IFRS Impact on Financial Reporting

This assignment delves into the effects of International Financial Reporting Standards (IFRS) on various aspects of financial reporting. It examines how IFRS adoption influences the quality of financial reporting, the level of voluntary disclosures made by companies, and the effectiveness of existing mechanisms for detecting financial reporting fraud. Students are expected to analyze relevant research articles and draw conclusions about the overall impact of IFRS on financial transparency and accountability.

FINCNCIAL REPORTING

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Context and purpose of financial reporting.............................................................................1
2. Analysis of regulatory and conceptual framework and key principles and qualitative
characteristics..............................................................................................................................2
3. Main stakeholders of organisation and benefits from financial information..........................3
4. Importance of financial reporting for meeting entity's growth and objectives.......................3
5. Formation of financial statements as per IAS 1......................................................................4
6. Interpretation of last two year's financial statement of company............................................5
7. Differences between IFRS and IAS........................................................................................6
8. Benefits of IFRS......................................................................................................................7
9. Degree of compliance with IFRS by organisation across the world and with in the nation...7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
APPENDIX....................................................................................................................................10
Balance sheet.............................................................................................................................10
Income statement......................................................................................................................11
Cash flow statement..................................................................................................................11

INTRODUCTION
Financial reporting is a form of summarising the financial information of an organisation
in understandable manner. It assist in analysing required areas of improvement and provide
solutions with appropriate financial standards (Ball, Jayaraman and Shivakumar, 2012). As a
junior auditor this report is prepared and submit to line manager subject to provide knowledge of
international financial reporting standards. Regulatory framework and key purpose and
principles are characteristics make financial information more reliable. Financial statements are
prepared by following accounting standards of IAS 1. There is an interpretation of financial
statements of Tesco for two years communicated to analyse financial performance of
organisation. Essentialness of international financial reporting standards in organisational
context. Degree of compliance is introduced with managerial activities and plans and
coordinated with proper examples.
MAIN BODY
1. Context and purpose of financial reporting
Financial Reporting
Financial reporting is a framework used in organisations to evaluate financial information
and positions. As per International Accounting Standard Board (IASB), providing data about
financial position, execution and changes in financial position of a business is the main objective
of financial reporting. It is beneficial to an extensive users who keep significant interest with in
the organisation.
It is a procedure of tracking financial data for better financial control and management.
The IASB characterizes that enterprise needs to form financial statements to provide accurate
financial information to stakeholders of organisation. it summaries consistently to demonstrate
the authenticated status of organization subject to improve investor's interest with in the
organization. It is vital for business to introduce fractional data of organization for better
execution. The information not only remain useful for stakeholders but also assist the managers
to analyse financial plans and strategic planning
Purpose of financial reporting
 To execute the clear data in term of profitability and financial position to investors and
stakeholders.
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 To provide data to the board of organization for making effective financial plans and
strategies.
 To give essential data with respect how an association is utilizing and obtaining diverse
assets with in organisation (Mohd Nasir and et. al., 2012).
 To maintain the ethical practice and control upon financial resources of organisation.
 Its primary aim is to examine the present market esteem and financial status of
organization for successful execution of financial departments of organisation.
 Main object is to upgrade social welfare by dealing with potential workers, maintaining
the interest of public and adhering government policies.
2. Analysis of regulatory and conceptual framework and key principles and qualitative
characteristics
Conceptual and regulatory framework
The conceptual framework incorporates the subjective and quantitative issues. This
structure incorporates the requirements of financial related attributes and valuable financial data
for substantial limits. It characterizes estimation for better execution of financial information
and better financial control (Brown, 2011). It provides revelation and ideas to identify required
capital support. Tesco adopts conceptual and regulatory framework to controls set provided by
the IASB. These directions are forced as IFRS. Requirement of IFRS is counted as follows:
It assists developing the further IFRS and controlling of existing standard by setting out
the fundamental accounting concepts. To enhance accounting controls and standards IFRS were
being used for better management and control. It empowers business to improve the reporting
tactics.
