Financial Reporting and Sustainability

This assignment provides a comprehensive overview of financial reporting and sustainability, incorporating insights from stakeholder theory and legitimacy theory. It covers various topics, including the impact of global financial crises on GRI disclosure in Italy, explanatory factors of integrated sustainability and financial reporting, and the relationship between audit fee cuts during the crisis and banks' financial reporting quality.

FINANCIAL
REPORTING

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Context and purpose of financial reporting.............................................................................1
2. Conceptual and regulatory framework....................................................................................2
3. Main stakeholders of Marks & Spencer..................................................................................3
4. Value of financial reporting for meeting entity's objectives and growth................................4
5. Main Financial statement as per IAS 1...................................................................................4
6. Two years financial statements and interpret..........................................................................7
7. Differences between International accounting standards and international financial
reporting......................................................................................................................................7
8. Benefits of IFRS......................................................................................................................8
9. Varying degree of compliance with IFRS by organisations across the world........................9
CONCLUSION..............................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
Financial reporting mention to the abstraction of financial information like financial
statement are disclose to management and external stake holders (customers, investors and
regulators) of the company (Adams, 2017). With the help of these financial information shows
performance of the company in specific time period. In this report select the company Marks &
Spencer, is a major British multinational retailer of clothing, luxury food products and home
products. In the report consist of purpose of financial reporting, conceptual and regulatory
framework. Identify of main stockholders and value of financial reporting. Prepare financial
statement, statement of equity and interpreted it. Difference between IAS and IFRS, benefits of
IFRS and verifying degrees of compliance with IFRS.
MAIN BODY
1. Context and purpose of financial reporting
Financial reporting is playing crucial role in economies world because it is disclose of
financial performance of the company. These financial reporting are provide financial
information to management and the public to shows the performance of the company for
particular time period. In financial reports are including Income statement, Financial statement
and cash flow of the company. These reports are prepare on the basis of quarter and annual.
According to international accounting standard board (IASB) financial reporting are
provided financial information in accurate way (Aversano and Christiaens,2014). Execution of
financial statements and changes in financial position is main objective of financial reporting. It
is specialization to focusing on the role of financial accounting processes and principles when
prepare reporting an organization's financial statements. It is important for organisation because
it shows financial position of the company as fractional data and these informations are useful
for all persons whose are reltae with the organisations.
Purpose of financial reporting
Financial reporting serves two primary purposes - first one is, it provide useful and
authentic data to the management of company where there is division in different departments
and also provide information to their stake holders. This happen mainly in private limited
company, where share capital is sold out to the public through a stock exchange system. So these
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investors want to know about position of the company so these information provided by financial
reports.
Second one is, it is helping to taking effective decision regarding to company. When
management analysis these reports so it helps to achieving overall strategies and objectives. It
also helping to know strength and weakness of an organisation. Stake holders taking decision to
stay long timer in company or not (Fornaciari and Pesci, 2018).
2. Conceptual and regulatory framework
A conceptual framework of financial reporting is present as a theory of accounting that
are prepared according to international financial accounting standard to against which practical
problems can be tested objectively. There is including components of conceptual frame work is
measurement and recognition concepts. These concepts are – the economic entity, revenue
recognition, full disclosure, materiality and periodic assumption.
A Regulatory framework of financial reporting based on IFRS and it was designed in
sequence to kind of a category of general language that businesses and companies accounts are
clear and comparable in international environments. In this framework need to preparation of
financial statements according to standards, these are as follows -
 To regulate companies behaviour and directors towards their investors.
 To ensure to need of financial statements to provide reasons of necessary numbers. During the process of financial reporting it helping to increases confidence.
Purpose
 It will helping to assist the board to develop IFRS standards that are based on agreeable
concepts, after that when results are come as financial information so that is useful for
creditors, investors and other lenders (Frias‐Aceituno, Rodríguez‐Arizaand Garcia‐
Sánchez, 2014).
 It is assist to understand all parties related to IFRS and interpret these standards. These standards are assist for preparing financial reports to acquire reconciled accounting
policies related to transaction or other events there are not applying any standard to allow
a choice of policies of accounting.
Qualitative characteristics makes financial information more reliable
These characteristics are important to present useful financial information for
management. Relevance and faithful presentation are the fundamentals of qualitative
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characteristics and it is properly apply to revised conceptual framework. There is also including
enhancing qualitative characteristics, they are as follows – Comparability, timeliness,
verifiability and understandability (Höglund, and Sundvik, 2016). There are main qualitative
characteristics are as follows -
Relevance –
According to this quality informations are provided in reliable way because it is capable
for taking effective decisions by owners. These financial information is able to making
difference in decision when providing predicative value or confirmatory value.
