Benefits and Challenges of IFRS Implementation

This project report discusses the importance of financial accounting for businesses, highlighting the need to follow specific rules and regulations. It emphasizes the use of IFRS in national and global levels to generate better outcomes for companies. The report also touches upon stakeholder effectiveness and the usefulness of company operations.

Financial Reporting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Q1. Financial concept and its use ..........................................................................................1
Q2. Evaluation of reporting design........................................................................................2
Q3. Determination of stakeholders and its advantage in an organisation ............................3
Q4. Value of financial reporting for attaining organisational objectives...............................4
Q5. Crucial financial statements.............................................................................................5
a) Income statement................................................................................................................5
(b) Change in equity statements.............................................................................................5
(c) Financial position statement..............................................................................................6
Q6. Interpretation of two years financial statements of Lloyd banking group 2016-15........7
Q7. Comparison among IFRS and IAS................................................................................10
Q8. Advantage of IFRS........................................................................................................10
Q9. Determine degrees of compliance with relation of IFRS..............................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Financial reporting is a crucial aspect of corporate governance. It is essential for company
to attain its long term objectives by using information that is collected from daily operations. It is
a primary element that can help investors or other outside stakeholders to make valuable decision
on the basis of financial reports that are being prepared by company (Mackenzie and et. al.,
2012). It consists of disclosure of accounting data to management which is performed during the
time. They are mainly issued at quarterly and yearly basis.
This particular report provides necessary information about the purpose of financial
reporting and evaluation of framework. Role of stakeholders and their advantages to an
organisation are discussed in this report. Understanding of financial statements in order to
analyse the performance of Lloyd banking group Ltd as well as role of IFRS and benefits in
reporting are studied here.
Q1. Financial concept and its use
In any business organisation, whether related to service or manufacturing, there are
multiple departments which operate everyday in order to attain organisation’s objectives. The
functioning of all these departments is either dependent or independent, but at closing of the
year, they are connected together as basic threat for accounting and finance administration. The
accounting aspects of them are recorded and informed to different stakeholders. There are mainly
two types of reporting such as for stakeholder and management accounting for internal
department of an organisation (Rensburg and Botha, 2014). With the help of these two effective
part of accounting system. In case of listed company's frequency of financial report relies on
yearly performance of company. It consists of:
 The financial statements: It consists of various records such as balance sheet, profit and
loss account and statement of stock holders equity.
 The reporting of notes is required to make financial statements. Quarterly and annual reporting of listed company.
Objectives of financial reporting:
The purpose of reporting is to provide data regarding financial stability, performance and
all those changes essential for financial position of an organisation. It is use for making crucial
decision-making. It will serves mainly two primary objectives. Initially, it will be helpful for
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management to get involve in effective decision-making that are primary concern with
objectives and overall planning of an organisation. The information disclosed in the report can be
helpful for managers to determine strengths and weaknesses of company as well as current
position in the market. Secondly, financial reporting is useful to get information about the
financial health and events of company that are presented in front of investors as well as other
concern parties (Flower, 2016).
 It provides essential information to the owners of Lloyd banking group which is utilised
for the purpose of planning, setting benchmark and valuable decision-making.
 Delivering information to external parties and public at a wide scale so that some specific
aspects can be analyse in effective manner.
 It will help company to provide necessary information about allocation of economic
resources of an organisation.
 Data records about roles and responsibilities of managers in supporting ethical operation
are analyse by the department.
Q2. Evaluation of reporting design
The list of companies is growing at a faster rate. Business and other legal bodies are
following reporting systems of an organisation in order to make sustainable environment. An
applicable financial reporting framework is a set of rules are use as guidelines in preparation of
annual reports. This is use in typically important types of business organisation and where it is
located as per accounting laws. The nature of entity and objectives of financial statements is
prepare by using some rule and regulation (Klassen and Laplante, 2012). It is adopted by
management where appropriate charges with laws are apply in order to remove any unethical
practices in recording financial transactions. There are certain examples of using financial
reporting frameworks as these are based on GAAP principles and IFRS. Accountants are
following these particular rules to record transactions in the books of accounts. There are mainly
two types of reporting framework such as:
Conceptual: It deals with the fundamental reporting problems arises in an organisation.
Some of the issues are related with the objectives, users of financial statements as well as
characteristics that are helpful in making accounting information effective. It provides an idea
that leads to the formulation of a consistent set of standards and obligations. Basically, in
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accounting, the rules are based on specific nature, functions and limitations that are practical in
accounting statements.
Regulatory: The presence of necessary format that provide direction, measure and
evaluation for the proper course of action and regulation. It is a form of uniform account that
are present in operators in order to keep regular entries in recording of financial transactions.
