Financial Reporting Analysis of Apple Inc.

This assignment examines the importance of financial reporting facilitated by IFRS and IAS for providing relevant information to stakeholders. It analyzes the profit and loss statement, balance sheet, and equity changes of Rita Plc, and calculates financial ratios for Apple Inc. based on two years of financial data. The analysis highlights the benefits of using such tools for attracting investors and understanding a company's financial health.

INTERNATIONAL
FINANCIAL

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. Objectives and Context of Financial Reporting.................................................................1
2. Analysing regulatory framework and the key principle with Qualitative characteristics. .1
3. Analysing the main stakeholders in the organisation as well as fruitfulness of financial
reports.....................................................................................................................................3
4. Measuring Importance of financial reporting in obtaining business efficiency and goals.3
5. Preparing the Financial statements for Rita plc..................................................................4
6. Financial ability of Apple Inc. in accordance with two year financial analysis.................6
7. Explaining the difference between IAS and IFRS.............................................................8
8. Evaluating advantages of IFRS..........................................................................................9
9. Analysing the various methods of IFRS and uses in several firms across globe...............9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
In the present assignment, there will be study over the financial reporting techniques as
well as its importance in meeting the organisational aims. There will be several requirements an
entity such as generating the demand in market related with products or services as well as
attracting numbers of investors to raise the capital fund. Hence, importance of such data set
techniques as well as various tools used in disclosure of such informations. It includes
preparation of income statements, balance sheet as well as analysis of financial ratios of several
organisations such as Rita Plc and Apple Inc. Apart from these, there will be discussion based on
uses of such financial used by various firm across the world.
1. Objectives and Context of Financial Reporting
Financial reporting tends to help organisation or accounting professionals in context with
facilitating them a framework on which they can be able to learn of understand the methods of
preparing such reports (Nobes, 2014). Hence, the main objective of such reporting techniques is
that, it will help in providing the transparency of informations as well as awarding firms with
adequate manner of presenting such data set. Thus, there will be some goals of such reporting
techniques which are as follows:
 It helps the managers in providing informations to investors or the users of such reports.
Thus, with the help of these methods professionals are facilitated with making better
reporting techniques which will fruitful for various external stakeholder to analyse the
profitability of entity as well as ability to pay dividends.
 It facilitates entity of professionals to make the proper tracking over cash flows
transactions held in the organisation.
 The managers at the organisation will be beneficial in making the proper analysis of
assets and liability as well as their valuation.
 Aim of these techniques as to build up the strong capital structure of the firm as well as
increase in the efficiency in operational performance.
2. Analysing regulatory framework and the key principle with Qualitative characteristics
To have the better financial structure in firm there is need to develop the better policies
and regulations which will help them in better governance of qualitative knowledge. Thus, with
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the help of various conceptual frameworks as well as standards which are awarded by GAAP and
IAS, IFRS in context with making the adequate disclosure of the accounts in the right manner
(Wiesel, Skiera and Villanueva, 2013). Thus, such accounting techniques are highly used by the
organisational professional in consideration with attracting the numbers of stakeholders or
investors to the entity. Hence, it can be said that, there are several principles and frameworks
which will help in governing the method of presenting financial statements in authorised manner.
Conceptual Framework: It consists of various guidances as well as theoretical
knowledge which will reflect in coherent and substantial reporting (The need for and an
understanding of a conceptual framework, 2011). Thus, motive of facilitating these kinds of
theoretical guidance which will help in enhancing the basic knowledge relevant to the financial
reporting. Hence, these reporting techniques will be helpful for organisation in context with
some importance:
 The conceptual framework can be seen as per the statements or standards facilitate by
GAAP in context with having the better economic decisions.
 These structure and standards helps organisation in having better control over costs or
expense made during the year.
 It will be beneficial in developing the better communication method between various
companies.
 It causes the better decision making and the favourable corporate governance in entity as
well as helps in analysing the corporate responsibilities of the firm.
