Financial Reporting Solution Assignment - Doc

FINANCIAL REPORTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
1.1 Accounting policies and structure followed by Nestle.........................................................1
1.2 Nestle consolidation with various entities.............................................................................2
1.3 Basic rules of consolidated financial statements...................................................................2
QUESTION 2...................................................................................................................................3
2.1 Comparison of requirements of IFRS 15 with current practices of IFRS 18 and IFRS 11. .3
2.2 Critical analysis of requirements of IFRS 15........................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
APPENDIX....................................................................................................................................11

INTRODUCTION
Financial reporting is considered as the most essential part of corporate governance and
last product of accounting. There is presence of most typical elements of financial reporting such
as income statement, balance sheet, statement of cash flow and change in equity. It gives
financial information to various external users which help in enabling and assessing risks and
returns of different opportunities of investment so that these can take part in taking useful
decisions about economy. The present report is giving brief understanding about accounting
treatment of economic transactions with respect to most specific international accounting
standards and to identify accounting treatment whichever is applied in Nestle Group. It has also
discussed about the implications of accounting of different issues of financial reporting along
with its demerits. Further, it has evaluated critically about consolidated financial statements of
Nestle Group under International GAAP from single statement which consist of different
accounting combination of business like associates, joint venture and subsidiaries. There is
representation of various approaches of non-financial reporting. There is presence of different
standards with their key variations and application of IFRS 11, IFRS 15 and IFRS 18.
QUESTION 1
1.1 Accounting policies and structure followed by Nestle
Nestle has prepared their financial statement complying with International Financial
Reporting Standards which are issued by International Accounting Standards Board and with law
of Swiss on accrual basis with respect to historical cost convention but not for some special cases
such as financial liabilities and assets, net liability for benefit plans which are measured and
payments on basis of shares in context of fair value. There are various revisions for estimating
accounts and it is recognised with the duration of outcomes which are referred as materialise.
The main principle followed by organization is revenue recognition in which revenue from sale
of goods is considered with respect to transferring rewards and risks of ownership and buyer's
effective control. For measuring revenue, price which is charged to every customer and they
have recorded net of return, rebates, trade discounts and other allowances of pricing to
consumers and most probably it is directly associated with economic benefits that will be
referred as flow to organization (Ball, Jayaraman and Shivakumar, 2012).
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The financial statement of organization is prepared by various accounting principles
which are mandatory by Swiss Law. The transaction of foreign currency are traced at appropriate
exchange rate of that specific date of transaction or else they are hedged forward on exchange
rate in context of forward contract. The profit and loss statement is prepared according to Swiss
law and company's article of association. The dividends are considered as proper margin of year
and they are rectified in annual general meeting instead of correcting in profit of year which is
related in this statement. In context of intangible assets, there presence of trademarks and other
rights of intellectual property which is directly written off for acquisition and in this context of
long period as it will not exceed their useful lives. Goodwill and intangible assets are not part of
invested capital as the recognised amount is not able to give comparison between various
segments because of variations in intensity of activity of acquisition and alterations in accounting
standards which are applied at different points of acquisition.
1.2 Nestle consolidation with various entities
Nestle is considered as one of the most known food brands across world. Its reach is in
whole world and so, according to this, it has been consolidated with various entities. Some major
entities are described below with proper variations like Nestle Germany, Nestle India and Nestle
Swiss. IFRS are followed by Nestle Germany and Swiss. Nestle India follows IAS 19 and 34.3%
capital shareholdings whose currency is of INR that is 96,41,57,160 and Nestle Germany has
100% ultimate capital shareholding of 214266628 Euro. Nestle India also complies with material
aspects which are notified under Section 133 of Companies Act, 2013. The operating income of
Nestle India is of 270.7 million which include incentives of export and scrap sales and of Nestle
Germany gives operating income of 1465700 CHF which has various subsets such as research
and development, selling general and administrative in huge proportion (Nestle India Annual
Report, 2017).
1.3 Basic rules of consolidated financial statements
The financial statements of Nestle Group are those in which all liabilities, income, asset,
equity, cash flows and expenses of parent and their subsidiaries (Nestle Germany, Nestle India,
etc.) are represented as a single economic entity. The consolidated financial statements are
prepared by Nestle S.A. with various applications of uniform policies of accounting for
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