Financial Statement Analysis: Atlas plc

The assignment content discusses the importance of presenting a fair view of the financial obligations and assets of a company to various stakeholders, including financial institutions and government. This is essential as these stakeholders rely on financial statements to make informed decisions, such as lending money or collecting taxes. The content also highlights the impact of issuing new shares on the company's balance sheet, increasing its ordinary share capital and share premium.

Financial Accounting and Reporting

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
1. Stating the influences of legal and regulatory framework on the financial statements of firm
.....................................................................................................................................................1
2. Assessing the implications of legal and regulatory influences on the different users of
financial statements.....................................................................................................................1
PART B............................................................................................................................................2
A and b). Stating the operating profit and income statement .....................................................2
c. Statements of the financial position for 31st January 2011.....................................................3
d). Impact on bank a/c, ordinary share capital a/c and share premium if Atlas plc issues 10
million shares @ £1.50 each ......................................................................................................3
REFERENCES................................................................................................................................5

INTRODUCTION
Financial accounting may be defined as a process in which accountant record all the
financial transactions by taking into consideration the standardized guidelines. This report will
examine the extent to which legal and regulatory framework has influences upon the financial
statements of the firm.
TASK 1
1. Influences of legal and regulatory framework on the financial statements of firm
According to the Company Act, 2006 of UK, business organizations have to prepare
Memorandum of association, Article of association, minimum share capital as well as other
necessary documents which are required for the incorporation of company. Article 4 of
International Accounting standards entails that directors require preparing all the financial
statements which are mentioned in such article (Bradshaw and et.al, 2013). Besides this, in
accordance with the section 386, each and every business entity needs to present updated record
of their financial transactions which are made by them during the accounting year.
Thus, laws and legislation entails that company has to provide all the information to their
stakeholders about the income, expenses as well as assets and liabilities. In addition to this,
company also requires to give information about their cash related activities such as operating,
financing and investing activities (Coeurderoy and Murray, 2014). Along with this, company
also has legal obligations to follow accounting concepts and principles namely; materiality,
consistency, fair view etc. All these legislative aspects have high level of influence upon the
financial statement which is prepared by the firm.
2. Assessing implications of legal and regulatory influences on the different users of financial
statements
Specifically, managers, suppliers, shareholders, financial institution, government and
employees etc. are the main user of the financial statements. They undertake financial statements
of the firm to make effectual decisions in relation to their investment or well being. Information
need of the different kind of users is enumerated below: Managers: They are main stakeholders of financial statement who frames strategies and
policies by conducting in-depth analysis of all the financial transactions. Thus, section 7
of IAS provides deeper insight to the manager’s analysis about the cash related activities
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of the firm. Whereas other sections of IAS furnishes all the necessary information which
they need for the effective decision making. Shareholders: Investors are also the one who have high level of interest in the financial
statements of firm. Shareholders undertake financial statement to assess the financial
health and performance of the firm through ratio analysis. It helps them in making
suitable investment decision. Thus, directors of the firm have responsibility to present fair
and appropriate view of financial statement (Frías-Aceituno, Rodríguez-Ariza and
García-Sánchez, 2013). Besides this, company also requires to give voting right to their
shareholders according to the laws and legislation. Financial institutions: Bank or other monetary institution also makes evaluation of the
balance sheet of the firm to identify the financial capability of firm. By assessing the
balance sheet, financial institution can easily identify the ability of the firm so that they
are able to repay amount of loan within the suitable time period or not (Peecher, Solomon
and Trotman, 2013). Therefore, company needs to present fair view of the financial
obligation and assets of the firm.
 Government: Tax is the major source of the income for government. Thus, government is
also highly concerned with the profitability and working practices of the firm (Users of
financial statements, 2016.). By taking into consideration the financial statements,
government is able to assess the suitable amount of tax which business firms have to pay
during the accounting year.
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PART B
A and B) Stating the operating profit and income statement
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C) Statements of the financial position for 31st January, 2011
D) Impact on bank a/c, ordinary share capital a/c and share premium if Atlas plc issues 10
million shares @ £1.50 each
The above mentioned transactions have significant influence upon the financial
statements of the firm in the following manner:
Liabilities Amount
(in £'000)
Asset Amount (in £'000)
Ordinary share capital 50000
Add: issue of share capital 10000
60000 Bank 15000
Share premium 6000 11000
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Add: issue of shares on premium
5000
On the basis of above table, it has been identified that when company issues 10 million
shares, then share capital of the firm is increased by £10 million. In addition to this, value per
share is £1 million and Atlas plc issues their 10,000 shares @ £1.5 million per share. In this, £.5
million per share is recognized as a share premium. Thus, amount of share premium is also
raised by £5,000. Along with this, asset side of the balance sheet is also increased with the same
amount on the basis of double entry system with the amount of £15,000.
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REFERENCES
Books and Journals
Bradshaw, M. and et.al, 2013. Financial Reporting Policy Committee of the American
Accounting Association's Financial Accounting and Reporting Section: Accounting
Standard Setting for Private Companies. Accounting Horizons. 28(1). pp.175-192.
Coeurderoy, R. and Murray, G., 2014. Regulatory environments and the location decision:
Evidence from the early foreign market entries of new-technology-based firms. In
Location of International Business Activities. Palgrave Macmillan UK.
Frías-Aceituno, J. V., Rodríguez-Ariza, L. and García-Sánchez, I. M., 2013. Is integrated
reporting determined by a country's legal system? An exploratory study. Journal of
cleaner production. 44. pp.45-55.
Peecher, M. E., Solomon, I. and Trotman, K. T., 2013. An accountability framework for
financial statement auditors and related research questions. Accounting, Organizations
and Society. 38(8). pp.596-620.
Online
Users of financial statements. 2016. Online. Available through:
<http://www.accountingtools.com/questions-and-answers/users-of-financial-
statements.html>. [Accessed on 23rd February 2016].
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