Under IAS 34, companies generally should use the discreet approach for interim reporting. However, IAS 34 outlines exceptions to this rule. Explain what these exceptions are and how they are treated in interim reports. What argument does IAS 34 provide for this treatment?

IAS 34 specifically discusses year-end bonuses, customer/purchaser rebates, contingent rents, employer payroll taxes, and income taxes as exceptions to the discreet approach. The guidance is to use the integral approach for these types of costs. The argument is that these types of expenses give rise to constructive obligations and therefore should be recorded as the obligation arises in each interim period. Companies should estimate or project what these costs might be for the entire year and then accrue the costs in the interim period.
1. Year-end bonuses: These bonuses are accrued in each interim period provided there is a legal or constructive obligation to pay and a reliable estimate can be made.
2. Customer volume rebates: If the required level of sales to the customer is expected to be achieved by the end of the year, and the rebate is probable, then the volume rebates should be accrued in each interim period. Similar treatment can be used by the purchaser who has earned the rebate and therefore accrues the receivable as purchases are made in each interim period.
3. Contingent lease payments: If the required level of sales is expected to be achieved over the year, then the lease payment obligation should be accrued in each interim period as the sales are recognized.
4. Income taxes: The interim income tax expense should be determined using the estimated average effective income tax rate.
5. Employer payroll taxes: Payroll taxes for employees change depending on the level of wages paid. As a result, the company estimates the taxes based on a full year's compensation.