Overview and Analysis of Financial Reporting

Overview and Analysis of
the financial reporting

ASOS: Introduction
UK based online fashion retailer founded in 2000.
Global Business:
 Online business in approximately 200 countries worldwide.
 Country-specific websites in different languages for Australia, Spain, Germany, Italy,
France, Russia and the United States (Asosplc, n.d.).
Target customers: Young population “20-something consumers” in the
fashion industry.
Product’s range:
 Women's wear, men’s wear, fashion accessories, footwear and skin & beauty
products.
 Offers near 80,000 products including both, the third-party brands and its exclusive
in-house brands.

ASOS: Introduction (continued)
Different Platforms: Its available on mobile and web platforms.
Significant growth since its inception in 2000:
 Focus on Innovation and technology: the use of social media and the use of
advanced features like picture-led search to attract young customers.
 Provides a value proposition for its customers: offers competitive prices and
efficient worldwide delivery options including free shipping and free returns.
In recent times, things were little gloomy for the whole online
retail market including ASOS:
 Increased competition.
 Increased discounting and promotional activities across the sector.
Increased costs have affected the company’s net profit and its
cash flows are expected to remain negative for the current year.

ASOS: Introduction (continued)
The company has excellent growth prospects:
 Trend-leading reputation.
 Technology focus.
 Global expansion strategy.
ASOS prepares its financial statements
according to:
 The International Financial Reporting Standards as
adopted for use in the European Union.
 The applicable parts of the Companies Act 2006.

The context and purpose of financial reporting
The process of financial accounting includes the design
and the recording of the entity’s:
 Assets and liabilities.
 Receipts and payments.
 Cash and bank balances.
Financial reports are prepared for a particular time period:
 Calendar year.
 Nation’s financial year.
 Firm’s trading year.
Financial reporting provides relevant and important
accounting information to all the stakeholders of the firms.

The context and purpose of financial reporting (continued)
Investors provide resources to the firm and to
know the financial health of the firm they need
annual statements describing:
 The financial performance and cash flows of the firm over a
particular period (Income statement and cash flow
statement).
 The financial position of the company at a current point of
time (Balance Sheet).
 The companies need to follow accounting
standards for financial reporting:
 To provide fair representation about their exact economic
reality to investors to help them make and assess their
investment decisions.

The context and purpose of financial reporting (continued)
Management needs to provide the
interpretation of this complex accounting
data to make it easy for the users to
understand via:
 Annual reports.
 Management discussion & analysis and footnotes
portion of the financial statements.

The context and purpose of financial reporting (continued)
There is a particular purpose of different financial
statements:
 Income statement-
Provides information regarding the performance of a company: revenues
and expenses in an accounting period.
Tells about the firm’s ability to generate profits from its business.
 Balance Sheet-
Provides information regarding the current financial position of the
company.
Tells about the company’s: assets valuation; liquidity status; debt and
funding position.
 Statement of cash flows-
Provides the category wise information regarding the company’s receipts and
payments.
Different parts of the cash flow statement are- cash flow from operations,
investing cash flows and financing cash flows.