the interim report to help us better understand it in the best way possible.
There are only three main content included in an interim report:
Cash Flow Statement (CFS)
A cash flow statement is a description showing the company’s overall cash management, the net amount of cash or it’s equivalent transferred in and out of the company. The Cash Flow Statement consists of financial statements that report the company’s cash usage over a period of time.
An income statement shows your company’s total revenue and expenditure during a specific period. Simply, an income statement showcases the expense, revenue, gains, and company losses in that designated period. It is an inclusive amount of profit and loss looking at the company’s operations, management, or industrial performances.
As per its name, a balance sheet helps summarise your company’s financial balances, which include assets, liabilities, and shareholder equities in a financial year. It is like a snapshot that provides the blueprint of what the company owns.
In some cases where reports are bound to show data on stocks, dividends, regulatory complaints, or so on, then explanatory notes are required to explain the requirements.
Moreover, you can also add some other business-related information depending upon whom you want to show your interim reports.
Additional Considerations for Making an Interim Report
Here are some of the points to note when preparing your interim report.
- Changes in accounting: If there are any changes to your company’s policies in evaluating accounting estimates, the company must report these changes to the respective bodies.
- Policies on accounting: Your company must adhere to the same accounting policies when preparing different financial statements.
- Cost of goods sold: To determine the cost of goods sold, you can conduct a manual inventory count or use an estimation method.
- Expense Recognition: The company must also recognise their expenses when preparing the interim report. This helps to assess the financial position of the company accurately. In a nutshell, an interim report is essential for every small and large-scale business industry in Hong Kong.
- Declines in the Market: The company must report any decline in the market in their interim reports. This helps to evaluate the business strategy accordingly and make changes that are beneficial for the company. You can properly understand your financial position by preparing an interim report for your business.
- Materiality: Companies must also define what is considered to be material to their business when preparing their interim report. This helps to provide more accurate information about the company’s performance in the market.
- Retroactive Adjustments: Any required retroactive adjustments must be mentioned in the interim report. This helps to make more accurate decisions regarding the company’s finances. By preparing an interim report, you can identify potential areas of improvement and develop strategies to come out from a bad financial year or quarter.
- Seasonal or Cyclical Revenues: It is important to include any seasonal or cyclical revenues in your interim report. This helps to better understand the changes in demand and how they affect the company’s performance. Interim reports provide a detailed overview of the current financial health of your business, enabling you to make informed decisions quickly.
- Recognition of Transaction: The company must also recognize any transactions that have occurred when preparing the interim report. This helps to provide more accurate information about the performance of the company. These are some of the key points to consider when making your interim report in Hong Kong.
Deadline for Interim Reports in Hong Kong
Regarding deadlines, the publication of an interim report depends on where your company is listed. In simple words, companies listed on the Main Board must submit their interim reports twice a year or semi-annually for every financial year.
Many companies publish their report within three months once the first half year of the interim period ends. On the other hand, companies listed under GEM ( Growth Enterprise Market) must present their financial reports within 45 days after the interim period comes to an end.
Another option for presenting your interim report is to publish them quarterly. This gives you a clear, consistent, and detailed view of all the financial aspects.
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