Analysis of Aston University Financial Statements

The assignment provides a detailed analysis of Aston University's financial statements, including income statements and balance sheets for the years 2017 and 2018. The income statement shows revenue of £106,982,000 in 2018 and £106,220,000 in 2017, with operating expenses of £10,020,800 in 2018 and £9,914,700 in 2017. The balance sheet shows total assets of £75,502,000 in 2018 and £82,925,000 in 2017, with total liabilities of £45,960,000 in 2018 and £51,421,000 in 2017. The analysis provides insights into the company's financial performance and position.

Financial Reporting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Q1 Financial reporting and its purpose.......................................................................................1
Q2 Examination of conceptual and regulatory framework and their purpose and principles.....2
Q3 Main stakeholders of an organisation and they way in which they benefit from financial
information..................................................................................................................................3
Q4 Value of financial reporting for meeting organisational growth and objectives...................4
Q5 Formulation of financial statements of the organisation.......................................................5
A: Statement of profit and loss:..................................................................................................5
B: Statement of equity:................................................................................................................6
C: Statement of financial position:..............................................................................................6
Q6 Interpretation of organisation's last two year's financial statements.....................................8
Q7 Difference between IAS and IFRS........................................................................................8
Q8 Evaluation of benefits of IFRS..............................................................................................9
Q9 Identification of the varying degree of compliance with IFRS.............................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
APPENDIX....................................................................................................................................12

INTRODUCTION
Financial reporting refers to the process of recording finance related information in the
final accounts of an organisation. These accounts are income and expenditures statement,
balance sheet and cash flow statement. It is very important for the organisations to generate
financial statements as these are required to analyse performance and financial strength of a
company. All the external stakeholders such as customers, government, suppliers, investors and
creditors monitor the statements and than analyse actual position of the organisation (Al-Matari,
2013). If the accountants of the company are not able to make effective decisions than it may
result in improper financial statements and may not be able to show the actual position of the
business enterprise. Organisation chosen for this report is Marks and Spencer and it is based in
UK. Various topics are discussed under the assignment that are financial accounting and its
purpose, requirement of regulatory framework, stakeholders of the organisation, value of
financial reporting in meeting organisational objectives and growth, formulation of different
financial statements to determine organisation's current position. Difference between IAS and
IFRS and benefits of IFRS have also been covered under this report.
MAIN BODY
Q1 Financial reporting and its purpose
Financial reporting: It refers to the process of formulating different type of statements
that are income statement, balance sheet and cash flow statement. External stakeholders may
analyse organisational performance with the help of these statements. It is very important for the
companies to conduct financial reporting for a certain period of time so that market image,
position and competitive advantage can be determined. According to law all the business
enterprises like Marks and Spencer have to prepare their all the statements every year so that
companies may analyse their yearly performance (Chae and Oh, 2016). All type of business
information is recorded in the final accounts of a organisation which is required to analyse
financial strength. Proper and transparent data can help the shareholders to make effective
decisions for investment and they also analyse that their money is used by the business
appropriately or not which is possible with the help of financial statements. Importance and
purpose of financial reporting for Marks and Spencer are as follows:
Importance of financial reporting:
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 Financial reporting is very important for Marks and Spencer to provide information of
organisational position to its stakeholders.
 It helps to make appropriate decisions and effective financial planning for the future
period so that all the long term goals can be achieved (Duncan, 2014).
Purpose of financial reporting:
 Main purpose of financial reporting is to analyse that Marks and Spencer is performing
well or not.
 Provide accurate and transparent information of business to the stakeholders so that
higher funds can be raised.
 Marks and Spencer create final accounts to analyse financial health of the business.
 To provide business information to the managers so that they may take effective
decisions for Marks and Spencer according to its current position.
Q2 Examination of conceptual and regulatory framework and their purpose and principles
Regulatory and conceptual framework: Both are required to prepare all the financial
statements effectively and to assure that all the transparent information is recorded in the reports.
Conceptual framework guides the companies to follow all the relevant accounting standards that
are followed while recoding financial informations in the books and accounting. IASB is the
regulatory authority who have introduced different type of standards for the companies to
formulate appropriate financial statements. Some selected principles are as follows:
IFRS (International Financial Reporting Standards): These are the standards that are
introduced by IASB (International Accounting Standards Board) for all the organisations who
are conducting financial reporting every year. It is required by the businesses to follow all the
standards while creating final accounts (IFRS, 2018).
 IFRS 9: It was introduced by IASB and includes requirements for acknowledgement and
measurement, modification, de-recognition and broad protection accounting related rules
and regulations for the organisations.
 IFRS 10: According to this standard business entities are required to formulate their
financial statements in consolidated form.
Purpose:
 Purpose of regulatory frameworks is to guide organisation while formulating financial
statements.