Characteristic:
 It is necessary to determine certain types of information those are more effective for the
users in development of organisation proportion (Zeff, 2013).
 The advantage of financial data is increases in case, it is more accurate and verifiable.
 Those company which is using IFRS policies for recording of transaction in order to
increase status and profitability of an organisation this happens to be more crucial to
implement reporting system
Q3. Determination of stakeholders and its advantage in an organisation
A stakeholder is an individual or group of person those are interest in or making
investment in something and that can make huge impact to business with decision-making. It
provide negative impacts on the program and levelling demands, regulation and expectation that
are helpful to determine success of the project. In most common words, anyone those are having
stake in a business. Any individual or group that are connected with and has a unconditional
interest in an organisation. The profitability of business is affected with the decision made by
company in order to enhance productivity. The stakeholder is a person who make investment in a
business to earn profit and market share, whether the business is in good position or not. There
are certain examples of stakeholder such as customers, suppliers, communities and shareholder
or other outside financiers.
It is essential that every stakeholder of a company can have useful information regarding
capital that are invested under the projects (Shackelford, Slemrod and Sallee, 2011). All those
concern parties that are working for Lloyd banking group company is completely relies on
financial status and performance. In business, a stakeholder is mainly known as investors of a
company those are responsible for taking certain action in respect with the company. It is
responsibility of managers to provide proper information about their investment plan whether
they are in healthy position to cover their losses.
Benefits to the company's:
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 As a active participants in Lloyd banking group operations they need to anticipate
external issues that are affecting growth of the company.
 They are applicable for delivery proper solution to a problem and reduce risk those are
presented because of many reason.
 Statement of equity can be helpful record to make necessary decision to overcome any
demand that are essential for the company.
 It is crucial to analyse current position of an organisation with the help of proper
guidelines and rules (Eccles and et. al., 2012).
 Stakeholder of the company is liable to take active participants in decision-making
process that are organise by the department.
 The do have certain rights to evaluate valuable data whether firm have sufficient amount
of cash-flows to meet out short-term or long-term liabilities.
Q4. Value of financial reporting for attaining organisational objectives
Reporting is known as one of the crucial aspects for managers as well as accountant to
record and interpret various transactions that are during the time preparing financial statements.
It involves some effective statements such as profit and loss statements, balance sheet and cash-
flows statements. With the help of these financial statements, it will be easy to analyse current
position by comparing past and previous records. By this, it can be reliable for the company's to
make use of valuable changes that is based on current evaluation.
In the current time, it is vital for the company to prepare report for the purpose of
achieving individual as well as group goals. There are few consequence of increasing global
shareholding and trade. They are essential for dealing in various transaction. The rules to be
follow by accountants in order to maintain proper balance in accounting books which are base
for making reliable and accurate decision (Van Greuning, Scott and Terblanche, 2011). IAS is
a primary financial bodies that are set out as basic standard in order to incur better outcomes for
the company. It is necessary for every organisation department to follow proper rules and
accounting regulation according to the set standards. The main purpose of financial reporting is
to provide right direction to managers to perform its operation in the way of attaining maximum
profitability. The main components that are use in reporting purpose are mention underneath:
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Profit and loss statements: It is necessary for the company to known about the total
income and expenses those are incur during production process. It is collected from various
activities such as operational and non-operating activities.
Balance sheet: It is known as financial statement that consists detail information about assets
and liabilities of company's. In order to make critical decision regarding investment this happens
to be more effective statements (Nobes, 2014). With this, performance and growth of the
company can easily be identified.
Cash-flows statement: According to this, total data about company's cash-inflow ans
outflow done during the year from various activities can be identified. It will be vital to identify
exact information about actual cost levied at the time of production process.
