Financial Reporting

This report analyzes the importance of financial reporting for organizations, focusing on the case of Marks & Spencer. It examines the context, purpose, and regulatory framework of financial information, highlighting the benefits of IFRS and the factors influencing company compliance with these standards. The report also includes a detailed analysis of Marks & Spencer's financial statements over two years, using various financial ratios to assess its performance.

Financial Reporting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Analyse the context and purpose of financial reporting ........................................................1
2. Conceptual and regulatory framework and qualitative characteristics of financial
information..................................................................................................................................2
3. Stakeholders of an organisation and its benefits from financial information.........................2
4) Importance of financial reporting in context of organisational objectives and growth..........3
5. Analysis of financial statement of organisation......................................................................4
6. Two years financial statement analysis of Marks & Spencer ................................................5
7. Difference between International Financial reporting standards and International
Accounting system .....................................................................................................................6
8. Benefits of international financial reporting standards ..........................................................7
9. Degrees of compliance with IFRS and its factors which influence company.........................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
.......................................................................................................................................................10

INTRODUCTION
Financial reporting provides the finance related information to an organisation. Through
it position of a corporation can be understand and which help the business to take effective
decisions. In the report chosen company is Mark & Spencer which is British Multinational
retailer from United Kingdom. It main aim of this is to analyse the financial statement of
organisation. It covers the following topics such as: context, purpose and objectives of financial
reporting, regulatory framework & key principles, benefits and statement of profit & loss
account, changes in equity and balance sheet. Apart from this it discuss about the difference
between IAS and IFRS.
TASK 1
1. Analyse the context and purpose of financial reporting
Financial reporting helps the company to get financial results of its business related to a
particular period of time. It involves statement of cash flow, balance sheet and profit and loss
account. It helps the business to know its position through which an organisation can understand
it is in profit making or loss making situation.
Financial reporting provides useful information and data to corporation which helps it to
take important decisions related to money related matters. It gives appropriate and realistic
financial information to the stakeholders of company and on the basis of this they take
investment related decisions. Management of Mark & Spencer can make planning and strategies
on the basis of financial information.
Purpose of financial reporting are as follows:
 To provide accurate information related to profits and financial position of corporation.
 To gives data to the management for planning and strategic decisions.
 It provides required information regarding obtaining and managing assets of the business.
 To effectively control financial resources with in the company (Shivakumar, 2013).
 The main objective is to analyse the current status related to financial matters for a
specific time period of time.
 It helps to an organisation in making essential decisions so that it can expand its business
and make effective investment as a result Mark & Spencer can generates more returns. So

financial reporting is very important for a corporation through which management can
know about its financial position.
2. Conceptual and regulatory framework and qualitative characteristics of financial information
Conceptual and regulatory framework
Conceptual framework incorporates regarding the quantitative and subjective issues. The
structure can be followed by various disciplines but it particularly accompanying to financial
reporting, a regulatory and conceptual framework which is provided by IASB. It provides better
information and financial data so that Mark & Spencer can take better decisions and effectively
control its operational activities. It helps to develop relevant ideas to evaluate essential capital
support. Organisation can use regulatory and conceptual framework to control its unnecessary
financial activities and follows the rules and regulations as per the guidelines of IASB. These
guidelines are forced as IFRS. Necessity of IFRS are as follows:
Fundamental accounting concepts are set and controlled by International financial
reporting standards. IFRS can be use by companies for better control and it improves accounting
controls and the standards (Kim and Zhou, 2014).
Qualitative characteristics which makes financial information realistic:
International financial reporting standards are extensively used by companies so that it
can it can set its standards as per the rules and regulations of IFRS. It is essential at international
level so that financial information can be get more accurately and reliable. International financial
reporting standards are recognised by the international Organisation of Securities Commission
for the purpose of utilization IFRS for effective management and control in the company. So
Mark & Spencer can apply this concept and improves it financial management system (Jung,
and Weber, 2014).
3. Stakeholders of an organisation and its benefits from financial information
Stakeholders
Stakeholders are the group of persons who have interest in the company. From the
decisions and actions of an organisation they can get influenced and their interest has affected. It
involves directors, employees, suppliers, creditors, government, shareholders etc. These are the
authorise persons which associated with investment and other organisational decisions. Business
of Mark & Spencer can affect the stakeholders in both positive and negative way.
Internal stakeholders of Mark & Spencer and its benefits from financial information