Qualitative characteristics of financial reporting: There has been various characteristic of
such accounting techniques which in turn helps in acquiring the authenticated informations:
 Data must be relevant as well as comes from the authenticated sources, which in turn
helps the organisation in having the legal transaction related with sales, turnover as well
as capital gathering (Evans and Hnatkovska, 2014).
 Informations which are facilitated in data sheet must be concrete and relevant to the facts
which will attract the numbers of stakeholders to the firm.
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 All the informations or results of such statement must be legally correct as well as
comparable in the sense of analysing the current years statements with the relevant
previous as to ow the growth of organisation.
 Due to universally accepted principles as well as framework it will be fruitful for the
organisation in generating investors across the national boundaries.
3. Analysing the main stakeholders in the organisation as well as fruitfulness of financial reports
Internal environment of the organisations denoted as execution of the operational
activities. Thus, here the various professional in firm are intend to make the favourable decisions
with the help of such reports (Schreck, 2013). Hence, the disclosure of such data set will be
beneficial for the managers in making the fruitful planning related will lower down the cost of
any activity. There has been various users of such informations which are as follows:
Directors in the organisation: The annual report consist of various cash inflows and
outflows which in turn helps the owners or director to make the profitable planning in context
with expanding the firm's operations or in research and development (Rossi and Hanni, 2016).
Executive managers: Due to disclosure of such reports, it will be fruitful for professional
heads to access all the loopholes as well as they will be able decide the fruitful ways to overcome
such situations (Capkun, Collins and Jeanjean, 2016). Thus, it can be said that, they will be able
to analyse volume of expenses as well as the returns the entity gains and find out the optimum
solutions.
Shareholders: The main users of such information are the shareholders in the firm as
they analyse the growth of the organisation as well as find out the profitability which in turn
helps them in knowing the ability of entity to meet its debts (Rostami and et.al., 2016). Thus,
such financial reports or statements are prepared for attracting the maximum numbers of
investors of to increase the share value which in turn benefited the capital structure.
4. Measuring Importance of financial reporting in obtaining business efficiency and goals
Ability of an entity can be analysed with the help of financial statements as well as the
balance sheet which are facilitated at the end of the year. Thus, such financial analysis will help
the firm in enhancing the efficiency as well as generating the numbers of staff members (Nobes,
2014). However, with the help of such analysis the managers and the professionals in the firm
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will be able to take the corrective action as well as make efforts for implementing the innovative
techniques to lower down such expense.
5. Preparing the Financial statements for Rita plc
Financial reports of Rita Plc will be analysed at measuring the various financial reports
such as:
A. Analysis of profit and loss:
Interpretation: On the basis of above Profit and loss analysis it can be said the Rita Plc
has generated net profit after deducting all the expenses from revenue or earnings. Hence, it can
be said that, the depreciation over assets as well as its adjustments are listed in the working note.
Thus, the gross profit of the organisation was measured at 89175 then there will be deductions of
various expenses such as Operating exp., Investment valuation, Depreciation, interest on bank
which brings ta earning before tax for 42720. However, there has been provision for depreciation
was added for 12000 which brings the net profit for the year at 30720 pounds.
WORKING NOTE:
PARTICULARS AMOUNT
Distribution of depreciation on non current assets
Depreciation on investment and property 5250
Depreciation on plant and equipment 3200
Total 8450
Cost of sales 4225
Operating expenses 4225
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B. Measuring change in equity:
statement of changes in equity
share capital retained earnings
Opening balance nil 23300
Net income 30720
Dividends -6670
Issue of share capital 40000
Total 40000 47350
Interpretation: The equity capital of Rita Plc will be measured at the above listed table.
Thus, the opening balance of such equity gains by firm is from retained earning as 23300. Hence,
after deducting the dividends from net profit and opening equity the total changes in the equity
was measured at 47350.
