Importance of IFRS in Financial Reporting

The assignment discusses the importance of IFRS in financial reporting, emphasizing its ability to provide a clear and consistent presentation of financial information. It highlights the benefits of using IFRS, including improved comparability, standardization, and relevance of financial statements. The document also touches on the challenges associated with implementing IFRS, such as dealing with international regulations and varying financial reporting concepts.

Financial reporting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
1. ............................................................................................................................................1
2. ............................................................................................................................................1
3. ............................................................................................................................................2
4. ............................................................................................................................................2
5. ............................................................................................................................................3
6. ............................................................................................................................................5
7. ............................................................................................................................................7
8. ............................................................................................................................................8
9. ............................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
In the global economy there are various regulations and laws which are required to be
complied with by all. By the help of them financial statements of company are to be made which
shows the position of company (Council, 2010). All this information is used by investors and
management in process of decision making. Several policies and strategies are formulated by the
help of which objectives are achieved. In this report all the aspects in respect of reporting will be
discussed in context of Tesco Plc. The benefits that are derived by shareholders through financial
information are are provided in below given report together with proper interpretation of it.
TASK
1.
In carrying out formulation of various statements several concepts shall be required to be
used and the tool that is used to identify them is known as IFRS framework. With the help of this
board is able to estimate the IFRSs that are emerging. Also there are certain issue for which
direct guidelines are not specified Under standards and by using the framework, a guidebook is
introduced and in that manner according to which those issues shall be dealt is mentioned.
Such accounting policies are applied by which all the required information is presented in
correct manner and this is required as then only interpretation can be made. All the concepts such
as identification, measurement and definition in respect of all expenses, Incomes, assets and
liabilities are presented in IFRS framework and it is needed by management to comply with them
(Li, 2010). By the use of them it will be possible to manage business in most effective manner
and also the information that is provided can be used by investors and other for the purpose of
decision making. So it is very important to ensure that all the financial statements shall be
prepared by taking into consideration regulatory framework. This will help in identifying the
financial performance of the company and also make the business to run in most efficient
manner.
2.
In order to examine the practical issues it is required that a theory shall be set and this is
done by responsible authority (Cheng, Dhaliwal and Zhang, 2013). All of this is covered under
conceptual framework and in this objectives, characteristics and elements of financial statements
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are mentioned and they all make the information usable for as various factors and issues are
addressed by them.
By using them several benefits are achieved which includes guidance that is provided to
those who are setting standards and examining all rules, definitions are also given in concise
manner so that all accounting factors can be discussed in appropriate manner. It is ensured that
all the standards which are made are in balance with organisation and by them auditors are able
to resolve financial reporting problems in best manner.
3.
In order to manage the business and conduct its operation in proper manner, there are
various individuals who are involved and all of them are considered as stakeholders. Also they
will be having some amount of interest in business (Barth and Landsman, 2010). Some of them
are employees, suppliers, customers, shareholders, government and others.
For the purpose of earning more returns it is required that operations shall be performed
properly and for that all the information shall be made available to stakeholders. So the investors
are to be provided all data by which they can take proper decisions. Also the data regarding
profits and assets and other aspects provides all with the financial position of company and also
performance of it in past years. By the help of cash statements it is identified that all the funds
are utilised appropriately or not.
With the help of statements of changes in equity it is determined that what are changes
that took place in that context and also the amount of retained earnings made during specified
period. So by using all the financial statements, all stakeholders will be able to analyse various
factors and know whether company is able to timely meet all liabilities that are present. On that
basis they will further decide regarding investments to be made in it.
4.
In an organisation many concepts are undertaken to attain the targets and the most
important among all is financial reporting (Ball, Jayaraman and Shivakumar, 2012). By the use
of it performance evaluation is done and by that it will be identified that who are rivals and how
is our working different from them. All the measures that are needed to make improvement shall
be taken on basis of it. Standards are to be followed as then only transparency can be attained
and that increases investors attraction. All of these rules are made by regulatory bodies
responsible in this respect. By the help of reporting all important information is rendered to
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investors and other stakeholders and by using it they are able to make required decisions
(Altamuro and Beatty, 2010). Due to all of this companies overall profitability is increased as
improvement is made in all operations. So this all leads to attainment of companies objectives.
5.
a) Income statements
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It can be noted that above mentioned are some of the important financial statements that
are required to be prepared to be made by all the organisations and on the basis of them various
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decisions are to be made so that growth can be attained (Costello, 2011). In addition to them cash
flow statements is also needed by the help of which cash position of business is identified. All
the transaction which are related to cash are involved in this and they are bifurcated in three
classes which includes financing activities, from operating and investing operations. In the given
case all the amounts that shall be involved in the statements includes sales, rent which are to be
taken from income statement and bank amount from the statement of financial position. They
will be representing the amount that is used by enterprise in present period. By the help of this
financial position of company is evaluated and it is identified that whether resources are being
allocated in appropriate manner or not.
