Financial Reporting and Analysis

The assignment provided is a comprehensive study on financial reporting and analysis. It covers various topics such as the importance of financial reporting and analysis, international accounting standards (IAS), and differences between IFRS and Vietnamese GAAP. The assignment also includes a review of the development path of Vietnamese accounting system and provides examples from companies like Coca-Cola. The study aims to provide students with an understanding of financial reporting techniques and their significance in decision-making.

Student Name /ID Number Truong Yen Phi
Unit Number and Title Unit 13: Financial Reporting
Academic Year Semester 2, Academic year 2019 - 2020
Unit Assessor Ms. Kim Oanh Vu and Ms. Bich Ngan Nguyen
Assignment Number and Title FR1: International Financial Reporting (1 of 3)
Issue Date 05th February, 2020
Submission Date To be announced by office
IV Name Ms.Doti Chee (Lead IV) and Ms. Bich Ngan Nguyen (IV)
IV Date 2nd January 2020
1. Outline the context and purpose of financial reporting.

In the world of business, financial reporting serves as a crucial tool in providing information
about the financial and business condition of an enterprise since its examinations and
interpretations are the key to assess the quality of a company from which to make business
choices. For that, financial reports are represented as the scorecards of enterprises in reporting
their financial status, namely: balance sheet, income statement, cash flow statements, etc. Thus,
the outputs of financial reporting can be carried out in forms of reports, snapshots and books.
(Cengage Learning, 2019)
There are three main purposes of financial reports which mainly resolve around financial
performance, financial position and financial management of a firm in a given period of time:
 Financial performance: Based on financial statements, a firm can measure if the business
meets the outcome requirements of owners, shareholders and State agencies.
 Financial position: After reviewing their financial performance, they can also identify
their current business status in comparison of other competitors in the industry.
 Financial management: Lastly, a firm may also see the results of the management's
stewardship of business resources. (Zeff, 2012)
Above all, accounting standards must be implemented in the process of conducting financial
statements so that financial information will be distributed with honesty, transparently and
accuracy, especially in defining contractual entitlements. However, mandatory standards can be
flexibly applied in each enterprise to avoid unwanted business outcomes. (Elliott, B. & Elliott, J.,
2011)
2. Examine the regulatory frameworks and governance of financial reporting.
The table below describes some basic accounting standards of financial reporting:
Definition Formation Content
International
Accounting
Standard
(IAS)
The first international
accounting standards
established by the
International
Formed in 1973, then
later developed by
IASB (International
accounting standards
IAS consists of 41
different ordinances which
cover a variety of basic
accounting regulations on:

Accounting Standards
Board (IASB)
(Kenton, 2020)
board) to become a
uniformed
international standard,
named IFRS. (Kenton,
2020)
 Business combinations
 Present value
 Reporting financial
performance
 Insurance
 Extractive industries
 Financial instruments.
(Kenton, 2020)
International
Financial
Reporting
Standard
(IFRS)
Standards created by
the IFRS Foundation
and the International
Accounting Standards
Board (IASB).
(Palmer, 2020)
In 2001, IFRS was
formed being the
replacement of IAS
(International
Accounting Standard).
(Palmer, 2020)
IFRS provides a common
global language for
business affairs with 17
different ordinances which
cover:
 Accrual basis of
accounting
 Materiality &
aggregation
 Offsetting
 Frequency of reporting
 Comparative
information
 Consistency of
presentation. (Palmer,
2020)
Generally
Accepted
Accounting
Principles
(GAAP)
A common set of
accounting principles,
standards, and
procedures made by
the Financial
Accounting Standards
Board (FASB)
In response of the
Stock Market Crash of
1929 in the United
States and the
subsequent Great
Depression, GAAP
was primarily formed.
GAAP governs the
accounting world with 10
general rules and
guidelines which cover:
 Revenue recognition;
 Balance sheet
classification;

(Tuovila, 2020) (Ross, 2020)  Materiality. (Tuovila,
2020)
Vietnamese
Accounting
Standard
(VAS)
Basically, it is the
application of IFRS
which Vietnam carries
into its own
accounting system.
(Business School
Hunan University,
2012)
The Ministry of
Finance (MOF)
promulgated the first
Vietnamese
accounting standards
in 2001, along with 25
other standards from
then to 2006.
(Business School
Hunan University,
2012)
VAS takes up numerous
accounting standards
which based on IFRS with
several differences:
 Presentation of
Financial statements
 Cash flow statements
 Chart of Accounts.
In which the previous
standards aimed at
consistency to protect the
auditors, while the later
ones resolved around
bringing transparency for
investors (Tran, 2018)
3. Identify the main stakeholders of an organization and how they benefit from financial
information.
The table below provides information about some distinct groups of stakeholders
and their particular interests for decision-making toward the business:
User Group Decision
Owners The assessment of business’s potential risks and returns as well as
the senior managers’ performance.
Customers Need to be ensured whether the firm has the ability to cover their
business needs. Furthermore, they will especially focus on any
insurance claims made.
Competitors Compare the competitors’ business performance to make
adjustments.