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 All the frame works are induced by the regulatory authority in order to facilitate
businesses in the process of financial reporting.
Qualitative characteristics of financial information:
 Qualitative features of informations can help to identify relevant data which is mainly
required to be recorded in the final accounts.
 When the information in easy to understand to all the stakeholders than it may help to
enhance their interest and funds.
 If the financial information is comparable than it may help the customers, investors and
shareholders to analyse actual performance of the company.
It is very important for Marks and Spencer to follow all the rules and regulations of the
government so that business can be executed effectively. If the business enterprise is not able to
precede the standards of regulatory authority than strict actions can be taken for the company by
the government (Eker and Aytaç, 20167).
Q3 Main stakeholders of an organisation and they way in which they benefit from financial
information
Stakeholders are the external independent parties of an organisation who have right to get
the exact information of financial strength. These are internal and external stakeholders such as
customers, government, investors and shareholders. Financial information may benefit them
because it may help them to analyse actual performance of the and also determine the financial
strength of the organisation with whom they are related. Following are the internal and external
stakeholders of Marks and Spencer:
External stakeholders:
Customers use financial information to analyse that market image of Marks and Spencer
is good or not and it helps to satisfied them with the proper and accurate information.
Investors are the individuals who invest money in Marks and Spencer but they invest
money for the purpose of getting higher returns on their investment. They get benefited by
accurate financial information because it helps to them to assure that they will get good returns
on their profits by evaluating the effectiveness of the business entity (Elbayoumi and Awadallah,
2017).
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Creditors are the persons who provide goods to the company on credit. Transparent
financial information help them to analyse that Marks and Spencer is able to pay the money back
or not.
Government will also be benefited with the help of appropriate financial information
because this will help the legal authority to analyse that Marks and Spencer is paying appropriate
taxes or not. It also help to assure that organisation is not hiding any information to save tax.
Internal stakeholders:
Shareholders who are internal stakeholders of Marks and Spencer, who also use
financial information to determine that their money is used by the business entity effectively or
not. This also help them to analyse the possible returns that may be acquired by them in future.
Managers evaluate the financial information to formulate effective strategies which is
required to improve the organisational performance. It facilitate the managers to make
appropriate decisions for Marks and Spencer so that business can be operated effectively.
Q4 Value of financial reporting for meeting organisational growth and objectives
Financial reporting helps an organisation to to meet all its goals and objectives and grab
the growth opportunities so that a successful business can be established. In Marks and Spencer
financial reporting is done in an effective manner so that all the stakeholders may get the actual
information of the company. If the process of reporting is appropriate and the information is
accurate than it may help to attain all the organisational goals like attracting investors and sales
maximisation. It is very important for the managers and accountants of Marks and Spencer to
record appropriate information in the final accounts so that all the goals can be achieved. It may
also help to identify growth opportunities in the market that may facilitate Marks and Spencer to
expand its business to different location (Formisano, Fedele and Calabrese, 2018). It is possible
with the help of increased sales and number of customers who get attracted toward the
organisation with the help of good market image. Bad market image reduce the number of
growth opportunities as in this condition it is impossible to attract new customers and the old one
will also switch to other companies.
Objectives may be achieved if the organisation is following right principles and legal
regulations for financial reporting as appropriate records may help attract new investors for the
company. They may analyse financial statements and make their decision to invest or not to
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invest in the organisation. There are three main components of financial reporting that are as
follows:
Income statement: All the expenses and incomes are recorded in income statements that
are related to a specific period of time. It helps to stakeholders to evaluate that organisation is
able to bear all its expenses and the costs. Profit for a particular period of time is calculated with
the help of this statement.
Balance sheet: Assets and liabilities are recorded in balance sheet that depicts actual
performance and financial health of the company. Stakeholders collect informations from
different sources of balance sheet to measure effectiveness of the business (Guo, 2018).
Cash flow statement: Cash inflows and outflows on a particular period is recorded in
cash flow statement. It helps to determine liquid strength of the company. Monetary resources
are recorded in three different types of categories like operating, investing and financing
activities.
