Financial Reporting: Analysis of Financial Performance and Standards

This report provides a comprehensive overview of financial reporting, beginning with an introduction to the process and its importance in organizations. It delves into the requirements, purpose, and key principles of regulatory and conceptual frameworks, followed by an examination of the main stakeholders and their benefits from financial data. The report explores the value of financial data in meeting organizational growth and purpose, detailing various financial statements like profit and loss, changes in equity, financial position, and cash flow. It further analyzes how these statements communicate and interpret financial performance, highlighting the differences between IFRS and IAS, along with the benefits of IFRS and its varying degrees of compliance globally. The report includes financial statements, such as the statement of profit and loss, changes in equity, and statements of financial position, which are crucial for understanding a company's financial health. The analysis of financial statements includes calculations and interpretations of key financial metrics. The report concludes by summarizing the key findings and emphasizes the importance of accurate financial reporting for effective decision-making and organizational success.

Financial Reporting

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
1: Financial reporting...................................................................................................................1
2: Requirement, purpose and key principles of regulatory and concept framework...................2
3: Main stakeholders of an organisation and their advantage from financial data......................3
4: Value of financial data for meeting organisational growth and purpose.................................4
5: Financial statements of an organisation...................................................................................5
(a): Statement of profit and loss...................................................................................................5
(b): Changes in equity..................................................................................................................5
(c): Statements of financial position............................................................................................5
(d): Statements of cash-flow statements......................................................................................7
6: The way in which financial statements are used to communicate and interpret financial
performance.................................................................................................................................7
7: Difference between IFRS and IAS..........................................................................................8
8: Benefits of IFRS......................................................................................................................8
9: Varying degree of compliance of with IFRS by organisations across the world....................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
APPENDIX....................................................................................................................................12

INTRODUCTION
Financial reporting is a process of recording all the financial activities and position of an
organisation. It is prepared on the basis of relevant information in a well-structured manner and
in a form easy to understand (Mir, 2013). The primary motive of financial reporting is to provide
information regarding the financial position, present position and changes in the financial
position of business organisation like “MARKS AND SPENCER” that is valuable to large
range of users in making effective economic decision. This project report aimed on providing
crucial information regarding the purpose of using financial reporting. Apart from this, analysis
of the financial statement that are prepared by the company during the period. Along with this,
evaluation of financial reporting standard and theoretical model are also covered under this
report. Examination of international difference in financial accounting are identify effectively in
the project.
1: Financial reporting
In every business organisation, it is crucial to make use of reliable reporting systems that
can lead to generation of relevant profit in coming period of time. It is one of the effective
process of producing statements that can disclose “M&S” financial status to the owners and the
government. It is basically a combination of external financial statements such as income
statement, comprehensive statements, balance sheet and changes of stakeholder’s equity. It used
to provide investors, creditors and other business stakeholders an idea of integrity and worth of
the company. This will give crucial information that can be used to make reliable business
decision such as they should open new business with the available resources (Russo, Mitschow
and Schinski, 2015).
As per IASB “M&S” need to formulate financial records to show outcome status of the
company in front of their shareholders. There must be transparency of data can be helpful for the
business entities to deal with business effectively. It is crucial to follow every accounting related
principles, rules and regulation that could be helpful for recording data in different record so that
it should be helpful in depict real position of “M&S”. This company is preparing their financial
reports consistently to operate business at international level (Lu and Fang, 2013).
Purpose:
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The main objective of the financial reporting is to deliver information regarding the
financial position, performance and changes in financial position of an organisation that is
valuable for an organisation in longer period of time. To help managers of M&S to make
accurate strategic planning so that external stakeholders can increase total sales, profits and
market share in order to gain competitive advantage over other company.
2: Requirement, purpose and key principles of regulatory and concept framework
Conceptual framework is basically an effective type of analytical component with the
motive of variable quantity and certain related textual aspects. It is applied through organisation
when overall performance and status of business is being needed (Lu and Fang, 2013). It is
basically used by most of the companies to make variation and arrange innovative ideas more
effectively. Regulatory framework is the combination of legal obligations and regulations that
are set the by higher authority of UK regarding various companies that are operating in business
environment. According to the law and rules that are implemented in the company is been
required to conducts financial reports for their business because it used to examine actual
position and financial stability of M&S. This is related with the following regulation that are
based on IASB because, it can be helpful the stakeholders to analyse organisational performance
effectively. These rules and regulations are imposed in the specific format of IFRS as mentioned
below:
IFRS: It Stands for International financial reporting standards that are introduced through
IASB. According to this particular body which is responsible for formulating principles and
specific set of regulatory norms. There are certain key principles which are explained below:
IFRS 1: It is associated with the initial implementation of IFRS, under which companies
adopt IFRS for the first time. It would have related directly with M&S to develop with financial
statements effectively.
