Analysis of Ecovista PLC's Financial Statements and Chairman's Statement

Contents
INTRODUCTION......................................................................................................................................1
REGULATION AND BACKGROUND...................................................................................................1
NARRATIVES CHAIRMAN’S STATEMENT........................................................................................2
CONCLUSION........................................................................................................................................12
References:...........................................................................................................................................13

INTRODUCTION
Ecovista PLC is an investment company investing in real estate
property .The main purpose of Ecovista is to search for the
property were development is required and has the potential to
increase the value of the sites or to procure development sites so
that it can be developed very quickly. Ecovista has its main
headquarter located at Bishops Stortford, Hertfordshire and was
founded in the year 2009.It is a public company limited by shares.
The size of the company is not very big; it has almost ten
employees working in a company. (Microsoft Corporation,
2019).The financial statement of Ecovista Plc is presented in
currency pound, as this is the main currency of the entity.
REGULATION AND BACKGROUND
The Financial statement of Ecovista Plc is presented under
historical cost concept. It also includes the revaluation of
investment property in accordance with the financial reporting
standard applicable in UK and the companies Act 2006.The
company recognizes the revenue when it is received or
receivable. Rental income of the company is recognised over a
straight-line basis based on the tenure of the lease. The company
recognizes the tax as the sum of current tax payable and deferred
tax. The current tax is computed as per the rate prescribed by the
act. Deferred tax is recognised based on timing difference
between the carrying amount of the assets and liability in the
company’s financial records. Initially investment property is
measured at cost and it includes transaction cost too. After
recognizing initial investment at cost, subsequently it is measured
at fair value. Any gains or losses arising from the changes in the
fair valuation are recognised in the profit and loss statement of
the company in the period in which they arose. All the property of
the company is held under operating lease in order to earn
rentals for the company or to appreciate the capital of the
company. (Welbeck Associates, 2017)

The company Ecovista Plc also apply the provisions of Section 11
“Basic Financial Instruments” and section 12 “Other Financial
Instrument issues “of FRS 102.The Financial assets and liabilities
of the company are offset and the net amount of the assets and
liabilities are reflected in the financial statement of the company.
Financial instruments are recognised only when there is a
contractual provision to recognise such financial instrument and
when the company becomes party to it. Impairment of the assets
is reviewed at each reporting date in order to find any indication if
there is any assets suffering from impairment loss if any. If any
impairment is recognised than recoverable amount of, the asset
is estimated and compared with the carrying amount of such
assets. If the recoverable amount is lower than the carrying
amount of the assets is reduced to the recoverable amount and
the impairment loss in recognised in the profit and loss of the
company. The foreign exchange transaction of the company,
which the company engages in not in their functional currency, is
recorded at the rate on which any foreign transaction took place.
The other financial liabilities of the company like loans are initially
recognised at the fair value and subsequently measured at
amortized cost using interest method. (Welbeck Associates, 2017)
NARRATIVES CHAIRMAN’S STATEMENT
Readability of accounting narratives : Source (Jones and
shoemaker,1994)
Readability of a statement can be measured scientifically through
the use of various indices in which the flesch index is the most
popular index in US.Readability of a statement may be generally
measure by using any of the three following tools:
(a) Flesch Index: It is one of the most popular US index and is
designed by educationalists of 1948 to measure the age of the

person reading the statement, especially among children
through words, sentences and syllables;
(b) Fox Index: It is also one of the popular US tools which is used
for measuring the reading age of children;
(c) Lix: It is a popular Sweden tool which is used to measure the
difficulty of reading texts written in foreign.
The tools used for analyzing the Narratives Chairman
Statement are Flesch Index and Lix.
Readability of accounting narratives (General findings)
 Classify annual report as difficult and very difficult
 Analyse chairman statement most readable part.
 Annual reports generally are harder to read than the report
of employees
 It is becoming more harder over time.
Readability ,understandability Source:cloze Smith &Taffler
(1992)
 Readability doesnot correspond with the understandability
 CLOZE procedure :consider only text and subject and
interaction
 One used to conduct an experiment with the accounting
students,accounting practitioners,and narratives of failing
companies.
 Find out the difference between three indices
Cloze/Lix/Flesch.
Understandability Source :Jones and Smith(2014)
 Find out the alternative ways to understand the report.