6.
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Above mentioned are the business statements of Tesco Plc and on their basis
interpretations are to be made which shall be used for the purpose of doing improvements in
business organization. For the identification of profitability it is to be noted that profit margin is
obtained at 1.01 and 0.04 in years 2016 and 2017 respectively and all of these shows that profits
are reducing and it is not a good sign for any business. Together with this return on capital
employed and equity has also declined and it shows adverse aspect of company.
It has been seen that current ratio is almost related but is very much less then standard
ratio needed. Quick ratio that represents liquidity is identical in both years which means that
company is meeting its obligations in similar manner (Financial Reporting, 2017). Companies
interest cover is declining which shows that volatility is increasing and this is not good for any
entity.
7.
International accounting standards committee is authorised to issue various standards
which are known as IAS and are required to be complied by all organisation (Agoglia, Doupnik
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and Tsakumis, 2011). With the help of it misrepresentation can be reduced as financial
statements will be prepared in proper manner by using this. All the manner in which recording
shall be made in context of all transactions is specified in them which makes the process more
effective. In the year 2001 committee was acquired by international accounting standards board.
According to that there were some alterations which shall be made in previous standards and
then comes the new ones which are to be adopted on international level and they are known as
international financial reporting standards. This brought the modifications to all markets and
businesses.
There are various differences which exist among IAS and IFRS which includes that the
ones which were made after 2001 are identified as IFRS and rest as IAS. The number if total IAS
is 39 but IFRS are only 9 which are adopted till date. The body which is authorised for the
making of IAS and IFRS are International accounting standards committee and IASB
respectively (Nobes, 2014). In IAS no such details were mentioned that are present in IFRS
which includes demonstration, determination, measurement and disclosure of various figures that
are present in statements. The points which are specified in IAS are to be followed but those
which are specified in IFRS are to be compulsorily complied by all as they are guidelines which
provide manner according to which work shall be performed.
8.
1. For investors:
=>IFRS provides more accurate, comprehensive, timely financial statement information which
are in relation to the national standards.
=> Information given by financial statements are prepared as per IFRS which is more
understandable for investors.
=> The new and small investors are use IFRS to make reporting standards simpler and of
good quality which help them to stand in by with the professionals in same position.
=> BY applying IFRS, it reduces the international deviation in reporting regulation.
2. Timely recognition of loss: one of the key attribute of IFRS is to recognise the loss
immediately that gives benefit not only to investors but also to the lender and
stakeholders (Epstein and Jermakowicz, 2010). This feature of IFRS helps in increasing
the efficiency of contact between companies and management.
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3. Comparability: Use of IFRS for preparing financial statements has improved the
comparability of financial statements of different companies. This will be achieved by
using identical reporting standards under the similiar market.
4. Standardize accountancy and financial reporting: Another advantage of IFRS is that it
standardize the accounts and financial reporting which improves the similitude of
financial statements. It also removes the trade obstruction by using single reporting
standards.
5. Improve clarity and uniformity of Financial reporting: It is the crucial benefit of
IFRS to make financial statements more crystalline which improves the relationship
among investors and companies between other countries.
6. Effortless access to foreign capital market: By using IFRS and making all financial
statements as per same reporting standards makes easy to access the foreign capital
markets and make investments in that because it is easy to compare the financial
statements made under same reporting standards.
7. Easy comparability of financial data with global rival:
If all are using IFRS for the purpose preparing financial statement then it is very easy for
the investors and lenders to make comparison of the ones financial information with other global
competitors and make judgment according to use of such information.
8. Relevance:
=> The new IFRS helps the companies and stakeholders to present the companies transactions
fairly.
=> The way IFRS presents profit and loss it puts IFRS in more credible point.
=> Balance sheet as per IFRS are more elaborated due to its design and it would be more
conformable.
=> The new IFRS is not allowed to make secret reserves through manipulation by managers.
9.
In the procedure of devising of financial statements, there are various regulation which
are to be utilised by all the enterprise (Iatridis and Rouvolis, 2010). By the use of IFRS which are
applied in all the countries and by the help of this transparency will be achieved in all operations
of business. There are many contingencies which are eliminated by the aid of it. All the countries
are having their personal boards which are authorised to makes standards and there are some or
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other restraint in respect of them which hampers the effective operations and in order to deal
with them IFRS are issued. Some differences originate in international regulation and some other
financial reporting concept which makes the process some what difficult and so proper
analysation shall be made so that they can be eliminated. For this function only professionals are
employed as they are able to remove the variations and make the procedure better.
CONCLUSION
From the above presented report it can be concluded that in procedure of financial
reporting there are many IFRS which are made and with the help of them it is possible to
represent the real position of concern. The problems which originate in business are dealt in
appropriate manner by the use of it. Various financial statements have been prepared ans also
ratios are calculated with the help of which interpretations are made and all errors that are
present are identified.
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REFERENCES
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