Q5. Crucial financial statements
a) Income statement
Profit and loss statement of ROB Plc for
the year ending 31st December 2016
Particular Amount
Sales 285100
Less: COGS 191700
Gross profits 93400
Rental income 1600
Loss on sale of inventory 400
Loss on revaluation of investment property 3300
Operating expenses 43100
Profit from operation 44600
Preference dividend 1330
Bank interest 1030
PBT 42240
Tax expenses 12000
Profit after tax for equity shareholders
30240
(b) Change in equity statements
ROB Plc Share Retained
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Statement of changes in equity for the
year ended 31st December 2016 Capital Earnings
Balance at 1 January 2016 26700 23300
Changes in accounting policy - -
Correction of prior period error - -
Restated balance 26700 23300
Changes in equity for the year 2016
Issue of share capital - -
Profit for the year - 30240
Revaluation gain - -
Dividends - -5340
Balance at 31 December 2016 26700 48200
(c) Financial position statement
Statement of Financial Position of ROB
Plc. as on 31st December 2016
Particular Amount
ASSETS
Non-current assets (A)
Plant and equipment 22400
land and property 80000
Investment property 18000
Total (A) 120400
Current assets (B)
Cash and cash equivalents Nil
Bank -530
Trade receivables 18000
Inventories 12930
Total (B) 30400
TOTAL ASSETS (A+B) 150800
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EQUITY AND LIABILITIES (C)
Retained earnings 48200
10% redeemable preference shares 13300
Ordinary shares 26700
Revaluation reserve 28000
Total equity (C) 116200
Non-current liabilities (D)
Long term borrowings Nil
Current liabilities (E)
Short-term borrowings Nil
Trade and other payables 15700
Deferred taxation 6900
Provision for tax 12000
Total current liabilities (C+D) 34600
TATAL EQUITY AND LIABILITIES 150800
Working note:
Particular Amount
Calculation of Depreciation:
On Land and property:
Plant and equipment 48000-
22400*12.5% 3200
Property 4000
Total 7200
Charged to operating expenses 3600
Charged to cost of sales 3600
Q6. Interpretation of two years financial statements of Lloyd banking group 2016-15
Income Statement: 31/12/16 31/12/15
£ (Millions) £ (Millions)
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Revenue: 39611 23150
Operating Profit / (Loss): 4238 1644
Net Interest: n/a n/a
Profit Before Tax: 4238 1644
Profit after tax from continuing operations: 2514 956
Discontinued Operations:
Profit after tax from discontinuing operations: n/a n/a
Profit for the period: 2514 956
Attributable to:
Equity holders of parent company: 2413 860
Minority Interests / Other Equity: 101 96
Total Dividend Paid: (c) n/a (c) n/a
Retained Profit / (Loss) for the Financial Year: (c) n/a (c) n/a
Earnings per Share:
Dividend per Share: 3.05p 2.75p
Diluted: 2.90p 0.80p
Basic: 2.90p 0.80p
Adjusted: 2.90p 0.80p
As per above given income statement profit is calculated. In 2015 revenues were record
as £39611 million and in 2015 the revenues were £23150 million. There is an huge increment
can be seen in revenues with the variation change of 71.10% from the last year. Operating loss
get increase from the last year and where the loss was recorded £1644 million in 2015 recorded
increased up to £4238 million with the variation changes of 157.79% approx. increasing in long
term debts cause the high amount of interest paid for the year 2016 that is the main reason bank
has increased amount of operating loss. How ever the profit records remain favourable which are
the result of investigates made in 2015. it is recorded that organisation earn £2514 million profit
in 2016 and in 2015 the profit was £956 million, the variation change was recorded as 162.97%
in profitability. There are some monitory interest and other equities were also recorded as
£101.00 million in 2016 where it was recorded as £96 million in 2015. variation of change is
calculated as 5.43%.
(b) Balance sheet of Lloyd banking group for the year ending 2016-15
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Balance Sheet: 31/12/16 31/12/15
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£ (Millions) £ (Millions)
Assets:
Non-Current Assets:
Property, Plant & Equipment: 12972 12979
Other Non-Current Assets: n/a n/a
Other Financial Assets: 243836 222843
Investments: n/a n/a
Investment Properties: n/a n/a
Intangible Assets: 3697 3854
260505 239676
Current Assets:
Trade and Other Receivables: n/a n/a
Other Current Assets: 536415 543597
Inventories: n/a n/a
Current Asset Investments: n/a n/a
Cash at Bank & In Hand: n/a n/a
536415 543597
Other Assets: 20873 23415
Total Assets: 817793 806688
Liabilities:
Current Liabilities:
Other Current Liabilities: 226 279
Borrowings: n/a n/a
226 279
Net Current Assets: (c) n/a (c) n/a
Non-Current Liabilities:
Provisions: 4868 5720
Borrowings: 19831 23312
Other Non-Current Liabilities: n/a n/a
24699 29032
Other Liabilities: 235347 212373
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Total Liabilities: 768978 759708
Net Assets: 48815 46980
Capital & reserves:
Share Capital: 7146 7146
Share Premium Account: 17622 17412
Shareholders Funds: 48375 46589
Retained Earnings: 3600 4416
Other Reserves: 20007 17615
Minority Interests / Other Equity: 440 391
Total Equity: 48815 46980
Bank was retaining the property, plant and equipment of worth £12972 million for the
year 2016 and in 2015 these were recorded as £12979. the variation change was recorded as -7%
cause some of the land and equipment part was sold in 2016. financial assets were recorded as
£243836 in 2016 and £222843 for 2015 with the variational change of 9.42%. overall non
current assets were recorded of £260505 million in 2016 and £239676 million for 2015 with the
variational change of 8.69%. variational change in current assets were recorded as -1.32%
because of huge amount of cash out flow in respect of further investments. Total current assets
were recorded as £817793 in 2016 and £806688 in 2015 with the Variational change of 1.37%.
