Financial Reporting

This report explores the role of financial reporting in a business context, analyzing the regulatory framework, key principles, and qualitative characteristics of financial information. It includes an interpretation of H&M's financial statements for the last two years, examining its financial performance and position. The report also discusses the benefits of IFRS and the degree of compliance by organizations across the world.

FINANCIAL REPORTING

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Context and purpose of financial reporting.............................................................................1
2. Analysis of regulatory and conceptual framework and key principles and qualitative
characteristics..............................................................................................................................2
3. Main stakeholders of organisation and benefits from financial information..........................3
4. Importance of financial reporting for meeting entity's growth and objectives.......................4
5. Formation of financial statements as per IAS 1......................................................................4
6. Interpretation of last two year's financial statement of company............................................5
7. Differences between IFRS and IAS........................................................................................6
8. Benefits of IFRS......................................................................................................................7
9. Degree of compliance with IFRS by organisation across the world and with in the nation...8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
APPENDIX....................................................................................................................................10
Balance sheet ............................................................................................................................10
Income statement......................................................................................................................11
Cash flow statement .................................................................................................................12

INTRODUCTION
In modern world, financial reporting can be considered as a form through which
summarising of data related to finance of a business company. With the help of this, analysation
can be done of areas that requires improvement (Brusca, and et. al., 2016). Using financial
reporting, effective solutions can be made considering various standards related to finance. For
the purpose of better knowledge related to standards of international financial reporting, junior
auditor have developed this report for line manager. This assignment is going to be enclosed with
regulatory framework, purpose and principles that consists with characteristics of financial data.
Away with this. Assignment will also include interpretation of H&M's financial statements for
the last two years so that performance of this organisation can easily be examined. Lastly, degree
related to compliance have also been presented that consists of activities along with a plan
considering significant examples.
MAIN BODY
1. Context and purpose of financial reporting
Financial Reporting
In present time, financial reporting can easily be defined as an approach which is being
utilised by a company when it comes to measure the financial position or to analyse the data as
well (Che Azmi and Hanifa, 2015). According to International Accounting Standard Board
(IASB), main objective of developing financial report is that, data can be rendered for analysing
the current financial position so, that effective alterations can be made for the purpose of
enhancing the position of the company. This tool is majorly being used by extended users that
consists with a purpose (interest) within a company like H&M. It has been analysed that,
financial reporting consists with a procedure which could aid in tracking that data which is
related to finance so that effective management or control can be done of exchange of finance or
funding capacity of a company.
Apart from this, it is being found that IASB mainly shows that H&M needs to develop
statements of financial so that right data related to funds can be provided to stakeholders. This
eventually pulls out or it shows authentic position of H&M in finance so that it could aid in
attracting new investor's or develop interest of existing investors. On the other hand, it is
required for analysts of H&M to focus on fractional data so that execution could take place. It is
1

being found that stakeholders needs every single information related to financial status of a
company before investing and the financial reporting may also aid managers of H&M in
developing financial plans which could aid them in reducing expenses and enhancing profit
margins.
Purpose of financial reporting
 To evaluate or gather right and authenticated data related to both financial position and
profit rations and this could be submitted to stakeholders along with investors.
 To deliver information or the data to BOD of organisation H&M so that they could easily
develop accurate plans or strategies related to finance.
 To improve or enhance data that needs to be used by a company related to its diverse
assets.
 To keep control over resources related to finance of a company.
2. Analysis of regulatory and conceptual framework and key principles and qualitative
characteristics
Conceptual and regulatory framework-
Conceptual and regulatory framework is a set of policies and processes which deals with
subjective as ell as quantitative issues (Fradeani, Panizzolo and Metushi, 2016). This is a
regulatory framework structure used by H&M which helps a business concern to deal with major
financial issues. It contains all basic information regarding financial data with substantial limits.
It helps in analysing estimates for efficiency in execution of financial policies as well as
helps to achieve better financial control. H&M adopts these policies and procedures under IFRS.
Requirements laid down by IFRS are as follows:
 It supplies with effective ideas which can be used for identifying required amount of
capital support.
 It helps in developing and controlling existence standards with help of accounting
concepts.
 It helps in improving business position by enhancing growth and developing
opportunities.
The qualitative characteristics that makes financial information more reliable
International Financial Reporting Standards (IFRS) could easily be an effective tool
which aid a firm in developing or maintaining international financial reporting standards (Siew,
2