C. Financial position of firm:
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Financial position of Rita Plc
PARTICULARS AMOUNT
ASSETS
Non-current assets
Plant and Equipments Revalued 22400
Land and property revalued 78750
investments 18000
Current assets 119150
FIXED ASSETS
trade receivables 18000
inventories 14000
TOTAL FIXED ASSETS 32000
TOTAL ASSETS 151150
LIABILITIES
Equity earning
Ordinary shares 26700
Retained earnings 47350
Preference shares 13300
Total equity 87350
Non-current liabilities
Deferred income tax 6900
revaluation reserve 28000
Total non current liabilities 34900
Current liabilities
trade payables 15700
bank overdraft 1200
provision for tax 12000
Total current liabilities 28900
TOTAL LIABILITIES 151150
Interpretation: Financial position or the balance sheet of Rita Plc was measured above
which facilitate actual financial state of organisation. Thus, the current assets of business is
119150 and the fixed assets at 32000 which brings the Total Assets for 151150. On the other side
the Equity of Owners will be measured at 87350 as well as current and non current liability for
the amount 34900 and 28900 respectively which in turns brings the total liabilities for 151150.
6. Financial ability of Apple Inc. in accordance with two year financial analysis
Financial Ratio Of Apple
Inc. 2015
RATIO
S 2016
RATIO
S
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PROFITABILITY RATIOS
Return On Equity Profit Available To Owners *100 84505
0.70801
39081 73333
0.22796
45368
Average Equity 119355 321686
Return On Assets Profit *100 84505
0.29091
60387 73333
0.22796
45368
Average Total Assets 290479 321686
Profit Margin Profit *100 84505
0.36157
28558 73333
0.34007
29924
Sales Revenue 233715 215639
Cash Flow CF From Op Act *100 81266
0.34771
40962 65824
0.30525
09054
To Sales Ratio Sales Revenue 233715 215639
ASSET EFFICIENCY
RATIO
Asset Turnover Sales Revenue 233715
0.80458
48409 215639
0.67034
0021
Ratio Average Total Assets 290479 321686
Days Debtors Average Trade Debtors *365 2500
3.90432
79208 3500
5.92425
3034
Sales Revenue 233715 215639
Times Debtors
Turnover Sales Revenue 233715 93.486 215639
61.6111
428571
Average Trade Debtors 2500 3500
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LIQUIDITY RATIOS
Current Ratio Current Assets 89378
1.10877
0624 106869
1.35266
94175
Current Liabilities 80610 79006
Quick Ratio Current Assets-Inventory 87029
1.07963
03188 104737
1.32568
41253
Current Liabilities 80610 79006
Cash Flow Ratio Net CF From Op Act 81266
1.00813
79481 65824
0.83315
19125
Current Liabilities 80610 79006
CAPITAL STRUCTURE
RATIOS
Debt To Equity
Ratio Total Liabilities *100 290479
2.43373
96841 321686
2.50829
24623
Total Equity 119355 128249
Debt Ratio Total Liabilities *100 290479 1 321686 1
Total Assets 290479 321686
Equity Ratio Total Equity *100 119355
0.41089
02881 128249
0.39867
75924
Total Assets 290479 321686
Interest Coverage EBITDAF 84505
4.76998
19372 73333
3.58018
8449
Ratio Net Finance Costs 17716 20483
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Debt Coverage
Ratio Non-Current Liabilities 90514
1.11379
91288 114431
1.73843
88673
Net CF From Op Act 81266 65824
Interpretation: On the basis of two year financial data of Apple Inc. the ratios and
growth and profitability of this industry was measured. Thus, the profitability ratio of the firm is
consisted of ROE, ROP, Profit Margin and cash flow which can be seen growing from the
previous year. Hence, the efficiency ratio of the organisation as per the asset turnover in both the
year as 0.8045848409 and 0.670340021 respectively. However, the current ratio of both the
years at 1.108770624 and 1.3526694175 as well as the debt equity ratio as 2.4337396841 and
2.5082924623 respectively.