Q5 Formulation of financial statements of the organisation
A: Statement of profit and loss:
Particular Amount
Sales 285100
Less: COGS 191700
Gross profits 93400
Rental income 1600
Loss on revaluation of investment
property 3300
Loss on sale of inventory 400
Operating expenses 43100
Profit from operation 44600
Bank interest 1030
Preference dividend 1330
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PBT 42240
Tax expenses 12000
Profit after tax for equity shareholders 30240
Working note:
Calculation of Depreciation: Amount
On Land and property:
Property 4000
Plant and equipment 48000-22400*12.5% 3200
Total 7200
Charged to cost of sales 3600
Charged to operating expenses 3600
B: Statement of equity:
Statement of change in equity
Particulars Ordinary capital Retained earnings
opening balance 26700 23300
Dividend paid -5340
Profit from current year 30240
Closing balance 26700 48200
C: Statement of financial position:
Statement of changes in financial position
Particulars Amount
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Current Assets
Inventory 12930
Trade receivables 18000
Bank -530
Total current assets 30400
Non Current Assets
Investment property 18000
Land and property 80000
Plant and equipment 22400
Total non current assets 120400
Total assets 150800
Liabilities and equities:
Current liabilities
Trade payables 15700
Provision for tax 12000
Deferred taxation 6900
Total liabilities 34600
Equities:
Revaluation reserves 28000
Retained earnings 48200
Ordinary shares 26700
10% redeemable preference shares 13300
Total equity 116200
Total equities and liabilities 150800
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Profit and loss of the organisation depends upon the sales which is 285100, Company
made gross profit of 93400 in 2018. The rental income is 1600 whereas loss on revaluation of
investment property &sale of inventory is 3700. Operating expenses of company are 43100 and
profit from these operations is 44600 along with the bank interest of 1030. Tax expenses of
company are 12000 whereas the profit after paying taxes for equity stakeholders is 30240.
Property, plant and equipment amount of company are total of 7200 which is charged to cost of
sales and operating expenses. Opening balance of capital for the company is 26700 along with
retained earning of 23300 and divided paid by company is 5340 which is a negative value. From
these capital and retained earning, the closing balance of the company is 26700 whereas the
retained earnings rises to 48200. Company owns current assets of 30400 and total non current
assets of 120400 which together becomes 150800 value of total assets (Haneef and Smolo,
2014). The total liabilities of the company is 34600 whereas the total equities and liabilities are
150800. These financials will help the management in improving the company where changes
are required or the growth is going down. Company should adopt necessary policies and
strategies for improving these financial which are going down and hindering the productivity and
performance of the company. Investor and financials auditor should keep a close eyes on the
change of these records as they are a integral part of the company and the performance and
growth of the company is measured by this data.
Q6 Interpretation of organisation's last two year's financial statements
As analysed from the financial statements of Marks and Spencer that, revenues of M&S
in 2018 are 10698200 which is quite high then the previous year revenues that are 10622000.
This state that the company is growing at a slow pace. Whereas the expenses of company in 2018
is 6745600 and the total profit made by company is 3952600 in 2018 which is comparatively low
than 2017 gross profit. The operating expenses of the company are comparatively low in the
2018 than the 2017. The total operating expenses of the company in 2018 is 10020800 which is
more than the 9914700 in the year of 2017. The net income made by company after all taxes and
expenses in 2018 is 25700 which is far less than 117100 in 2017. This indicates that the cost of
company is rising due to various factors which leads to less net income. M&S current assets are
7550200 which is again low than the 2017 assets 8292500. Total current liabilities of M&S in
2018 are 1826000 which is less than 2368000 in 2017. The tangible assets of company in 2017
was 2447300 which is more than present year assets. Treasury stock and other stockholder
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equity stocks are in negative in both years which shows that the change in assets were very low.
Minority interest of M&S is also in negative for both years.
All this financial data is analysed so that the investor and management can track the financial
stability as well as performance of the company. The data interpreted here shows that the
revenue of company is increasing in 2018 Whereas the expenses, total profit, total operating
expenses, cost are not performing good due to the barriers in development by different factors.
Q7 Difference between IAS and IFRS
IASB (International ) is the board who is responsible to introduce different accounting
and reporting standards for the businesses so that appropriate information can be recorded in the
books of accounting. Two main standards are introduced by this board that are IFRS and IAS.
IFRS is international financial reporting board in which different standards are introduced by
IASB that direct organisations while formulation of financial statements (Hassaan, 2012). IAS is
international accounting standards that are introduced to guide the companies follow all the
accounting standard while recording transactions in to different accounts. A few differences
between IAS and IASB are as follows:
IFRS IAS
Full form of IFRS is international financial
reporting standards.
Full form of IAS is international accounting
standards.
It was introduced by International Accounting
Standards Board in year 2001.
It was published by International Accounting
Standards Committee in year 1973.
IFRS were published to resolve the
contradictions in the IAS.
IAS was introduced to provide basic
accounting standards to the organisations.
All IFRS related decisions are taken by IASB. IASC is responsible for all the actions of IAS.
Q8 Evaluation of benefits of IFRS
International Financial Reporting Standards are vital for all the organisation to follow so
that financial information can be recorded appropriately. All the standards are the set of rules and
regulations that are required to be followed by the companies as it may help to analyse the actual
business performance. If the organisations are not following all the rules than it is not possible to
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operate business effectively because the government will not allow to execute business activities
if proper rules and regulations are not followed. Attractive financial statements can attract more
and more investors toward the company and also increase their interest in the business. There are
various benefits of financial reporting that are as follows:
 Appropriate use of all the financial reporting standards help a company to contribute
toward the development of the economy with the help of the growth of business and its
operations.