Stakeholders are the group of persons or individuals who can get influenced by a strategy
or project of company. It involves management, employees, owners and shareholders who have
some interest whether directly or indirectly in the organisation. Internal management of Mark &
Spencer can be affected by the actions or activities of internal stakeholder. It helps to an
organisation to accomplish its goals and objectives because they are connected with corporation
and engaged with its operational activities. It has been considered that less than fifty percent of
workers turnover counted in Mark & Spencer, its reflects the positive sign for the corporation.
Stakeholders can take their investment decisions on the basis of financial information of
company and its has good financial position as compare to the competitors (Hasnan and
Mahenthiran, 2012).
External stakeholders of Mark & Spencer and its benefits from financial information
External stakeholders are those persons who are associated with the organisation and can
be affected from the actions or decisions of company. External stakeholders of Mark & Spencer
are such as follows consultants, vendors, government regulators, suppliers, consumer and bank.
Consumers can take advantage by quality services and products of corporation, bank provides
better returns on the investment of it. So these group of persons can take benefit from the
financial information because on the behalf of this they make investment decisions. It shows the
intelligence of persons.
4) Importance of financial reporting in context of organisational objectives and growth
Financial reporting is essential for an organisation because it helps to a company
regarding expansion and investment decisions. Mark & Spencer can use this so that it can know
the financial position of its business. Importance of financial reporting are as follows:
 Financial reporting can be used by company to enhanced their position and financial
structure. It helps the management to take effective decisions (Flower, 2016).
 It provides useful information and data through which a company can know about its
financial position.
 It provides the guidelines to an organisation and according to that they have to follow the
structure of financial report. Mark & Spencer can prepare its reports on the basis of
financial reporting system.
 It helps the corporation to develops its strategies so that management can be enhanced.

 It promotes a company in context to quality decisions which leads the efficiency and
growth.
 People analyse an organisation on the basis of its financial results and business
performance.
 Financial reporting provides help to Mark & Spencer to take effective decisions related to
money. So it is important to meet organisational growth and objectives and which leads
the success of corporation (Gomez-Mejia and Imperatore, 2014).
5. Analysis of financial statement of organisation
a) Statement of profit and loss account
Statement of Profit and loss of Mark & Spencer for the year 2017 (£)
Particulars Amount
Sales 385100000
Cost of goods sold (before damage) 297560000
Gross profit for the year 87538000
Less – Operating Expenses -83443000
Total 3875000
Other income
Add – Rental Income 5600000
Less - Loss in value of investment property 2300000
Net profit of the year 7175000
Less - Bank interest 830000
Profit before tax 6345000
Taxation 1500000
Profit for the year 4845000
b) Change in equity statement
Date Particulars Opening
share capital
Retained
earning
Revised
reserve
Total
01/01/17 Balance 86700000 32100000 118800000

( Balancing
figure)
01/01/17 Revaluation 40700000 40700000
01/01/07 Ordinary
dividend paid
-4340000 -4340000
Profits
available for
equity
shareholders
2515000 2515000
31/12/17 Balance c/d 86700000 30275000 40700000 157675000
c) Financial position statement
Statement of financial position of Mark & Spencer for the year 2017
Particulars Amount (£)
Investment in Boland Ltd Asso. Co. 165000000
Sunday Assets 759000000
Total 924000000
Share capital 240000000
Retained Earnings at 1st April 2008 600000000
Earnings 2008/2009 ( 38400000+9600000) 48000000
Earnings 2009/2010 ( 21600000+14400000) 36000000
Total 924000000
6. Two years financial statement analysis of Marks & Spencer
Financial ratio of Marks & Spencer
Particular ratios Formula 2017 2018
Profitability ratio