Government Assessing on the company’s profits and sale revenues to supervise on
their compliance in tax-paying and policies-following, thereby
detecting any illegal business behaviors.
Suppliers The assessment of the firm’s ability to pay for any goods and service
supplied to see if they should continue supplying in the business.
Lenders Lenders will check the company’s ability to cover interest payment
and principal sum repayment to see if they should continue lending
the company or to ask for repayment and loans.
(Atrill & McLaney, 2012)
4. Examine the value of financial reporting for meeting organizational objectives and
growth.
Durcevic (2019) assumed that financial reporting is considered as a tool to measure, record and
publish the aims and responsibilities of enterprises toward sustainable development. Therefore,
financial statements are important for stakeholders and the company itself in meeting the
business goals. Hence, being publicly and transparently in financial reporting will help the
company earn trusts and credibility in stakeholders’ eye, thereby creating the brand image in the
general public eye as well. (Osadchy, et al. 2018)
As a matter of fact, Coca-Cola – One of the most well-known soft drink-producing companies
has a very strategic way of announcing their financial information. The company’s annual
reports are always available freely online as well as the summary of quarter highlights on their
official website.
The company stated that “Our long-term targets consist of solid revenue growth of
4% to 6%, strong operating leverage driving 6% to 8% operating income growth,
delivering meaningful EPS growth and improving on our free cash flow conversion.”
in the first quarter of 2019 on their annual report.
Criteria Current ratio Aimed ratio
Organic Revenue 4% 6%

Operating Income 6% 8%
Earning Per Share 7% 9%
Free Cash Flow 90% 95%
(The Coca-Cola Company, 2019)
By publicly sharing the company’s financial targets, Coca-Cola received more attentions from
investors, lenders and suppliers to outgrow the EPS growth and improving their free cash flow
conversion ratio to 9% and 95%, respectively. Also, this helps Coca-Cola to allocate their
resources and portfolio perspective in the market, channel, and customer considerations. In the
fourth quarter of 2019, Coca-Cola claimed to have achieve the desired organic revenue ratio
which accounted at 7% and operating income ratio at 8%. (The Coca-Cola Company, 2019)
5. Critically analyze the different regulatory frameworks and governance of financial
reporting for specific stakeholders.
The table below compares the regulatory framework of IFRS and VAS on
shareholders:
Criteria IFRS VAS
Revenue
The revenue-related standards
are on IFRS 15 - Revenue from
Contracts with Customers which
enterprises apply when reporting
information about the nature,
amount, timing and uncertainty
of revenue and cash flows from
a contract with a customer.
VAS would follow guidance
under VAS 14, Revenue and
other income and VAS 15,
Construction contracts.
However, there are certain
guidance under IFRS 15 which
have been included in VAS
via guidance provided under
Circular 200.

Expected credit losses IFRS 9 – Financial Instruments
specifies a new model for the
recognition of impairment losses
– the expected credit losses
(ECL) model.
VAS has not adopted ECL
model, however, the standards
are provisioning under
guidance of Circular
228.
Hedge accounting
(Risk management)
IFRS 9 – Financial Instruments
also defines an entity’s risk
management strategy which is
central to the objective
of hedge accounting.
No guidance for hedge
accounting in VAS.
(PwC, 2018)
Ms. Ngân’s overall comments:
- e sửa bài khá tốt
- tuy vậy lần sau cần chú ý nộp draft cho cô check không sát deadline
- bài đạt mức band điểm khoảng D1-
References

Atrill, P. & McLaney, E. (2012) Accounting and Finance for Non-Specialist. (8th edn). Harlow:
Pearson Pretice.
Business School Hunan University. (2012) Vietnamese Accounting System Reform – Review
and Prospect [Online]. Accessed from:
https://pdfs.semanticscholar.org/7268/a3b03e2c9fee3e3f4a3b8d7a58ddcacc0853.pdf
[Accessed on March 20, 2020]
Cengage Learning. (2019) Financial Reporting: Its Conceptual Framework [Online]. Accessed
from: https://www.cengage.com/resource_uploads/downloads/032465913X_287044.pdf
[Accessed on March 20, 2020]
Durcevic, S. (2019) The Importance of Financial Reporting and Analysis: Your Essential Guide
[Online]. Accessed from: https://www.datapine.com/blog/financial-reporting-and-
analysis/ [Accessed on March 25, 2020]
Elliott, B. & Elliott, J. (2011) Financial Accounting and Reporting. (14th edn). Harlow: Pearson
Pretice.
Kenton, W. (2020) International Accounting Standards (IAS) [Online]. Accessed from:
https://www.investopedia.com/terms/i/ias.asp [Accessed on March 23, 2020]
Osadchy, E.A., Akhmetshin, E.M., Amirova, E.F., Bochkareva, T.N., Gazizyanova, Yu.Yu.,
Yumashev, A.V. (2018) Financial Statements of a Company as an Information Base for
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Palmer, B. (2020) International Financial Reporting Standards (IFRS) [Online]. Accessed from:
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PwC. (2018) Similarities and Differences: A comparison of International Financial Reporting
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April 2, 2020]
Ross, S. (2020) When and Why Were GAAP First Established? [Online]. Accessed from:
https://www.investopedia.com/ask/answers/021315/when-and-why-were-gaap-first-
established.asp [Accessed on March 23, 2020]

The Coca-Cola Company. (2019) Coca-Cola Financials [Online]. Accessed from:
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2020]
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https://www.researchgate.net/publication/324519264_The_Development_Path_of_Vietna
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https://www.investopedia.com/terms/g/gaap.asp [Accessed on March 23, 2020]
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[Accessed on March 19, 2020]