7. Explaining the difference between IAS and IFRS
BASIS IAS IFRS
Constitution Standards are made for
recording the particular
transactions in financial
statements.
Facilitating the framework and
the format under which all the
financial data will be record
In force Used from many years Starts from the last two
decades.
Uses The basic accounting
knowledge as well as the
theoretical informations
Can be used from various
computer devices and with the
help of digital accounting
tools.
8. Evaluating advantages of IFRS
There has been various benefits of international financial reporting standards such as:
 The accounting informations which are provided in such data set are generated or
recorded through authenticated sources.
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 These informations are clear or transparent as well as easily understood by every
accounting professional or investor.
 It clearly explains the growth or the organisation as well as the profitability which
indicates capacity of firm in meeting the debts.
 It facilitates the users to make the comparison of the previous year data set with the
current year as to make better judgement related with investing in the organisation.
 It is build on consolidated statements which in turn helps the managers to make the
strategic development in the operational efficiency of the organisation.
9. Analysing the various methods of IFRS and uses in several firms across globe
There has been use of various methods or techniques in analysing the financial status of
an organisation. Thus, such informations must be clear, transparent as well as easily understood
by various stakeholders across the globe (Wiesel, Skiera and Villanueva, 2013). Hence, it will be
fruitful for the organisation in gaining investments from the outside countries. Thus, it can be
understood by the uses of such accounts in the above listed example of various companies such
as Apple Inc. which in turn describes that there has been use of such financial tools such as:
 It consists of preparation of profit and loss statements which includes all financial
transaction such as sales, revenue, purchase, expense during the assessment year.
 It facilitates the fixed format relevant to financial statement, cash flows and the balance
sheet.
 With the help of the financial ratios which indicates the liquidity, profitability as well as
ability of firm in meeting the future expenses and in paying debts.
CONCLUSION
On the basis of above study, it can be said the financial reporting facilitate by IFRS and
IAS gives the guidance to the accounting professional in a firm to make the adequate data set
which is consisted of all relevant informations. Hence, the profit and loss statement, balance
sheet and the equity change of Rita Plc were measured. Thus, the financial ratios of Apple Inc.
was calculated on the basis of two years financial data. Further, it can be said that with the use of
such financial tools an industry will be beneficial in attracting various numbers of stakeholders.
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REFERENCES
Books and Journals
Capkun, V., Collins, D. and Jeanjean, T., 2016. The effect of IAS/IFRS adoption on earnings
management (smoothing): a closer look at competing explanations. Journal of Accounting
and Public Policy. 35(4). pp.352-394.
Evans, M. D. and Hnatkovska, V. V., 2014. International capital flows, returns and world
financial integration. Journal of International Economics. 92(1). pp.14-33.
Nobes, C., 2014. International Classification of Financial Reporting 3e. Routledge.
Rossi, P. and Hanni, T., 2016. The Impact of Voluntary IAS/IFRS Adoption on Medium Italian
Private Entities: Implications for the Adoption of IFRS for SMEs. Journal of Modern
Accounting and Auditing. 12(12). pp.582-611.
Rostami, A., and et.al., 2016. Iranian GAAP and IFRS: The history and current status of
IAS/IFRS convergence process in Iran. International Journal of Finance & Managerial
Accounting. 1(3). pp.55-66.
Schreck, P., 2013. Nonfinancial disclosure and analyst forecast accuracy: International evidence
on corporate social responsibility disclosure. Social and Environmental Accountability
Journal. 33(3). pp.180-181.
Wiesel, T., Skiera, B. and Villanueva, J., 2013. Customer equity: an integral part of financial
reporting. American Marketing Association.
Online
The need for and an understanding of a conceptual framework. 2011. [Online]. [Available
through]
:<http://www.accaglobal.com/in/en/student/exam-support-resources/fundamentals-exams-
study-resources/f7/technical-articles/conceptual-framework-need.html>. [Accessed on 17th
October. 2017].
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