Gross profit ratios Gross profit/ Sales
*100
2.3837318772 1.4628629115
Net profit ratio: Net profit / Sales *100 1.0892487291 0.272008
ROE Total income/
shareholder equity
0.0224313278 0.031048128
Liquidity ratio’s:
Liquid ratio: Current asset-
inventory+ prepaid
expenses/ Current
liabilities
0.2940306681 0.4073057432
Current ratio: Current asset/ current
liabilities
0.7217415115 0.7277449324
Efficiency ratio's
Fixed assets turnover Net sales/ Averages
total fixed assets
1.6169396578 1.7165412448
Total assets turnover
ratios
Net sales/ average
total assets
1.0983443709 1.4169161082
There are comparison of two years financial statement of Marks & Spencer, It
has been analysed that there are various types of ratios which are shown in this report. This
organisation makes financial statements so that it can get information through consolidates
earnings of its company as well as subsidiaries of it. Realisable value can be analysed by using
income and comprehensive statement. Company also makes changes in equity statement for the
year 201 (Fang and Zhang, 2015.).
From the above ratios of Marks & Spencer, it has been determined that in the year 2018
liquidity is more as compare to the year 2017. From the profitability ratio is has analyse that in
the year 2017 company is earning more on the basis of ratios. Efficiency ratio is more in 2018 as

compare to 2017. It shows that organisation has invested in fixed assets so its returns are
increased.
7. Difference between International Financial reporting standards and International Accounting
system
International Accounting system: This system has now replaced by International
Financial reporting standards and it is an old concept. It is introduced in the year 1973 by
international accounting committee. It makes financial statements more accurate, transparent,
reliable and effective. It encourage the investors to make investment decision more effectively
and minimize the risk and maximize the returns .
International Financial reporting standards: It is introduced in the year 2001 by
global accounting standard board and it contradict wit International Accounting system (IFRS.
2018). It provides world wide language to different types of business activities which help the
organisation to moving globally and evaluates accounts of corporation (charya and Ryan, 2016).
Difference between IAS and IFRS
IFRS IAS
It is introduced in the year 2001 by
international accounting standard.
It is introduced in the year 1973 by
international accounts standard committee.
Changes in accounting and business business
practices can be reflected by the IFRS because
of its set standards.
Is to using by companies from a long time.
International Financial reporting standards
were issued by IASSB.
International Accounting system was issued by
IASC.
It mainly support the international financial
reporting standards.
It mainly support the IAS
8. Benefits of international financial reporting standards
It is conceive that International financial reporting standards are applied in world wide. It
has lots of advantage to the management and other persons who can use financial statements.
Organisation can take better decisions from it by properly analysing the financial reports so that

it can take effective decisions in context to minimizing cost of investment and maximizing the r
returns. People properly analyse the reports and statements of Marks & Spencer and on the basis
of it they take investment decisions.
Effective comparability
Organisations can apply other standards as per the need and nature of business. So that it
is convenient for a company to compare with other corporations. In the world there are different
– different organisations who are established in various countries and they have applied its own
rules and regulations as per the government instructions of that nation. So it make the
comparison more effective because Marks & Spencer can apply those methods which can
generates more profits for it.
More flexibility
International financial reporting standards are based on the values rather than rules. It
provides freedom to an organisation to apply IFRS as per the needs and different situations. It
can help a corporation to accomplish its goals and objectives. (Chandar and Zheng, 2012).
Beneficial for new and small investors
International financial reporting standards provides help to the new and small investors
by provide appropriate and realist information which makes the analysing process simple and
easier. It is essential for Marks & Spencer to apply IFRS so that its investors can easily
understand the financial position of organisation and on the basis of this they can take investment
decisions.
9. Degrees of compliance with IFRS and its factors which influence company
International financial reporting standards are essential to be maintain and follow by the
companies. All organisations have to follow the rules, regulations and compliances which are
associated with it. Marks & Spencer can use this so that it can take advantage from it. It is
beneficial for the management as well as investors. Financial reporting system leads the
transparency and reliability in the financial statements of corporation. Through this more
accurate information can be communicate to the business which help the investors to take more
effective investment decisions. As a result they can generates more returns and earn more profits.
Compliances can make sure to the people that company has provided true and fair information to
the public. There are various factors which influence compliances with International financial
reporting standards are as described below:

