Financial Reporting: Context, Purpose, Stakeholders, IAS vs IFRS, and Value for Organizational Growth

This article discusses the context and purpose of financial reporting, key principles of conceptual and regulatory frameworks, stakeholders and their benefits from financial information, the value of financial reporting for meeting organizational objectives and growth, and the difference between International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). It also covers the interpretation of financial statements.

Financial Reporting

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
Outline the context and purpose of financial reporting..........................................................................3
Key principles of conceptual and regulatory frameworks, their purpose................................................4
Main stakeholders of an organisation and analyse how they benefit from financial information..........6
Value of financial reporting for meeting organizational objectives and growth......................................7
Difference between International Accounting Standards (IAS) and International Financial Reporting
Standards.................................................................................................................................................8
Degrees of compliance with IFRS by organisations across the world and the factors.............................9
Interpretation of Financial statements..................................................................................................11
CONCLUSION.............................................................................................................................................17
REFERENCES..............................................................................................................................................18

INTRODUCTION
Financial reporting is a discipline of bookkeeping that deals with the actions of documenting
financial events, bookkeeping and preparing and presenting income reports. The income
statement shows a company's current financial situation, as well as the results of various
activities, functional and work engagement, future revenues, comparisons, and other data.
Financial statements include a cash position, a statement of comprehensive income, a net
income, a statement of retained earnings, a statement of cash flow, and other pertinent
comments. Financial reporting's major goal is to provide necessary details about an individual's
statement of financial position, as well as important effect on financial circumstances, to a
variety of users to aid in great decision (Baker and Persson, 2021). Such a study analyzes the
description and intention of financial reporting, the abstract and regulatory framework for
financial reporting, the leadership of financial statements, important accounting fundamentals
and their intention and requirements, relevant parties and their necessity accounting information,
the statement of assets reportage for organizational growth and success and development and the
discrepancies between IAS and IFRS.
MAIN BODY
Outline the context and purpose of financial reporting.
Financial reporting is the structured reporting or appearance of financial results,
consequences, and associated documents to upper executives and internally or externally
interested parties (equity holders, distributors, shareholders, clients, regulatory authorities, and
others) about how a company organisation works over time. Adopting proper reporting methods
that aid in the achievement of corporate goals and targets is critical for a commercial entity. The
financial reporting of British American Tobacco informs investors, owners, as well as other
industry professionals well about firm's earnings, authenticity, feasibility of various ongoing
initiatives, and overall value. The firm may establish a basis for effective judgment and examine
its own performance indicators, liquidity situation, leveraging, and possible or current lifestyle
factors based on the outcomes of the financial reporting system (Mohamadi, 2020).

Organizations like British American Tobacco are mandated by the International
Accounting Standard Board to follow all IAS and IFRS for compliance with accounting reasons
in order to achieve consistency and improve financial statement reliability. Financial reporting
guarantees that all required disclosures are made in order for final accounting to be transparent. It
also aids in the avoidance of financial statement window dressing and offers a genuine and
honest picture of the firm.
Purpose of financial reporting: The following are the major goals of financial reporting in the
United Kingdom:
• The primary objective of financial reporting is to review financial info about a disclosure
corporation that is important to prospective and current shareholders, depositors or lending
institutions, as well as other parties with a considerable interest in the reporting company in order
to make important financing and commodity judgments.
• It aids in identifying if numerous rules, rules, and guidelines are being followed.
• It holds shareholders, contributors, shareholders, and other users accountable.
• It aids in the development of an approach for evaluating an institution's real results and
compare it to its budget (Dameri, Garelli and Resta, 2020).
• Assisting British American Tobacco management in developing an adequate new strategy so
that the firm may accomplish desired revenues and profits and successfully compete in the
market edge.
Financial reporting aids in the budgeting process, which are necessary in order to determine
differences in achievement and allowing British American Tobacco to make decisions and
propose recommendations that will help decrease deviations in effectiveness in effort to match
the firm's goals and success objectives. The primary goal of financial reporting is to offer
accurate info about a company's operations and strategy so that users may make informed
decisions about the company for various purposes. On the influence of economic accounting,
investors make a variety of judgments, including lending, investment, taxation, and so on. The
financial report of Bruitish American Tobacco includes information on the company's activities,
financial status, and profitability.