The qualitative characteristics that makes financial information more reliable
IFRS are extensively acknowledged by organisations subject to manage international
financial reporting standards and rules (Van Greuning, Scott and Terblanche, 2011). To
accomplish consistency and similarity in terms of providing financial information were
considered essential at international level. The International Organization of Securities
Commissions (IOSCO) recognize IFRS for posting purposes in this way organizations that
utilization IFRS for arrangement purpose. Fiscal reports for any securities posting for nations
which are participative individuals from IOSCO.
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3. Main stakeholders of organisation and benefits from financial information
Stakeholders
These are the authoritative individuals or group of people who retain some rights and
interest in organisation. An organisational stakeholder can influence or to be influenced by the
activity of different business entities (Rajgopal and Venkatachalam, 2011). The Stakeholders' are
required the budget summary to examine their value with in the organisation. Stakeholders are
the only authoritative person that mainly associated with investments with proper decisions. Two
type of stakeholders are found in organisational context.
Internal Stakeholders of Tesco and benefits form financial information to them:
These are the person who remain inside the organisation and squarely related with the
organization. Tesco's internal management and control influenced by the small activity of
performed by internal stakeholders (Glancy and Yadav, 2011). These partners are considered as
representatives and gather organisational information for better formation of system plan,
program and process. Internal stakeholder group of Tesco is filled up with employees, managers,
board of directors. All these members remain active in terms of enhancing the value of
organisation inside and out side the organisation. It is analysed less than 50% of the employees
turnover counted in Tesco which is positive sign for organisation compare to competitors.
External stakeholders of Tesco and benefits form financial information to them
External stake holder's group of Tesco contains the customers, suppliers, banks and
financial institutions and local communities. Company is concerned with its external
stakeholders. Customers are benefited by quality products and services, suppliers get benefits of
vast supply chain management, financial institutions and banks are provided good returns on
their investments. Local communities gets opportunities to be a part of multinational
organisation and learn the tactics of better operations and management of business.
4. Importance of financial reporting for meeting entity's growth and objectives
Organisations are uses financial reporting to improve the financial structure of
organisation more effective and better way (Pucheta‐Martínez and García‐Meca, 2014). It assist
the senior level management and lower level management. Financial reporting standards and
aspects not only communicate the financial plans and strategies but also helps to analyse the
financial terms in more significant and effective manner. These detailing can be useful for the
organization with the end goal to encourage association to take better choices. As better choices
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would be useful for organization to meet its objectives and development. Money related detailing
demonstrates an unmistakable picture to the executives with respect to the financial position of
organization (Kaya and Koch, 2015). This enables higher expert of organization to plan
procedure as per monetary position of organization so objectives can be accomplished
effortlessly. The execution part was also analysed in various form that improved the functional
changes and dimensions. The financial revealing is spine for financial arrangements,
investigation, standard and basic leadership.
5. Formation of financial statements as per IAS 1
a) Statement of profit or loss and other comprehensive income
Statement of Profit & Loss and comprehensive income
For the year ended 31.12.2017 (in £000)
Particulars Amount
Sales 385100
Cost of goods sold (before damage) 297560
Gross profit 87538
Less – Operating Expenses -83443
Total 3875
Other income
Add – Rental Income 5600
Less - Loss in value of investment property 2300
Net profit 7175
Less - Bank interest 830
Profit before tax 6345
Taxation 1500
Profit for the year 4845
b) Statement of change in equity
Date Particular
Opening
share
capital
Revised
reserve
Retained
earnings Total
01/01/17 Balance B/f 86700 32100 118800
01/01/17 Revaluation 40700 40700
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01/01/17 Ordinary dividend paid -4340 -4340
Profit for the year for share of equity
holders 2515 2515
31/12/17 Balance C/d 86700 40700 30275 157675
c) Statement of financial position
Particular Amount (£)
Investment in Boland LTD Asso. co. 165000
Sundry Assets 759000
Total 924000
Share capital 240000
Retained earnings at 1st April 2008 600000
Earnings 2008/09 (38400+9600) 48000
Earnings 2009/10 (21600 + 14400) 36000
Total 924000
d) Evaluation of type of information of cash flow statement in comparison to other
statements
Cash flow statement is a part of financial statements that defines the cash flow position of
organisation in terms of financial transactions and activities (Laux, 2012). This statements
presents the cash flow position of organisation in three segments such as cash flow from
operating activities, cash flow from investing activity and cash flow form financing activity. As
per above financial information it is analysed that the items such as sales, operating expenses and
income will be considered in operating activity whereas the transactions related to sale of
investment property and acquiring of new assets are considered in investing activity. Repayment
of loans and advances, taxation expenses and the income form interest income are considered in
financing activity.