Faithful representation –
Financial information must present in faithfully way because it present to purpose of the
information. It is affected to different levels that are including in measurement uncertainty. In
faithful representation including possible, neutral, free from error and complete.
3. Main stakeholders of Marks & Spencer
Stakeholders
These are owners of the company who relate to the company direct and indirect way and
getting benefits from different prospective way. These stakeholders are impact to activities of
business and they are examine to budget of the Marks & Spencer. Stakeholders are those person
who invest in the company for getting effective results. These stakeholders are divided in two
parts they are -
Internal stakeholders of Marks & Spencer and benefits from financial information to them
In this including those persons who remain inside the organisation and squarely related
with a company. Internal management of Marks & Spencer controlled by activity of performance
by internal stakeholders. In internal stakeholders including employees, board of directors and
managers. In the organisation all members are stay active to measuring value of organisation
inside as well as outside (Krishnan and Zhang, 2014). After analysation of marks & Spencer's
employees turn over getting that there is positive effect compare with competitors. With the help
of financial information internal stakeholders are taking effective decisions and understand
actual performance of the company.
External stakeholders of Marks & Spencer and benefits from financial information to them
In external stakeholders of the Marks & Spencer includes suppliers, customers, local
communities, banks and financial institutions. Customers getting benefits related to product
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because it explained quality and services. Local communities are getting opportunities to become
part of multinational organisation and follow to management and their operations for better
business. Banks and financial institutions are getting advantage as good returns on their
investments and suppliers are getting benefit as supply chain management (Lee and Parker,
2014).
4. Value of financial reporting for meeting entity's objectives and growth
Marks & Spencer are using financial reporting for for improve financial structure of
organisation in better and more effective way. With the help of these reporting analysis of top
level management and lower level management. It provides accurate and reliable information to
their management for analysis performance of the business. These information helping to taking
effective decision regarding to accomplish objective and growth of the company. Financial
reporting standards and their outcomes helping to prepare financial strategies and plans to
analysis performance in significant way. These detailing helping to communicate regarding to
past success as well as future expenditure. For growth of the company publish their financial
statements on publicly to communicate with interested outsider parties for acquiring running the
business. These details are useful for an organization to motivate association to accomplish end
goal and take good choices (Mala and Chand, 2014). These better choices helping to Marks &
Spencer for getting its development and objectives. The expertise of the company properly
analysis of monetary position and also financial position for preparing financial plan and it will
helping to achieve their objectives and goals. When these strategies execute after that analysis
their impact on dimension, management and functional changes. So for organisation financial
report are important part that is helping to accomplish their object and goals and it will for
achieving growth.
5. Main Financial statement 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
Particulars Amount (£)
Sales 385100000
Cost of sales (before damage) 297560000
Gross profit 87538000
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Less – Operating Expenses -83443000
Total 3875000
Other income
Add – Rental Income 5600000
Less - Loss in value of investment property 2300000
Net Income 7175000
Less - Bank interest 830000
Profit before tax 6345000
Taxation 1500000
Profit for the year 4845000
b) Statement of change in equity
Particular
Ordinary
share capital
Revaluatio
n reserve
Retained
earnings Total
As per trial balance 86700000 40700000 32100000 159500000
Total Comprehensive income 2100000 7145000 9245000
Preference dividend -2330000 -2330000
Ordinary dividend -4340000 -4340000
Total 86700000 42800000 32575000 162075000
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Working notes 1
Particulars
Cost of
sales
Operating
expenses
As per trial balance 291700 78500
Adjustment in investment 700
Depreciation on land and property 2500 2500
Depreciation on plant and equipment 2663 2662
Amount to be shown in P & L 297563 83662
Working notes 2
Cost of damaged good 1470
Can be sold 1670
Residential -990
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Net realisable value 770
Decreased by 700
Cost of sales increased by 700
Depreciation of property
125/100*(8
8000-
45400)
5325
Working notes 3
Non current assets:
Land and
property
Plant and
equipment
Investment
property
As per question 120000 88000 23300
Accumulated depreciation -45400
Current year depreciation -5000 -5325
Revaluation 2100
Carrying value 115000 37275 25400
Working note 4
Closing inventory 18000
Goods on cost -1470
Net realisable value 770
Amount to be shown in balance sheet 17300
(d) Evaluation of type of information of cash flow statement in comparison to other
statements
Cash flow is important part of financial statements that are shows cash activities in
organisation relating to financial activities and transactions. This statement are prepare with three
activities that are connected to cash, these activities are cash flow from operating activities, cash
flow from financing activities and cash flow from investing activities. In operating activities
included those activities are related to sales and purchase of shares, operating expenses and in
this also consist of incomes from operating activities. In investment activities include those
activities related to investments (Monda. and Fiume, 2018).