 As all the standards are related to internation financial reporting than it may help to
attract foreign investors to enhance foreign capital of the country.
 Investors of such companies who are using all the IFRS can be assured and better
understand the right investment opportunities so that they may take right decisions about
the investment.
 It helps the organisation to increase funds from foreign markets at lower cost.
 It helps the accounting authorities to evaluate the financial statements of the companies
effectively and easily as all same standards are followed all around the world.
 IFRS also helps to establish a global language that may direct to establish good relations
with the investors who are from different regions (Nakashima and Okuda, 2016).
Q9 Identification of the varying degree of compliance with IFRS
International Financial Reporting Standards are the regulations that are imposed by IASB
for all the companies to be followed at the time of recording information in financial statements.
These are such type of regulations that are followed by each and every company whether it is a
small or large. Marks and Spencer is also following all the rules in order to provide appropriate
information to its stakeholders to enhance their interest in the company. Efficient use of all the
standards can help the company to generate more profits as an outcome of all its actions. With
the help of proper formulation of financial statements an organisation may attract international
investors to enhance foreign investment.
For example, all the countries are having their own accounting rules and regulations for
accounting process that may have different types of problems and issues. All of them may affect
the investor's decision of investment as they may not be able to analyse the financial statements
of the organisation (Zhao, 2017). As Marks and Spencer is operating business in UK where the
government has implemented different rules and regulations for financial reporting that are
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required to be followed by the company. Organisation is operating business in different countries
hence it is not possible to follow different accounting rules so the company should use IFRS so
that the information can be maintained properly. Accountants use IFRS to attain competitive
advantage at global level.
CONCLUSION
From the above project report it has been analysed that financial reporting is very
important fro an organisation as it may help to attain all the organisational goals by properly
formulating all the financial statements. There are three different types of statements that are
used by stakeholders to analyse organisation's performance. These are income statement, balance
sheet and cash flow statement.
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REFERENCES
Books and Journals:
Al-Matari, Y. A. A. T., 2013. Board of Directors, Audit Committee Characteristics and The
Performance of Public Listed Companies in Saudi Arabia (Doctoral dissertation,
Universiti Utara Malaysia).
Chae, S. J. and Oh, K., 2016. The Effect Of Family Firm On The Credit Rating: Evidence From
Republic Of Korea. Journal of Applied Business Research. 32(6). p.1575.
Duncan, K., 2014. Relationship between the audit function and effective governance.
Eker, M. and Aytaç, A., 2016. Effects of interaction between ERP and advanced managerial
accounting techniques on firm performance: Evidence From Turkey. Muhasebe ve
Finansman Dergisi. (72), pp.187-210.
Elbayoumi, A.F. and Awadallah, E.A., 2017. The Usefulness of Different Accounting Earnings
Measures: The Case of Egypt. GSTF Journal on Business Review (GBR). 2(2).
Formisano, V., Fedele, M. and Calabrese, M., 2018. The strategic priorities in the materiality
matrix of the banking enterprise. The TQM Journal.
Guo, N., 2018. Revisiting Corporate Financial Policy and the Value of Cash.
Haneef, R. and Smolo, E., 2014. Reshaping the Islamic finance industry: Applying the lessons
learned from the global financail crisis. Islamic Banking and Financial Crisis
Reputation Stability and Risks, pp.21-39.
Hassaan, M., 2012. Corporate governance and compliance with International Financial
Reporting Standards (IFRSs): evidence from two MENA stock exchanges (Doctoral
dissertation, Aston University).
Nakashima, M. and Okuda, S.Y., 2016. Implication of Internal Controls System and Accounting
Information System.
Zhao, S., 2017. Does Financial Development Necessarily Lead to Economic Growth? Evidence
from China’s Cities, 2007–2014. In MATEC Web of Conferences (Vol. 100, p. 05032).
EDP Sciences.
Online
IFRS. 2018.[Online] Available through:
<https://www.ifrs.com/>
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APPENDIX
Income statements:
particulars 2018 2017
Revenue 31/03/18 01/04/17
Total revenue 10698200 10622000
Cost of revenue 6745600 6629300
Gross profit 3952600 3992700
Operating expenses
Selling general and administrative 3324700 3348600
Others -49500 -63200
Total operating expenses 10020800 9914700
Operating income or loss 677400 707300
Income from continuing operations
Total other income/expenses net -610600 -530900
Earnings before interest and taxes 677400 707300
Interest expense -95400 -100200
Income before tax 66800 176400
Income tax expense 37700 60700
Minority interest -2500 -5900
Net income from continuing ops 29100 115700
Net income 25700 117100
Balance sheet:
particulars 31/03/18 01/04/17
Current assets
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