Size of the firm: Big companies have to follow more compliances as compare to the
small size of corporates. As a result it can protect their organisation from the government
interfere. It Marks & Spencer follow the compliances than its reputation can be enhanced in
market (Abbott and et. al,. 2016).
Profitability: If companies are earning more profits than it have to provide more accurate
information to its investor so that their belief can be increased and they can invest more.
Age of organisation: Old corporations areFang, V. W., Maffett, M. and Zhang, B., 2015.
more professional and they they know the importance of compliance in the company and its
benefits. It they does not follow than their reputation can be affected by it. New corporations
does not aware about the importance of compliances and if they does not maintain it than they
have to pay fine to the government.
IFRS provides help to an organisation to effectively follow the rules and regulations so
that its financial management can be enhanced.
CONCLUSION
From the above report, it has been concluded that financial reporting is very useful for the
organisation because it provides accurate and reliable information and data to company.
Framework and its principle of financial reporting can help the corporation to manage finance
effectively. By using IFRS Marks & Spencer can make effective control and take better
decisions for expansion and investment. Analysis of balance sheet, changes in equity and ratio
analysis provide help to corporation to know its financial position and wealth. Compliances
which are associated to IFRS can help to an organisation in following the rules and regulations
so that errors can be minimize.

REFERENCES
Books and Journals
Abbott, L. and et. al,. 2016. Internal audit quality and financial reporting quality: The joint
importance of independence and competence. Journal of Accounting Research. 54(1).
pp.3-40.
Chandar, N., Chang, H. and Zheng, X., 2012. Does overlapping membership on audit and
compensation committees improve a firm's financial reporting quality?. Review of
Accounting and Finance. 11(2). pp.141-165.
charya, V. V. and Ryan, S. G., 2016. Banks’ financial reporting and financial system stability.
Journal of Accounting Research. 54(2). pp.277-340.
Fang, V. W., Maffett, M. and Zhang, B., 2015. Foreign institutional ownership and the global
convergence of financial reporting practices. Journal of Accounting Research. 53(3).
pp.593-631.
Flower, J., 2016. European financial reporting: adapting to a changing world. Springer.
Gavana, G., Guggiola, G. and Marenzi, A., 2013. Evolving connections between tax and
financial reporting in Italy. Accounting in Europe. 10(1). pp.43-70.
Gomez-Mejia, L., Cruz, C. and Imperatore, C., 2014. Financial reporting and the protection of
socioemotional wealth in family-controlled firms. European Accounting Review. 23(3).
pp.387-402.
Hasnan, S., Rahman, R. A. and Mahenthiran, S., 2012. Management motive, weak governance,
earnings management, and fraudulent financial reporting: Malaysian evidence. Journal
of International Accounting Research. 12(1). pp.1-27.
Jung, B., Lee, W. J. and Weber, D. P., 2014. Financial reporting quality and labor investment
efficiency. Contemporary Accounting Research. 31(4). pp.1047-1076.
Kim, J. B., Shi, H. and Zhou, J., 2014. International Financial Reporting Standards, institutional
infrastructures, and implied cost of equity capital around the world. Review of
Quantitative Finance and Accounting. 42(3). pp.469-507.
Shivakumar, L., 2013. The role of financial reporting in debt contracting and in stewardship.
Accounting and Business Research. 43(4). pp.362-383.
Online
IFRS. 2018. [ Online]. Available Through:
<https://www.investopedia.com/terms/i/ifrs.asp>