6. Interpretation of last two year's financial statement of company
Tesco is one of the international retail industry in the UK. There is a interpretation of
financial statements of Tesco is presented below such as;
Income statement
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As per the financial statements of Tesco plc the group income statement presents the
gross profit of £3350 million for the year 2018 and £2902 million for the year 2017. After
deducting operating expenses the net profit before tax was calculated as £1143 million for the
year 2018 and £145 for the year 2017. net profit after tax was calculated as £1208 million for the
year 2018 and loss of £54 million for the year 2017. basic earning per share was calculated as
14.77p and diluted was 14.72p for the year 2018 and (0.19)p for the year 2017 in terms of basic
earning per share and 12.12p for earning per share form continuing operations.
Financial position statement
The financial position statement of Tesco presents the total fixed assets for the year 2018
was £31136 for the year 2018 and £30436 for the year 2017. The current assets was calculated as
£13577 for the year 2018 and £15073 for the year 2017. current liabilities was counted as
£19238 million for 2018 and £19234 for 2017. there is no any significant change was calculated
between these years. Non current liabilities are evaluated as £15166 million for 2018 and £20034
for 2017. total equity of organisation was calculated as £10458 million for 2018 and £6414 for
2017.
Cash flow statement
Cash flow form operating activities was calculated as £3309 million for 2018 and £2558
for 2017. operating expenses get increased due to cash flow from operations was recorded low
comparatively last year. Cash flow from investing activity was calculated as £666 million for
2018 and £279 for 2017. there is huge difference found in cash flow form investing activity.
Cash flow form financing activity was calculated as -£3236 million for the year 2018 and £1387
million for the year 2017.
7. Differences between IFRS and IAS
IAS: It is one of the authoritative council that provide rules related to effective
accounting standards and committee (IASC). This is an International Accounting Standard Board
was firstly established in 2001. It is considered Generally Accepted Accounting Principle. It was
firstly introduced in 1973 (Li and Yang, 2015).
IFRS: It is an another form of analysing the results related to global financial rules and
standards. This was mainly analysed with creating the global business analysis and the
organisational situation. It was mainly related to analysing the international accounting standards
for creating the changes and plans and opportunities.
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IAS IFRS
One of the significant contrasts is that the
arrangement of guidelines in the IAS were
introduced by the International Accounting
council.
IFRS were introduced to assist the financial
reporting and the transactional report for
managers and accountants.
IAS used to be before the presentation of IFRS.
It was firstly introduced in 1973 and
completely established in 2001.
IFRS are considered essential for principle
arrangements and articulation for accounting
with in the organisation.
IAS standard were introduced by the IASB IFRS measures were introduced by the IASSB
It was established to reduce various accounting
errors and the international financial
accounting.
IFRS was available through the different
contradictions in IAS and it reduce the illogical
contradictions in IAS.
It is mainly associated with managing the
international accounting standards and
estimations.
It assist the international financial reporting
standards and the provisions.
8. Benefits of IFRS
IFRS plays vital role in setting the international accounting and financial rules and
regulations. The accounting procedures for better organisational control and financial forecasting
various IFRS standards applied with in the organisation (Mohd Nasir and et.al., 2012). A quality
control and formation mainly followed for managing the sections and variations with in
organisational context. A international financial standard is set of guideline which is set up by
the International accounting standard load up and further created by FRS 102 lately. These
benchmarks depend on the sound and plainly expressed standards which advantage all partners.
The advantages of IFRS are defined below;
 This is useful in urging global industrialist to contribute and this prompts outside capital
stream to nation.