2015). On the other hand, it also aid in reaching to an all new level where accomplishment of
consistency can be done and this could aid in gathering financial data which is required or plays
a crucial role at international market. were considered essential at international level.
Away with this, International Organization of Securities Commissions (IOSCO) shows or
executes International Financial Reporting Standards and utilizes this approach for posting with a
purpose in a way where an organisation like H&M could arrange its finance for a purpose. Apart
from this, financial report consider safety for people that are from International Organization of
Securities Commissions.
3. Main stakeholders of organisation and benefits from financial information
Stakeholders
A stakeholder can be defined as an autonomous body with whom each of those that
makes wager deposits funds (money). Here, it has been analysed that organisational stakeholder
could easily influence by actions of activities made by various business companies (Laeven,
Levine and Michalopoulos, 2015). Away with this, budget summary is required for every single
stakeholder so that right examination can be done right on time. On the other hand, stakeholders
are also being considered as the only important individuals that could majorly that could be
connected with investments with proper decisions. There are two kind of stakeholders that are
needed to b developed and also required in organisational context.
Internal Stakeholders of H&M and benefits form financial information to them:
Internal member of H&M consists off with workers, administrators, top managerial staff.
Half of the stakeholders analysed the income and operations of H&M for better returns and
engagement. Each of the individuals stay dynamic regarding improving the estimation of
ingratiation for getting higher results.
External stakeholders of H&M and benefits form financial information to them
External partner's of H&M contains the clients, banks and financial related organizations
supplies and neighbourhood networks. Company is conscious about its external stakeholders and
provide effective services to them in order to retain stakeholders interest. Clients are profited by
quality items and administrations, providers get advantages of immense inventory network the
board, money related foundations and banks are given great profits for their speculations.
Financial information helps investors to understand their investment value after a specific
duration and analyse other effective alternatives to invest in better way.
3

4. Importance of financial reporting for meeting entity's growth and objectives
Business concerns generally use methods of financial reporting for improving financial
structure of any organisation in a more effective and efficient manner (Li and Yang, 2015).
These standards and aspects assist management and also communicate important financial plans
and techniques. It further helps managers of H&M to analyse financial terms and strategies in an
effective manner. These techniques further help in achieving end term goals and objectives and
also promote growth and development of any organisation.
Further, it helps managers of H&M to show a true picture of its liquidity position to
higher expert by which they can plan and formulate important policies and procedures. This
financial evaluation technique acts a backbone for fund management, investigation, standard and
basic leadership etc. Proper financial reporting helps in evaluating financial performance of
organisation and provide suggestions to managers to make future plans and strategic
management.
5. Formation of financial statements as per IAS 1
a) Statement of profit or loss and other comprehensive income
Statement of Profit & Loss and comprehensive income
For the year ended 31.12.2017 (in £000)
Particulars Amount
Sales 385100
Cost of sale (prior to damage) 297560
Gross profit 87538
Less – administration Expenses -83443
Total 3875
Other revenues
Add – Rent proceeds 5600
Less - Loss in price of investment property 2300
Net profit 7175
Less - Bank interest 830
Profit prior to payment of tax 6345
Tax 1500
Net profit after tax paid 4845
4