IFRS 3: This is associated with the combination under which merger and acquisition are
taken into account. It would assist organisation to combine all their assets and liabilities so that
liabilities can be paid to reduce financial losses (Lemieux, 2012).
Purpose of regulatory and conceptual framework:
There is specific objective of regulatory design that is responsible for guiding organisation
towards right direction as it will help in attaining overall aims and objectives of M&S during
future times. The primary purpose of framework is to examine overall performance of a business
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firms so that stakeholders can take effective decisions regarding the company. There are certain
objectives related with the regulatory and conceptual framework which is related with the
international regulation so that business can be plan their activities more effectively (Singh,
2015).
Quality feature of financial information: There are specific characteristics of financial
data that can assist them to make more reliable decision in coming period of time ( Kimbro and
Xu, 2016). There are certain points:
Relevance: It is most crucial for an organisation to record actual data so that it can assist
them to analyse their actual performance or financial position of the company.
Faithful representation: This is valuable aspects to gain overall trust of stakeholder such
as investors and shareholder because of this they can assure that organisation is in good situation
and can get long term benefits such as higher return on capital investments.
3: Main stakeholders of an organisation and their advantage from financial data
The primary users of financial record are basically said to be more common grouped as
investors and potential investors that are interested in their potential gains and overall security of
their investments. In case of future profits, it can be predicated from the targeted companies past
performance as mentioned in the income statements. Stakeholder are considered as primary
aspects of M&S that are associated with internal and external parties of M&S (Khanzhyn, 2012).
The company is having wide number of stakeholders with the assistance of operating business
more effectively. There are various benefits financial information to stakeholders such as:
Internal stakeholders: These are directly associated with the operation departments of
an organisation. It consists of certain parties that are mentioned below:
 Shareholders: They are considered as valuable part of the company as individual that are
providing capital to M&S. Company is entirely relies on their investments through which
future plans can be made accordingly. They can get benefited by the financial
information of dividend reports from which they can ascertain their profitability.
 Managers: In M&S, managers can get benefited by using financial information as it
would help them to make valuable decision through analysing the organisational
performance. In case, operations are not in effective manner they can implement
appropriate plan to overcome those issues (Jayasinghe, 2014).
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External stakeholders: They are not directly associated with M&S of an organisation but
they are having right option to collect financial data because they are essential part of the
company. some of valuable parts are:
 Investors: They are primary part of the group of an individual that invest their money in
M&S projects for the motive of earning maximum profits. They can get benefited from
balance sheet of the organisation as they can ascertain probable return that can be gained
by them.
 Creditors: The individual that can provide goods on credits to M&S are considered as
creditors. Financial data can assist them in analysing the organisation performance to pay
back their amount in the given period of time.
4: Value of financial data for meeting organisational growth and purpose
Financial reporting would assist in overall management of organisational performance
that will assist them attaining overall aims and objectives M&S is operating all around the nation
and for which appropriate financial statements so that all the stakeholders of the company which
can get satisfied and show more interest in the company. Objectives of M&S is to attract most of
the investors, satisfy clients and increase profit from the total amount of sales. Most of the
investors used to attract toward maximum return on their overall investments. Customers
satisfaction can be attaining with the help of positive market position which can be determine
through the help of increase revenue for the company for the longer period of time. In case of
M&S is having good image in the market that can help client to satisfied because they can get
assured about the using products of a company.
The organisation is performing good in the market than it will assist them more
competitive in the market and will try to acquire maximum profit for the company. Effective and
accurate financial statements can assist an organisation to examine the overall growth and
opportunity and will make efforts to grab them to attain more competitive benefits in near future
time. For this purpose, finance account of M&S can be right option to analyse the organisation
efficiency and profitability position of the company (Hung, and Chuang, 2012).
Financial statements of M&S can another valuable business that can be examine to
determine financial position in the market in order to assist specific growth in near future time.
The another aspect of this statements is to attain competitive advantage over by measuring the
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strength of the company. By the help of this, company can easily be able to attain maximum
amount of profit in coming period of time.