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6. Two years financial statements and interpret
Marks & Spencer is one of the multinational retail industry in UK. There is present of
interpretation of Financial statements of Marks & Spencer are presented below:
Income statement
As per the financial statements of Marks & Spencer, retailer company shows the revenues
of the company $10622 in 2017 and $10698 in 2018 after deducting cost of sales remaining
amount shows as gross profit, it is $4088 in 2017 and $4047 in 2018. From gross profit less
operating expenses bring out operating income $691 in 2017 and $671 in 2018. after deducting
all expenses there is income before income taxes $176 in 2017 and $67 in 2018. After
calculating all item there is net income $117 in 2017 and $26 in 2018.
Statement of financial position
From the above report of marks & Spencer there is total current assets $1723 in 2017
and $1318 in 2018. total assets of the company is $8293 in 2017 and $7550 in 2018. there is total
current liabilities is $2368 in 2017 and $1826 in 2018. after all recorded items total liabilities is
$5136 in 2017 and $4594 in 2018.
7. Differences between International accounting standards and international financial reporting
International accounting standards –
It is older accounting standards that are issued but international accounting standard
board, it is an independent international standard setting body based in London. These standards
are followed by the professionals in accounting fields. In present time, economies become more
global so activities of lenders and companies as well. In globally framework need to international
accounting standard for prepare of financial reports and records. With the help of these standards
reports are prepare in reliable, comparable, agreeable and transparent at international and
domestics levels (Nguyen, and Truong, 2017). They were first written in 1973 and applying
stopped when it recreate according to international accounting standard board in 2001.
International financial reporting standards -
It is a set of accounting standards that are helping to prepare financial reports in effective
way. These standards are issued by the IFRS foundation and international accounting standard
board (IASB). It provides a common global language to company for understand and compare
their international boundaries. In this rules and guidelines are set by the international accounting
standard board (IASB). These set rules and guidelines follow by the all organisation for
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compiling financial statements. In present time, over 100 companies are inflowing these
accounting standards for preparing financial statements. It is also using as analysis form to
present organisational situation with the help of financial information. It is mainly related to
accounting standards that helping to create changes and also for opportunities and planning
(Onesti,Romano. and Taliento, 2015).
Difference between IAS and IFRS
IAS IFRS
IAS standards were introduced by International
accounting standard board.
IFRS were introduced by the international
standard board to replace IAS.
It is written in 1973 and completely established
in 2001 (Reheul, Van Caneghem and
Verbruggen,2014).
It is founded in 2001 as modify way to
replacing IAS and apply there rules and
guidelines.
It was established by IASB to prepare
financing report in effective way and reduce
financial errors.
It is applying through Opposition in IAS for
reducing illogical errors in accounting
formation.
IAS was a standard of accounting standards
that was using by professionals for presenting
financial report to the managers of the
company.
IFRS were introduced to present financial
reports in effective and modify way to
management and accountants of the company.
It is mainly connected with International
accounting standards and their approximation
for shows their financial statements.
It is related to international financial reporting
standards and their provisions for shows
financial reports (Difference between IAS and
IFRS. 2018).
These standards are helping to prepare reports
consistent and reliable.
These standards are helping to create report in
appropriate manner.
8. Benefits of IFRS
International financial reporting standards are the standards which are made for the
recording financial transaction according international financial standards. As following of these
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standards can be very helpful for the business firms to record their transaction effectively and
efficiently. The recording of financial statement with help of IFRS can give huge benefits to the
company. There are some benefits of following IFRS these are as follows:
Helps in enhancing the international business:
This is a major benefit of international financial reporting standards. As companies which
are following this standards, they can grow their business internationally at very fast speed.
These standards are followed at international level so company can also follow this standard in
order to grow their business at global level (Spiceland and et.al., 2018).
Attract investors:
The IFRS can be very helpful in the attracting investors in order to get investment. As
investors make investment on the basis of evaluation of financial statement of company. If
company follows the international financial reporting standards than investor comes to know the
authenticity of these financial statements. And they can make investment on basis of financial
statement of company.
Helps accounting professionals:
This enables accountant to get more opportunity in the worldwide. As if company follows
the IFRS than accountant can follow same accounting practices throughout world. So accountant
has more opportunities by following these standards (Wagenhofer, 2014).
9. Varying degree of compliance with IFRS by organisations across the world
IFRS is the set of financial reporting standards in which companies are directed to
formulate all the financial statements appropriately so that external and internal stakeholders can
analyse actual performance of company. It is very important for all the business entities who are
operating business in multiple nations to use IFRS while recording financial information in
financial statements. This will help to enhance foreign investment by attracting investors from all
around the world. Marks and Spencer is an organisation who is currently operating business in
UK successfully. The managers and accountants of the company are using IFRS to formulate all
the financial statements that includes income statements, balance sheet and cash flow statement.
It helps to attain goals and objectives of the organisation.