b) Statement of financial position
Particular Amount (£)
Investment in Boland LTD Asso. co. 165000
Assorted Assets 759000
Total 924000
Share capital 240000
Earnings 2008/09 (38400+9600) 48000
Retained earnings at 1st April 2008 600000
Earnings 2009/10 (21600 + 14400) 36000
Total 924000
c) Statement of change in equity
Date Particular
Opening
share
capital
Revised
reserve
Retained
earnings Total
01/01/17 Balance B/f 86700 32100 118800
01/01/17 Revaluation 40700 40700
01/01/17 Ordinary dividend paid -4340 -4340
Net profit for share holder's equity 2515 2515
31/12/17 Balance C/d 86700 40700 30275 157675
d) Use of information subject to cash flow statement presents financial statements
There are type of information are required to form cash flow statement such as receipts
form debtors, payment to creditors, payment of taxes, direct and indirect expenses etc. all these
expenses remain categorised in major three activities such as operating, investing and financing
activity (Minnis and Sutherland, 2017). According to above monetary data it is examined that the
things, for example, revenues, administration costs and pay will be recognised in operating
activity while the exchanges identified with offer of speculation property and procuring of new
resources are considered in contributing action. Reimbursement of credits and advances, tax
assessment costs and the pay frame intrigue pay are considered in financing movement.
5

6. Interpretation of last two year's financial statement of company
There is an interpretation of financial statements of H&M is done to analyse the financial
performance of organisation.
Comprehensive Income statement
As per the comprehensive income statement of the organisation the net profit for the year
2017 was calculated as £16184 million and £18636 for the year 2016. fluctuation change was
recorded as 15.15% decrement due to increment of reclassified profit and losses. Other
comprehensive income was recorded as -£1577 million and -£688 subsequently for 2017 and
2016. it is seen that there is an increment recorded as 56.78%. after adjustment of other
comprehensive income, total comprehensive income for the year 2017 and 2016 was calculated
as £14607 million and £19324 subsequently (Financial statements of H&M, 2018).
Balance sheet
Financial position statement of H&M presents following information regarding the
financial position of organisation. As per the balance sheet total current assets was recorded as
£55746 million for the year 2017 and £50663 million for 2016. there is an increment with in
current assets was recorded of 10.032%. Fixed assets was recorded as £39818 million and
£38693 for 2017 and 2016. there is an increment of 2.90% recorded in terms of total fixed assets
of H&M. In total the assets was recorded as £106562 million for 2017 and £98579 for the year
2016. there is an increment recorded as 8.098% form last year. Total equity was recorded as
£59713 million and £61236 million for the year 2017 and 2016. there is a decrement recorded of
2.48% or two years. Total liabilities are considered as £106562 million and £98579 million.
Cash flow statement
As per the cash flow position of organisation it is analysed that the cash flow form
operating activity was recorded as £21587 million in 2017 and £23775 for 2016. it is analysed
that the cash flow form current operations decreased by 9.36% form last year. Cash flow form
investing activity was recorded as -£12496 million and -£13498 for 2017 and 2016 subsequently.
Cash flow from financing activity was recorded as -£8517 million and -£14069 for the year 2017
and 2016. compare to last year there is down fall recorded of 39.46% in financing activity.
7. Differences between IFRS and IAS
IAS: It is mostly used authoritative council which provides rules and laws related to
financial structure of any business concern in its most efficient way which is related to
6

accounting standards and committee (IASC). This is an international board for accounting
standards which was set up in 1973 (Weygandt, Kimmel and Kieso, 2015).
IFRS: This is another most commonly used form of evaluating and analysing results that
are related to financial rules that are applied globally (Mohd Nasir and et. al., 2012). This
mainly aims at creating global business analysis and organisational situation and culture.
IAS IFRS
This could be considered as one of essential
kind of an arrangement that can guide. Here,
IAS can easily be introduced through
international accounting council.
These were presented or launched so that
financial reporting could be developed. It may
also aid in developing the transactional report
for both managers or the accountants as well.
This is being utilised just before creating a
display of IFRS. At initial level in was
developed in 1973 and then it got completely
formulated in 2001.
IFRS can be developed or it considers
important principle set ups along with this,
jointing related to accounting can also be done
right on time.
IAS Standards can easily be presented with the
help of IASB.
IFRS was introduced by IASSB.
This was mainly found to cut down ample
number of accounting faults.
IFRS was developed and its made available of
various contradictions under IAS along with
reduction can also take place with illogical
contradictions in IAS.
This majorly stays linked with managing
different kind of international accounting
estimations or standards.
This tool made an assistance of international
financial reporting standards (IFRS) along with
provisions as well.
8. Benefits of IFRS
International Financial Reporting Standards (IFRS) in modern world, plays a crucial role
when it comes to planning the international accounting or developing regulations or rules. On the
other hand, accounting process could be developed or maintained with considering the
organisational control (Norwani, Zam and Chek, 2011). Quality control along with formation are
the two major factors that could be followed or maintained or managed with sections or
7