Key principles of conceptual and regulatory frameworks, their purpose
The term "accounting regulatory framework" refers to a collection of regulations,
regulations, and procedures that must be followed while preparing financial statements. The use
of these principles and guidelines by commercial organizations facilitates the comparison of
accounting records. Accounting policies and generally accepted accounting principles are
essentially included in the Regulatory Framework of Accounting for Financial Reporting.
Various frameworks have been established to give a basis for creating accurate financial reports.
The Summaries of Standardized Accounting Practice (SSAP) and Financial Reporting
Requirements are the two fundamental regulations in the United Kingdom (IFRSs). These two
guidelines stress uniformity in the preparation of various statements for limited public businesses
(McVay and Szerwo, 2021). Worldwide Accounting Standards (IASs) and International
Financial Reporting Standards (IFRSs) have been established to ensure that big global
corporations' financial statements are consistent.
A conceptual framework is a collection of concepts that provide uniform or widely
recognized advice for launching innovative reporting methods in response to new and emerging
difficulties, as well as evaluating current practices. In 1989, the Worldwide Accounting
Standards Board presented its conceptual framework with the goal of regulating or governing
nationally and internationally requirements, as well as assisting accountants in understanding
requirements and providing solutions to difficulties that the benchmarks do not address. The
purpose of the conceptual framework is to assure global accounting equity and to make corporate
data more critical and accessible (Yeboah and Pais, 2021).
Key principles: The below are the essential principles of the conceptual and regulatory regime,
as well as financial reporting leadership:
• Relevance: IFRS and IAS compliance guarantees that investors and other judgement have
access to the right information. Significance in knowledge also aids in the development of
stakeholder trust.
• Materiality: The IASB adheres to the quantification principle since the absence or
misunderstanding of any important information might impact an investor's choice.

• Studies to ensure in nature: it relates to the accuracy of data and disproves assumptions based
on past financial statement assessments.
• Information is substantial if removing or misconstruing it might impact user selections based
on the presented financial data.
• Predictive Value: The Board ensures that financial reports have predictive ability for judging
the company's efficiency in the near future by adopting certain criteria (Opare, Houqe and Van
Zijl, 2021).
Purpose of regulatory and conceptual framework:
The goal of regulation planning is quite particular: it is accountable for steering organizations in
the proper path, which aids in achieving British American Tobacco's mission and vision in the
long term. The basic goal of a regulatory framework is to monitor a firm's productivity so that
shareholders can make informed judgments about it. Certain objectives connected to
international rules are included in the administrative and conceptual framework so that
businesses may organise their operation smoothly.
Quality feature of financial information: There are some characteristics of financial
information that can assist businesses in making more trustworthy and productive decisions in
the future. There are a few characteristics of good financial data that are listed elsewhere here:
Relevance: It is critical for a company to keep track of real statistics so that it may be used to
evaluate its current growth and business status (Kian, Faghih and Amiri, 2021).
Faithful representation: This is one of the most important factors in gaining the trust of
participants including such debtors, lenders, and shareholders. This, on the other hand, can help
an organisation determine if it is in a favorable position and can gain lengthy benefits including a
greater interest rate on capital spending.
Main stakeholders of an organisation and analyse how they benefit from financial information
Individual people with only a major value or interest in a business corporation, such like
interests or funds, are the major interested in financial data and information. However, certain
prospective buyers are concerned well about business's forecasting activities and success.
Stakeholders are people, person, or categories of people who already are explicitly or implicitly

concerned in a company's accomplishments, success, economic standing, or ongoing or possible
future. Ownership, board and senior, contractors, users, and investors are all main persons in
British American Tobacco. As mentioned, accounting reporting has a lot of key benefit for many
participants (Sonnerfeldt and Pontoppidan, 2020).
Internal stakeholder is any person or classes of people who are firm specific and so far have
promised to assist it, including senior executives, staff members, activists, and other workers.
The following is with these internal stakeholders and their advantages:
• Shareholders: Equity holders are the most significant people in British American Tobacco, with
a stake in the company represented by ordinary shares. Investor actions have a significant impact
on a firm's net value. Shares own a piece of the company's earnings or net earnings in the shape
of dividends and stock valuation.
• Professionals: Professionals at British American Tobacco can help the students to learn the
company's business accounting reports although it will encourage people in estimating their
upcoming results of the company and appraising their individual effectiveness.
External stakeholders: Different parties comprises buyers, financiers and contractors,
distributors, politicians and agencies, some of whom are not deeply associated with British
American Tobacco but are invested in or disturbed about just the organization's business,
accomplishments, statements, and financial circumstances. Below foregoing are just some of
them:
• Investors: Buyers buy securities focus on financial details offered by the business and acquire
an interest in the firm’s profitability as a condition of their contribution. Workers are indeed
interested in helping a corporation generate profits (Sentuti and et.al, 2020).
• Supplies: Sellers are a body of individuals who want effects on price and quantity estimates and
predictions. Competitive advantage arise supplier by delivering large volumes of their stock
items.
Value of financial reporting for meeting organizational objectives and growth
Financial reporting aids corporate companies in managing their total accounting and
financial processes in order to reach their goals and strategies. It establishes the basis for British