For example Marks and Spencer is operating business all around the world hence it is not
possible for the company to adopt accounting standards of all the countries. In this situation
IFRS can help to formulate all the financial statements appropriately because all the standards
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are introduced for such companies who execute business in multiple nation. This will help the
investors to easily understand the information which is recorded in financial statements. As the
main objective of Marks and Spencer is to attract large number of customers IFRS will help to
achieve this objective as IFRS can facilitate investors to easily understand the financial statement
(Wolfson, 2014).
Appropriate financial reporting help to determine that organisation is performing well or
not it also guide managers in decision making so that company's performance can be enhanced.
IFRS is a tool that direct business enterprises to formulate their financial statements in
consolidated form so that all the internal ans external stakeholders including creditors, investors
and shareholders can evaluate actual financial status of the business. If a company who is
operating business all around the world is not adopting standards of IFRS than it will result
negatively for that company. In this situation the stakeholders from different countries will not
be able to understand the information recorded in final accounts.
For all the companies it will be very beneficial to implement IFRS while conducting
financial reporting as it can help to fulfil all the requirements of stakeholders. Main benefit of
IFRS is that it can help to attract foreign investment which will result in higher growth as
organisation is having sufficient funds to operate business.
CONCLUSION
As per the above discussion it is concluded that financial reporting are prepare according
to international financial accounting standard. It is important part of any organisation that present
financial situation of the company and helping to management for taking effective decision.
Financial report have important value in organisation and it will help to accomplish objectives
and goals of the company and shows growth. With the help of international accounting standards
prepare financial statements to showing present situation. IAS and IFRS are helping to prepare
financial reports and on preparing time implement their rules and guidelines. IFRS provides
many benefits and helping to reduce illogical errors of the company.
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REFERENCES
Books and Journals
Adams, C., 2017. Understanding integrated reporting: the concise guide to integrated thinking
and the future of corporate reporting. Routledge.
Aversano, N. and Christiaens, J., 2014. Governmental financial reporting of heritage assets from
a user needs perspective. Financial Accountability & Management. 30(2). pp.150-174.
Fornaciari, L. and Pesci, C., 2018. Global financial crisis and relevance of GRI disclosure in
Italy. Insights from the stakeholder theory and the legitimacy theory. FINANCIAL
REPORTING.
Frias‐Aceituno, J. V., Rodríguez‐Ariza, L. and Garcia‐Sánchez, I. M., 2014. Explanatory factors
of integrated sustainability and financial reporting. Business strategy and the
environment. 23(1). pp.56-72.
Höglund, H. and Sundvik, D., 2016. Financial reporting quality and outsourcing of accounting
tasks: Evidence from small private firms. Advances in accounting. 35, pp.125-134.
Krishnan, G. V. and Zhang, Y., 2014. Is there a relation between audit fee cuts during the global
financial crisis and banks’ financial reporting quality?. Journal of Accounting and
Public Policy. 33(3). pp.279-300.
Lee, T. A. and Parker, R. H., 2014. Company financial statements: an essay in business history
1830–1950. In Evolution of Corporate Financial Reporting (RLE Accounting)(pp. 27-
51). Routledge.
Mala, R. and Chand, P., 2014. Impacts of additional guidance provided on international financial
reporting standards on the judgments of accountants. The International Journal of
Accounting. 49(2). pp.263-288.
Monda, M. and Fiume, R., 2018. Dialogue with standard setters. FINANCIAL REPORTING.
Nguyen, N. N. H. and Truong, T. P., 2017. Regulatory enforcement, financial reporting quality
and investment efficiency: a pitch. Accounting Research Journal. 30(01). pp.12-18.
Onesti, T., Romano, M. and Taliento, M., 2015. Acquisition-type or merger-type accounting?
Further insights on transactions involving businesses governed by the same party (-ies).
Financial reporting.
Reheul, A. M., Van Caneghem, T. and Verbruggen, S., 2014. Financial reporting lags in the non-
profit sector: An empirical analysis. Voluntas: International Journal of Voluntary and
Nonprofit Organizations. 25(2). pp.352-377.
Spiceland, D. and et.al., 2018. Intermediate accounting.
Wagenhofer, A., 2014. Trading off costs and benefits of frequent financial reporting. Journal of
Accounting Research. 52(2). pp.389-401.
Wolfson, M. A., 2014, June. The effects of ownership and control on tax and financial reporting
policy. In Proceedings of the Conference Accounting and Economics: In Honour of the
500th Anniversary of the Publication of Luca Pacioli's Summa de Arithmetica,
Geometria, Proportioni et Propotionalita, Siena, 18-19 November 1992 (p. 318).
Routledge.
Online
Difference between IAS and IFRS. 2018. [Online]. Avilable through:
<https://superprofs.com/blog/ifrs/difference-ifrs-vs-ias/>
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