 This is useful in development of economy as by expanding its development of its
worldwide business.
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 It offers all the more accounting chance to accounting proficient by following same
accounting practice all through world.
The use of IFRS is not only limited to multinational organisation, small scale and
medium scale organisations are also adopting the IFRS rules and regulations for better
controlling and forecasting process. There is a systematic procedure is required to follow to
manage the flow of interrogation and management approach.
9. Degree of compliance with IFRS by organisation across the world and with in the nation
Consistence with IFRS offer favourable position to the two speculators and organizations,
for example, upgrade in nature of data gave to financial specialists will at last prompt higher
straightforwardness in financial detailing theoretical account. When all is said in done
consistence is connected with laws and enactment (Norwani, Zam and Chek, 2011). Resultantly,
speculators will be more inspired by financing. Level of consistence goes about as affirmation
for precision to speculators who are reliant on data given by associations. Multinational firms
like Tesco are accepted to have high level of consistence as contrasted and littler firms since they
seek after great notoriety. Additionally this aides in staying away from government intercession.
The IFRS standard has set by exposure of consistence in setting of both explicit divulgence
require and expanding dimension of guideline of revelation.
Tesco is stable with its financial reporting standards and analysing the financial
feasibility and changes in more significant and effective strategic planning procedure (Norwani,
Zam and Chek, 2011). This is extremely useful in the bringing organization's store up both
domestic and international market. Finance related information is profitable for such
organisations. As associations are required to get ready and present money related reports and
proclamations
CONCLUSION
The above report summarise the concept of financial reporting with reference of IASB
and IFRS rules and regulations. Interpretation of financial statements and evaluation of financial
reporting standards are defined in this report. The theoretical models and concepts are defined in
organisational context for determining the rations and fractions in various forms. Differences
between the international reporting and accounting rules are counted in organisational context.
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REFERENCES
Books and Journals:
Ball, R., Jayaraman, S. and Shivakumar, L., 2012. Audited financial reporting and voluntary
disclosure as complements: A test of the confirmation hypothesis. Journal of
Accounting and Economics. 53(1-2). pp.136-166.
Brown, P., 2011. International Financial Reporting Standards: what are the benefits?. Accounting
and business research. 41(3). pp.269-285.
Glancy, F. H. and Yadav, S.B., 2011. A computational model for financial reporting fraud
detection. Decision Support Systems. 50(3). pp.595-601.
Kaya, D. and Koch, M., 2015. Countries’ adoption of the International Financial Reporting
Standard for Small and Medium-sized Entities (IFRS for SMEs)–early empirical
evidence. Accounting and Business Research. 45(1). pp.93-120.
Laux, C., 2012. Financial instruments, financial reporting, and financial stability. Accounting
and business research. 42(3). pp.239-260.
Li, X. and Yang, H. I., 2015. Mandatory financial reporting and voluntary disclosure: The effect
of mandatory IFRS adoption on management forecasts. The Accounting Review. 1(3).
pp.933-953.
Mohd Nasir, N., and et.al., 2012. Financial reporting practices of charity organisations: A M
Norwani, N. M., Zam, Z. M. and Chek, I. T., 2011. Corporate governance failure and its impact
on financial reporting within chosen companies. International Journal of Business and
Social Science. 2(21).
Norwani, N.M., Zam, Z.M. and Chek, I.T., 2011. Corporate governance failure and its impact on
financial reporting within chosen companies. International Journal of Business and
Social Science. 2(21).
Pucheta‐Martínez, M. C. and García‐Meca, E., 2014. Institutional investors on boards and audit
committees and their effects on financial reporting quality. Corporate Governance: An
International Review. 22(4). pp.347-363.
Rajgopal, S. and Venkatachalam, M., 2011. Financial reporting quality and idiosyncratic return
volatility. Journal of Accounting and Economics. 51(1-2). pp.1-20.
Van Greuning, H., Scott, D. and Terblanche, S., 2011. International financial reporting
standards: a practical guide. The World Bank.
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APPENDIX
Balance sheet
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Income statement
Cash flow statement
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