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INTRODUCTION

Financial reporting is a process of recording all the financial activities and position of an organisation. It is prepared on the basis of relevant information in a well-structured manner and in a form easy to understand (Mir, 2013). The primary motive of financial reporting is to provide information regarding the financial position, present position and changes in the financial position of business organisation like “MARKS AND SPENCER” that is valuable to large range of users in making effective economic decision. This project report aimed on providing crucial information regarding the purpose of using financial reporting. Apart from this, analysis of the financial statement that are prepared by the company during the period. Along with this, evaluation of financial reporting standard and theoretical model are also covered under this report. Examination of international difference in financial accounting are identify effectively in the project.

1: Financial reporting

In every business organisation, it is crucial to make use of reliable reporting systems that can lead to generation of relevant profit in coming period of time. It is one of the effective process of producing statements that can disclose “M&S” financial status to the owners and the government. It is basically a combination of external financial statements such as income statement, comprehensive statements, balance sheet and changes of stakeholder’s equity. It used to provide investors, creditors and other business stakeholders an idea of integrity and worth of the company. This will give crucial information that can be used to make reliable business decision such as they should open new business with the available resources (Russo, Mitschow and Schinski, 2015).

As per IASB “M&S” need to formulate financial records to show outcome status of the company in front of their shareholders. There must be transparency of data can be helpful for the business entities to deal with business effectively. It is crucial to follow every accounting related principles, rules and regulation that could be helpful for recording data in different record so that it should be helpful in depict real position of “M&S”. This company is preparing their financial reports consistently to operate business at international level (Lu and Fang, 2013).

Purpose:

The main objective of the financial reporting is to deliver information regarding the financial position, performance and changes in financial position of an organisation that is valuable for an organisation in longer period of time. To help managers of M&S to make accurate strategic planning so that external stakeholders can increase total sales, profits and market share in order to gain competitive advantage over other company.

2: Requirement, purpose and key principles of regulatory and concept framework

Conceptual framework is basically an effective type of analytical component with the motive of variable quantity and certain related textual aspects. It is applied through organisation when overall performance and status of business is being needed (Lu and Fang, 2013). It is basically used by most of the companies to make variation and arrange innovative ideas more effectively. Regulatory framework is the combination of legal obligations and regulations that are set the by higher authority of UK regarding various companies that are operating in business environment. According to the law and rules that are implemented in the company is been required to conducts financial reports for their business because it used to examine actual position and financial stability of M&S. This is related with the following regulation that are based on IASB because, it can be helpful the stakeholders to analyse organisational performance effectively. These rules and regulations are imposed in the specific format of IFRS as mentioned below:

IFRS: It Stands for International financial reporting standards that are introduced through IASB. According to this particular body which is responsible for formulating principles and specific set of regulatory norms. There are certain key principles which are explained below:

IFRS 1: It is associated with the initial implementation of IFRS, under which companies adopt IFRS for the first time. It would have related directly with M&S to develop with financial statements effectively.

IFRS 3: This is associated with the combination under which merger and acquisition are taken into account. It would assist organisation to combine all their assets and liabilities so that liabilities can be paid to reduce financial losses (Lemieux, 2012).

Purpose of regulatory and conceptual framework:

There is specific objective of regulatory design that is responsible for guiding organisation towards right direction as it will help in attaining overall aims and objectives of M&S during future times. The primary purpose of framework is to examine overall performance of a business firms so that stakeholders can take effective decisions regarding the company. There are certain objectives related with the regulatory and conceptual framework which is related with the international regulation so that business can be plan their activities more effectively (Singh, 2015).

Quality feature of financial information: There are specific characteristics of financial data that can assist them to make more reliable decision in coming period of time (Kimbro and Xu, 2016). There are certain points:

Relevance: It is most crucial for an organisation to record actual data so that it can assist them to analyse their actual performance or financial position of the company.

Faithful representation: This is valuable aspects to gain overall trust of stakeholder such as investors and shareholder because of this they can assure that organisation is in good situation and can get long term benefits such as higher return on capital investments.

