Question

What approaches have been suggested to overcome the seasonality problem related to interim reporting?

Short answer

One of the recommended approaches to address the issue of regularity related to interim reporting is to normalize fixed non-manufacturing costs based on anticipated sales.

Step-by-step solution

Meaning of Interim Reporting

An interim reporting can be a financial report covering a period of less than one year. Interim reporting is used to communicate a company's performance prior to the conclusion of normal full-year financial reporting cycles. Not at all like annual statements, is interim reporting not required to be overseen.

Explaining the approaches that have been suggested to overcome the seasonality problem related to interim reporting

One suggestion has been to normalize the fixed non-manufacturing cost based on expected sales. The issue with this strategy is that future sales are unclear, and consequently, an extraordinary deal of subjectivity is involved.

Another approach is to charge as one-period costs that are incomprehensible to designate for any one period. Under this approach, the detailed results for a quarter will reflect only fixed costs and commitment to profits, which is basically a commitment edge approach.

To mitigate the issue of regularity, the profession recommends that companies subject to material seasonal varieties highlight the regular nature of their business and with data for the 12-month period ending on interim dates for the current and preceding years. Consider supplementing your annual report.