American Tobacco leadership to determine sound economic and financial decisions. By giving a
genuine image of the firm, financial reporting helps to create and maintain shareholder
confidence. Financial statements are used in the financial reporting to evaluate an organization's
overall profitability and market share. IAS and IFRS conformance is required for financial
statements, which improves the reliability and applicability of accounting records (Kartadjumena
and et.al, 2021). Businesses and consumers are critical to a corporation's growth and progress,
and the credibility of its financial statements entices them to contribute or pick it. British
American Tobacco's main aim is to persuade shareholders and consumers, as well as to increase
profit with enhancing productivity. Although all different stakeholders examine monetary data to
create choices, the accounting reporting offered by the company balance sheet serves to boost the
global brand prices and market share. BRITISH AMERICAN TOBACCO provides financial
statements for each income statement, allowing the company to compare one or even more
seasons' system and evaluate patterns.
Gaining a strategic advantage is aided by the company's future and brand recognition.
Accounting information that are accurate and useful assist a company in analyzing its general
development and market possibilities, as well as promoting the successful exploitation of
chances. The feasibility and performance of decisions made by a firm based on financial
statements created as part of the financial information disclosure assures the condition and
performance of those decisions that lead to growth and advancement. Organizations may easily
identify development prospects by employing corporate accounting data (Ertimur and et.al,
2020).
Difference between International Accounting Standards (IAS) and International Financial
Reporting Standards
IFRS (International Financial Reporting Standards): This was developed by the IASB that is
a global financial reporting body that was created to offer direction to businesses on how to
report activities in their accounting records. It is critical for all businesses to adhere to all
bookkeeping rules and requirements so that reports can be generated and presented to various
stakeholders so that they can make informed choices.
IAS (International Accounting Standards): All IAS requirements are imposed by the
International Accounting Standards Committee (IASC), which directs businesses on how to use

financial statements in their accounting processes. As a result, it aids in the recording of needed
data in financial statements (Gamayuni, 2020).
Comparison of IFRS and IAS:
IAS IFRS
International accounting standard is the full
version of IAS.
The entire form of IFRS, on the other hand, is
international financial-reporting standard.
The release of such standards spanned the
years 1973 to 2001.
Such guidelines were first released in 2001.
Such criteria are controlled and managed by an
international accounting standard and
committee.
The International Accounting Standard Board
is in charge of these.
Benefits of IFRS and IAS: The below are some of the advantages of adhering to IFRS and IAS:
1. Such requirements stimulate economic growth by promoting the expansion of foreign or
transnational enterprises in the United Kingdom.
2. These criteria motivate and encourage foreign buyers to make significant investments in the
nation, resulting in an increase in capital inflows.
3. When particularly in comparison to accounting records constituted using distinct financial
reporting framework according to their particular countries, accounting information constituted
to use a broad sense catalogue of financial reporting shareholders in understanding and analysing
investment possibilities (Kurauone and et.al, 2021).
4. Financial statements developed in accordance with these criteria can instil or strengthen
overseas investment' respect in their decision to invest.
5. These guidelines provide additional possibilities or chances for professional accountants such
as accounting practitioners all around the globe.

6. Such criteria aid businesses in establishing benchmarks for themselves and gaining a success
in the international marketplace.
Degrees of compliance with IFRS by organisations across the world and the factors
International Financial Reporting Standards (IFRS) are developed by the Accounting
Standards Board to guarantee consistency in accounting and auditing, as well as to include a
prevalent or largely acknowledged vocabulary for commercial transactions at a world stage, so
that a company group's account holders are quickly readily available from various regions or
borders. Compliance with various IFRS is required for such industries or business organisations
that operate throughout international territories or borders. The upper and lower limits of these
standards may vary from one country to the next. Various regions have their own reporting
requirements. Because Marks & Spencer is an international corporation, adopting the accounting
norms and standards of the several countries in which it operates is difficult, hence IFRS are the
best option for consolidating its income reports. This standard also aids in attracting overseas
buyers to purchase shares (Whittington, 2020).
The main goal of the International Financial Reporting Standards (IFRS) is to provide
businesses with direction on how to frame financial statements in an effective and suitable
manner. Some of these guidelines aid in the analysis of the British American Tobacco group's
actual quality by combining financial statements from several businesses in various regions. IAS
were initially released by the IASB, however compliance with IAS has revealed a number of
complexity and challenges. So, in order to cope with all of these issues and complications, the
IASB created the International Financial Reporting Standards (IFRS). Some of the IAS are still
relevant to businesses. Businesses in the UK and other european countries employ GAAP, or
generally accepted accounting principles, whereas IFRS is used in over 110 countries across the
globe. The International Financial Reporting Standards (IFRS) are widely acknowledged by
world governments and regulatory agencies, necessitating their observance. Such rules are re-
commendatory rather than mandated in some nations; hence IFRS is used to preserve fairness in
presenting in such nations (Baidybekova and et.al, 2021).
Herein, the differences of financial reporting among some countries are mentioned below:
UK USA AUSTRALIA