3: Main stakeholders of an organisation and their advantage from financial data

The primary users of financial record are basically said to be more common grouped as investors and potential investors that are interested in their potential gains and overall security of their investments. In case of future profits, it can be predicated from the targeted companies past performance as mentioned in the income statements. Stakeholder are considered as primary aspects of M&S that are associated with internal and external parties of M&S (Khanzhyn, 2012). The company is having wide number of stakeholders with the assistance of operating business more effectively. There are various benefits financial information to stakeholders such as:

Internal stakeholders: These are directly associated with the operation departments of an organisation. It consists of certain parties that are mentioned below:

  • Shareholders: They are considered as valuable part of the company as individual that are providing capital to M&S. Company is entirely relies on their investments through which future plans can be made accordingly.They can get benefited by the financial information of dividend reports from which they can ascertain their profitability.
  • Managers: In M&S, managers can get benefited by using financial information as it would help them to make valuable decision through analysing the organisational performance. In case, operations are not in effective manner they can implement appropriate plan to overcome those issues (Jayasinghe, 2014).

External stakeholders: They are not directly associated with M&S of an organisation but they are having right option to collect financial data because they are essential part of the company. some of valuable parts are:

  • Investors: They are primary part of the group of an individual that invest their money in M&S projects for the motive of earning maximum profits. They can get benefited from balance sheet of the organisation as they can ascertain probable return that can be gained by them.
  • Creditors: The individual that can provide goods on credits to M&S are considered as creditors. Financial data can assist them in analysing the organisation performance to pay back their amount in the given period of time.

4: Value of financial data for meeting organisational growth and purpose

Financial reporting would assist in overall management of organisational performance that will assist them attaining overall aims and objectives M&S is operating all around the nation and for which appropriate financial statements so that all the stakeholders of the company which can get satisfied and show more interest in the company. Objectives of M&S is to attract most of the investors, satisfy clients and increase profit from the total amount of sales. Most of the investors used to attract toward maximum return on their overall investments. Customers satisfaction can be attaining with the help of positive market position which can be determine through the help of increase revenue for the company for the longer period of time.  In case of M&S is having good image in the market that can help client to satisfied because they can get assured about the using products of a company.

The organisation is performing good in the market than it will assist them more competitive in the market and will try to acquire maximum profit for the company. Effective and accurate financial statements can assist an organisation to examine the overall growth and opportunity and will make efforts to grab them to attain more competitive benefits in near future time. For this purpose, finance account of M&S can be right option to analyse the organisation efficiency and profitability position of the company (Hung, and Chuang, 2012).

Financial statements of M&S can another valuable business that can be examine to determine financial position in the market in order to assist specific growth in near future time. The another aspect of this statements is to attain competitive advantage over by measuring the strength of the company. By the help of this, company can easily be able to attain maximum amount of profit in coming period of time.

5: Financial statements of an organisation 

(a): Statement of profit and loss

Continuing operations

Amount

Revenue

385100.00

Cost of sales of goods

291700.00

Gross Profit

93400.00

 

 

Operating Expenses

78500.00

Operating Profits

14900.00

Finance Income

5600.00

Finance Cost

830.00

Profit before income tax

19670.00

Income tax expenses

15000.00

Profit after tax

4670.00

Dividend

 

Equity

830.00

Preference

2330.00

Retained Earning

1510.00

 

 

 

From the above statements, it has been seen that financial position of the company can help them to assist the total earning after the making of all adjustments such as tax expenses and other. The P&L statements for the company is showing gross profit of 93400. After taxation, the balance amount is valued to 19670 and profit after deduction is amounted as 4670.

(b): Changes in equity

Particulars

Ordinary capital

Retained earnings

opening balance

86700

32100

Dividend paid

 

-2330

Profit from current year

 

4670

Closing balance

86700

34440

(c): Statements of financial position

Assets

 

Amount

Land & Property

160700.00

 

Less:Depreciation

-185100.00

-24400.00

Property

88000.00

 

Less:Depreciation

-8000.00

80000.00

Investment property

 

23300.00

Plant & Equipment

 

78000.00

 

 

 

Deferred tax assets

 

8900.00

Other assets

 

 

Total non-current assets

 

165800.00

 

 

 

Inventories

 

17230.00

Accounts receivable

 

68000.00

Other assets

 

 

Short-term investments

 

 

Cash and cash equivalents

 

1500.00

Total current assets

 

86730.00

 

 

 

Total assets

 

252530.00

 

 

 

Equity and liabilities

 

 

 

 

 