variations in context to H&M. An international financial standards could set a guidelines that
may set up through international accounting standard and this is being developed considering
FRS 102 (Young, Cohen and Bens, 2018). Along with this, benchmarks depends upon a number
of advantages of IFRS and these are given beneath:
Advantages of IFRS:
 these are accounting standards that are adopted by worldwide companies to make or
present their financial statement. These standards helps international investors to
understand better investment opportunities.
 It motivates the foreigner investors to invest their company's
 it increase country's economy to grow its international growth.
 The company is able to make capital from international market at low cost.
 It allows for greater comparability using same standards to make financial statements are
more accurate compare with others.
9. Degree of compliance with IFRS by organisation across the world and with in the nation
This is to a great degree helpful in the bringing association's put away both local and
universal market. Back related data is productive for such associations (Schaltegger and Burritt,
2017). H&M is steady with its budgetary detailing principles and investigating the money related
plausibility and changes in more critical and viable key arranging methodology. Type of factors
impact the compliance such as IFRS rules and regulations, alteration in international accounting
policies and standards, organisational structure and needs etc. As affiliations are required to
prepare and present cash related reports and decrees.
CONCLUSION
The above report depict the role of financial reporting in organisational context. There is
an analysis of financial reporting in various context are defined in this report. Financial
statements are prepared and consolidated on the basis of IAS 1 that is related to presenting
financial statements of organisation. Financial statements of H&M are interpreted with
comparison. Use of financial accounting standards are also analysed in vary specific and
dynamic way. A proper analysis and control subject to international difference of financial
reporting also consolidated in this report.
8

REFERENCES
Books and Journals
Brusca, I. And et. Al, 2016. Public sector accounting and auditing in Europe: The challenge of
harmonization. Springer.
Che Azmi, A. and Hanifa, M. H., 2015. The Sharia-compliance of financial reporting practices: a
case study on waqf. Journal of Islamic Accounting and Business Research. 6(1). pp.55-
72.
Fradeani, A., Panizzolo, D. and Metushi, E., 2016. Financial reporting in XBRL: First evidence
on financial statement notes of Italian unlisted companies.
Laeven, L., Levine, R. and Michalopoulos, S., 2015. Financial innovation and endogenous
growth. Journal of Financial Intermediation. 24(1). pp.1-24.
Li, X. and Yang, H. I., 2015. Mandatory financial reporting and voluntary disclosure: The effect
of mandatory IFRS adoption on management forecasts. The Accounting Review. 1(3).
pp.933-953.
Minnis, M. and Sutherland, A., 2017. Financial statements as monitoring mechanisms: Evidence
from small commercial loans. Journal of Accounting Research. 55(1). pp.197-233.
Mohd Nasir, N., and et.al., 2012. Financial reporting practices of charity organisations: A M
Norwani, N. M., Zam, Z. M. and Chek, I. T., 2011. Corporate governance failure and its impact
on financial reporting within chosen companies. International Journal of Business and
Social Science. 2(21).
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Siew, R. Y., 2015. A review of corporate sustainability reporting tools (SRTs). Journal of
environmental management. 164. pp.180-195.
Weygandt, J. J., Kimmel, P. D. and Kieso, D. E., 2015. Financial & managerial accounting.
John Wiley & Sons.
Young, S. D., Cohen, J. and Bens, D. A., 2018. Corporate Financial Reporting and Analysis.
Wiley.
Online
Financial statements of H&M, 2018. [online]. Available
through:<https://about.hm.com/content/dam/hmgroup/groupsite/documents/en/Annual
%20Report/Annual%20Report%202017.pdf>.
9

APPENDIX
Balance sheet
10

Income statement
11

Cash flow statement
12