Other liabilities were recorded £226 million for the 2016 and £279 million for 2015 and
the variational change was recorded as -19%. There were many short term borrowing were
repaid during the year 2016 which resulted decreased amount in other current liabilities.
Borrowing for the year 2015 was £23312 million which decreased up to £19831 million after
repayment of certain long term borrowings. The variation change was recorded as -14.93%.
Provision also get decreased in 2016 the difference between 2016 and 2015 was £852 million
with the changing rate of -14.90%. total liabilities shows the balance of £768978 million for the
year of 2016 and £759708 million for the year 2015, and the variation change was recorded as
1.22% increased.
After adjustments the net assets was recorded as £48815 for 2016 and £46980 for 2015.
3.90% increment was recorded in net assets interest rates got changed during the year 2016
which impacted the net solvency ratio of company. There was no any variation recorded in share
capital, bank was retaining the share capital of £7146 million which was same for the year 2015.
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share premium account get increased by £210 million in 2016 with the change of 1.20%. other
reserves was recorded as £20007.00 million for the year 2016 and £17615 million for the year in
respect of 2015. The difference was recorded as £2392 million with the variational change of
13.58%. retain earnings was recorded as £3600 million for the year ended 2016 and £4146
million for the year 2015 with the variational change of -18.47%.
Shareholders fund was recorded as £48375 million in 2016 and £46589 in 2015 with the
variational change 3.83%. there is a change of £49 million in minority and other equity which
create difference change with the 12.53%. the total equity was recorded as £48815 in 2016 and
£46980 in 2015. the variational change was recorded as 3.90%.
Q7. Comparison among IFRS and IAS
In every organisation, there are certain misunderstanding which are arises at the time of
financial recording. In order to remove all those hurdles that are arises in an organisation they
need to follow certain standard which can be helpful in detecting issues. IAS is an effective
standard that provide right direction to accountant to perform its work in respect of attaining
organisation objectives. They are made in such a manner that chances of making better results
can be enhanced (Maffett, 2012). The chance of misconduct and fraud can easily be reduce if the
company is following right standards to record their financial transaction. If transaction are
made in more systematic manner it will be easy for the investors to take its decision for further
investments.
One of the most vital difference that program of standards in the IAS are maintain in
systematic manner. Whereas, standard board are latest version of accounting that are started in
2001.
Comparison among both these standards
IFRS IAS
It does need to follow any tough concept and
principles to record maturity accounting.
As per this particular standard, every aspects of
rules and policies are needed to be followed.
It is classify as accounting assets in respect to
IAS 39.
It is associated with those transaction that are
connected with parent company to an entity
that has having plenty of units.
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It is said to be more revise standard of IAS
while, there are general aspects which are use
with IFRS.
They are enhance with concise rule and
principles use in recording of financial
transactions.
Q8. Advantage of IFRS
International financial reporting standards are known as single set of accounting
principles those are use in various parts of the country. The basic advantages of using these
standards consists of systematic formats which are having international comparability.
According to this particular standard manager should analyse what transaction should be
recorded and analyse (Klai and Omri, 2011). Some specific feature of IFRS is to draw fair and
compliance associated with the IFRS. These are essential for making accrual basis of accounting
which are recognised as total element in framework of IFRS.
Benefits:
 It is essential to draw the attention of international fund flow in the nation by increasing
moral of investors and outside stakeholder (Benefits of IFRS, 2017).
 This will be useful for industries to increase the capital at very minimum cost from the
global market.
 It is providing wide range of opportunities to the accountant because of same policies and
standards.
Q9. Determine degrees of compliance with relation of IFRS
There are some critical aspects those are applicable in determining compliance with
international financial reporting standard. It is more effective regulation those are followed by
every account offer while recording or transaction. With the help of this, Lloyd banking group
can help them to protect there management and communication at the time of recording financial
transaction. It is necessary for the manager to incur more profit with proper allocation of
resources. The unethical aspects can easily be manage and control that are affecting the
performance of an organisation (Council, 2012). However, few countries are having theirown
accounting principles and compliance that make them separate from other company's. Various
problems that are present with financial departments those are making huge impacts on the
performance and growth of the company. Moreover, in order to provide proper consistency to the
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