Equity

 

 

Equity share capital

 

86700.00

10% Pref. Share capital

 

23300.00

Revaluation Reserve

 

42800.00

Retained Earning

 

33610.00

Total non-current liabilities

 

186410.00

 

 

 

Provisions

 

 

Accounts payable

 

66120.00

Total current liabilities

 

66120.00

 

 

 

Total  equity and liabilities

 

252530.00

According to the above balance sheet or financial changes which is valuable for the companies to determine the actual cash position during an accounting period of time. The above mentioned balance sheet can provide the total assets and debts which is held by the company for the specific period of time. The balance sheet shows current assets of 86730 and total liabilities of 186410.

(d): Statements of cash-flow statements

In the financial reporting, a cash flow statements shows total changes in overall balance sheet accounts and profit affects cash and cash equivalents. It would break the analysis down to operating, investing and financing. The company can use this information for the purpose of analysing total inflows and outflow. The primary objective of preparing cash flow statements for a specific period is to show information regarding availability of cash and total amount going out from the business. Cash flow statement is mentioned in the appendix. The information is related with the reduction in the capital and expenditure which was partially offset through weaker business performance with adjusted operating gain down with 94.3 million. Working capital was internationally flat on the overall year with reduction in clothing and home inventory offset trough minimising creditors.

6: The way in which financial statements are used to communicate and interpret financial performance

As analysed form the appendix Revenues of Marks and Spencer for year 2017 were 10622000 and these are increased in year 2018 and reached up to 10698200. Cost of sales for both the years are 6629300 and 6745600 for year 2017 and 2018 respectively. Gross profit was reduced up to 3952600 in year 2018 form 3992700 which was for year 2017. Operating period for both the years are 707300 and 677400 respectively. Net income for the organization were 117100 and 25700 for both the years 2017 and 2018. Cash and cash equivalents of Marks and Spencer were decreased up to 207700 in year 2018 as compare to 468600 which was for year 2017. Total current assets in year 2017 were 1723300 that are decreased up to 1317900 in year 2018. Long term investment of the organization for year 2017 were 51500 that are decreased in year 2018. Total assets of the organization were 7550200 in year 2018 and for 2017 there were 8292500. Total liabilities in year 2018 are 4596000 that are decreased as compare to year 2017. Total shareholder’s equity for year 2017 were 3156300 that are decreased up to 2357500 in year 2018.

7: Difference between IFRS and IAS

IFRS (International Financial Reporting Standards): These were induced by IASB which is international accounting standard board that are introduced for the organisations to provide guidance while recording transactions in financial statements. It is very important for all the companies to follow all the regulations for accounting so that reports can be formed appropriately as they are presented to external shareholder in order to formulate decisions.

IAS (International Accounting Standards): All the standards under IAS are introduced by International Accounting Standards Committee (IASC) in which organisations are direct to implement accounting standards in accounting process. It helps to record appropriate information in the books of accounting (Feng, 2018).

Difference between IFRS and IAS:

IFRS

IAS

It stands for international financial reporting standards.

It stands for international accounting standards.

IFRS are mainly introduces to resolve all the consequences that are faced by organisations by using IAS.

These were introduced to resolve accounting related problems.

All the standards under IFRS are issued by IASB.

Accounting standards are issued by IASC.

IFRS were issued in year 2001 to resolve issues that are taking place due to IAS.

IAS were issued in year 1973 for the purpose of guiding companies to use accounting standards in accounting system.

8: Benefits of IFRS

IFRS: These are the set of standards that are mainly related to financial reporting in which organisations are directed to follow all the rules and regulations of government that are set for the reporting procedure of financial transactions (Benefits of IFRS, 2017). All the benefits of IFRS are as follows:

  • It is a technique that may contribute in the enhancement of economy by providing good opportunities to the investors.
  • Directs organisations to record appropriate information in financial statements so that shareholders may analyse that their money is used effectively or not.
  • It helps companies to set benchmark for themselves and attain competitive advantage in the market.
  • As these standards are related to international financial reporting hence they help to attract foreign investment so that business can be operated smoothly.
  • It helps to set a global language in which investors from all around the world may become part of an organisation.
  • IFRS is launched to guide companies so that accurate and appropriate financial statements can be formulated and managers may analyse actual financial status of the company and take effective decisions according to the conditions of the company.