Accounting standard For the practice of
accounting, the IFRS
(international financial
reporting standard) is
used.
GAAP (Generally
accepted accounting
principles).
AASB (Australian
accounting standard
board).
Accounting time
period
The economic year in
the United Kingdom
goes from April 1 to
March 31.
Accounting records for
the period of October
1 to September 30 are
filed by the United
States.
The accounting
statements in Australia
are created for the
period from July 1 to
June 30.
Interpretation of Financial statements
Ratio analysis:
(a) Profitability ratios
 Gross profit ratio = Gross profit / net sales x 100
Interpretation- According to the aforementioned gross profit ratio computation, their ratio will
be growing in the year 2021. It is so because in the year 2020, the 75.19 percent figure grew to
81.42 percent.
 Net profit = Net profit / net sales x 100
Interpretation- According to the examination of net profit ratio, in the year 2020, it was 184.96
percent, which reduced by a significant margin to 24.62 percent. Greater net profits in 2020
could be the cause of this disparity.
 Operating profit ratio = Operating profit / net sales * 100
Interpretation- The above company's operating profit ratio was 31.88 percent in 2020, but it
improved by a large margin the following year, to 38.53 percent. Increased operating expenses in
2020 are the cause of this disparity.
(b) Liquidity ratio

 Current ratio = Current assets / current liabilities
Interpretation – This current ratio of the company was 0.89 times in 2020, but it has since
reduced to 0.77 times. Businesses were unable to fulfill the optimal current ratio requirement of
2:1 in both periods.
 Quick ratio- Quick assets / Current liabilities
Interpretation- In 2020, the firm's quick ratio was 0.52 times, but by 2021, it had dropped to
0.40 times. The corporation, like the current ratio, is unable to achieve the standards of an
optimum quick ratio of 1.5:1. This is due to the fact that current obligations are bigger than quick
assets.
A corporation ranked in the FTSE 100 is chosen to fulfil this research project work.
British American Tobacco is the firm's brand. The financial results of this firm during the
previous two years are examined as wants to follow:
Analysis of financial statements
1. Balance-sheet of British American Tobacco:
Interpretation- According to the following balance sheet, the firm's revenue assets are growing
in the current year 2018 as comparison to the prior year 2017. For example, in 2017, the total
assets value was £ 141038 GBP million, which climbed to £ 146342 GBP million in 2019.
Although total liabilities totaled £ 80234 GBP million in 2017, they increased to £ 80898 GBP
million in 2018. It demonstrates that the corporation has sufficient assets to cover its liabilities.
2. Income statement of British American Tobacco:
Interpretation- According to the income statements for the years 2017 and 2018, net profit in
2017 was £ 37533 GBP million, which fell the following year to £ 6032 GBP million. This
demonstrates that the current status of the businesses is not ideal, because they are seeing
reduced profits this year. Increasing expenses are the cause of this unsatisfactory financial
situation in 2018.
3. Cash flow statement of British American Tobacco company

Interpretation- According to the above cash flow statement for the fiscal year 2017-18, free cash
flow at the end of 2017 was £ 4369 GBP million. In the previous year, it was £ 9352 GBP
million. This demonstrates that the corporation generated adequate cash in 2018 as compared to
2017.
CONCLUSION
According to the project report, financial reporting is a controlled and structured procedure
in use by businesses to capture all fiscal knowledge / analysis in balance sheet and income
statement to monitor financial performance over time. The International Financial Reporting
Standards (IFRS) and International Accounting Standards (IAS) establish guidelines for keeping
financial records and monitoring financial results. Aside from such requirements, financial
reporting consistency is maintained through accounting rules, ideas, and other essential norms.
Financial reporting helps a variety of stakeholders, including as clients, dealers, and vendors,
analyse critical macroeconomic choices. Shareholders of the company evaluate whether or not
their business selections are lucrative.

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APPENDIX

Balance sheet

Income statement

Cash flow statement