All the IFRS are very beneficial for Marks and Spencer because they are the best standards that may help the managers and other stakeholders to take effective decisions that may result positively for the organisation. According to law it is essential for the companies to follow all the rules and regulations of government so that business can be operated effectively.

9: Varying degree of compliance of with IFRS by organisations across the world

There are various types of standards that are introduced by government for the business entities and all of them are required to follow the standards because all of them may help to formulate financial statements appropriately. As Marks and Spencer is operating its business all around the world hence it is not possible to implement the accounting rules of all the countries hence IFRS are the best options as they are related to international accounting. This helps the organisation to attract foreign investors toward the organisation so that investments can be enhanced (Alyousif and Kalenkoski, 2017).

Main purpose of IFRS is to direct organisations so that they may formulate financial accounts in appropriate manner and their investors may take investment related decisions. All the standards are related to the financial transactions and their treatment in the financial reports. Firstly, IAS were introduced by the IASC and then different complexities are identified in the IAS. To deal with all such complexities IASB introduced IFRS so that it may facilitate organisations to record all the financial information accurately. These standards may help to attain organisational goals and objectives such as enhanced investments, satisfied customers and increased sales. For Marks and Spencer, it is very important to implement all the standards that are induced by IASB so that the business can be operated legally and according to the financial requirements. If an organisation is not able to follow the rules and regulations that are published by IASB than it may take strict action against that organisation. IFRS is very helpful for the organisations who are operating business all around the world and have to formulate financial statements in consolidated form. GAAP accounting standards are used in the UK, while IFRS is the used in almost all over 110 nations all over the nation. GAAP is the combination of authoritative standards and commonly accepted as well as reporting with certain accounting data. It consists of principles of regularity and consistency.

CONCLUSION

From the above project report, it has been concluded that financial reporting is a method which is used by organizations to record all the financial information in the financial statements so that financial performance can be measured. All the companies are required to follow all the standards of IFRS and IAS so that all the transactions can be recorded accurately. Stakeholders of the business entities determine financial strength so that they may pass judgement on their investing decisions. Shareholders analyze that their money is used by the company in appropriate manner or not. Financial information helps the stakeholders to analyze financial statements and then pass judgment on financial position of the organization.

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REFERENCES

  • Alyousif, M. and Kalenkoski, C. M., 2017. Who seeks financial advice?.
  • Feng, A. X., 2018. Bank Competition, Risk Taking, and their Consequences: Evidence from the US Mortgage and Labor Markets. International Monetary Fund.
  • Hung, C. T. and Chuang, F. C., 2012. The Influence of Global Economic Crisis towards the Financial Performance of the Shipping Industry. In Applied Mechanics and Materials (Vol. 145. pp. 480-484). Trans Tech Publications.
  • Jayasinghe, P., 2014. Incorporating Exchange Rate Exposure Asymmetries: A Firm Level Study.
  • Khanzhyn, V., 2012. Three essays on the role of financial development. The University of Nebraska-Lincoln.
  • Kimbro, M. B. and Xu, D., 2016. Shareholders have a say in executive compensation: Evidence from say-on-pay in the United States. Journal of Accounting and Public Policy. 35(1). pp.19-42.
  • Lemieux, V. ed., 2012. Financial analysis and risk management: Data governance, analytics and life cycle management. Springer Science & Business Media.
  • Lu, T. and Fang, S., 2013. Sovereign Debt, Real Interest Rate and Gold Pricing.
  • Lu, T. and Fang, S., 2013. The Value of Gold as a Super-Sovereign Zero-Coupon Bond.
  • Mir, M.A., 2013. GLOBAL FINANCIAL CRISIS AND INDIAN ECONOMY: CAUSES & CONSEQUENCES. Annamalai International Journal of Business Studies & Research. 5(1).
  • Russo, N., Mitschow, M. and Schinski, M., 2015. FOR WANT OF A NAIL: A CONCISE EXPLANATION FOR THE ONGOING FINANCIAL CRISIS. Journal of Theoretical Accounting Research10(2).
  • Singh, S. P., 2015. STATUS AND SCOPE OF FUTURE COMMODITY TRADING IN INDIA (Doctoral dissertation, Institute of Agricultural Sciences, Banaras Hindu University, Varanasi).

 

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