5: Financial statements of an organisation
(a): Statement of profit and loss
Particular Amount
Revenues 385100
Less: Cost of sales -297563
Profit 87537
Add: Other income 5600
Gross profit 93137
Less: operating expenses -83663
Operating profit 9475
Less: Finance cost -830
Profit before tax 8645
Less: Tax -1500
Profit after tax 7145
Add: Other comprehensive income 2100
Total Comprehensive income 9245
From the above statements, it has been seen that financial position of the company can
help them to assist the total earning after the making of all adjustments such as tax expenses and
other. The P&L statements for the company is showing gross profit of 93400. After taxation, the
balance amount is valued to 19670 and profit after deduction is amounted as 4670.
(b): Changes in equity
Particular Ordinary
share
Revaluatio
n reserve
Retained
earnings
Total
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capital
As per trial balance 86700 40700 32100 159500
Total Comprehensive income 2100 7145 9245
Preference dividend -2330 -2330
Ordinary dividend -4340 -4340
86700 42800 32575 162075
(c): Statements of financial position
Assets Amount
Non current assets:
Land and property 115000
Plant and equipment 37275
Investment property 25400
Total non current assets 177675
Current assets:
Inventory 17300
Trade inventories 62000
Total current assets 85300
Total assets 262975
Equities and liabilities
Ordinary Share @25 each 86700
Revaluation reserve 42800
Retained earning 32575
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Total equities 162075
Non current liabilities:
10% redeemable preference share 23300
Deferred taxation 8900
Total non current liabilities 32200
Trade payables 65700
Bank overdraft 1500
Tax payables 1500
Total current liabilities 68700
Total equities and liabilities 262975
Working notes:
Calculation of cost of sales and operating expenses:
Particulars
Cost of
sales
Operating
expenses
As per trial balance 291700 78500
Adjustment in investment 700
Depreciation on land and property 2500 2500
Depreciation on plant and equipment 2663 2662
Amount to be shown in P & L 297563 83662
Cost of damaged good 1470
Can be sold 1670
Residential -990
Net realisable value 770
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Decreased by 700
Cost of sales increased by 700
Depreciation of property
125/100*(8
8000-
45400)
5325
Working note 2:
Non current assets:
Land and
property
Plant and
equipment
Investment
property
As per question 120000 88000 23300
Accumulated depreciation -45400
Current year depreciation -5000 -5325
Revaluation 2100
Carrying value 115000 37275 25400
Working note 3:
Closing inventory 18000
Goods on cost -1470
Net realisable value 770
Amount to be shown in balance sheet 17300
According to the above balance sheet or financial changes which is valuable for the
companies to determine the actual cash position during an accounting period of time. The above
mentioned balance sheet can provide the total assets and debts which is held by the company for
the specific period of time. The balance sheet shows current assets of 86730 and total liabilities
of 186410.
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(d): Statements of cash-flow statements
In the financial reporting, a cash flow statements shows total changes in overall balance
sheet accounts and profit affects cash and cash equivalents. It would break the analysis down to
operating, investing and financing. The company can use this information for the purpose of
analysing total inflows and outflow. The primary objective of preparing cash flow statements for
a specific period is to show information regarding availability of cash and total amount going out
from the business. Cash flow statement is mentioned in the appendix. The information is related
with the reduction in the capital and expenditure which was partially offset through weaker
business performance with adjusted operating gain down with 94.3 million. Working capital was
internationally flat on the overall year with reduction in clothing and home inventory offset
trough minimising creditors.
6: The way in which financial statements are used to communicate and interpret financial
performance
As analysed form the appendix Revenues of Marks and Spencer for year 2017 were
10622000 and these are increased in year 2018 and reached up to 10698200. Cost of sales for
both the years are 6629300 and 6745600 for year 2017 and 2018 respectively. Gross profit was
reduced up to 3952600 in year 2018 form 3992700 which was for year 2017. Operating period
for both the years are 707300 and 677400 respectively. Net income for the organization were
117100 and 25700 for both the years 2017 and 2018. Cash and cash equivalents of Marks and
Spencer were decreased up to 207700 in year 2018 as compare to 468600 which was for year
2017. Total current assets in year 2017 were 1723300 that are decreased up to 1317900 in year
2018. Long term investment of the organization for year 2017 were 51500 that are decreased in
year 2018. Total assets of the organization were 7550200 in year 2018 and for 2017 there were
8292500. Total liabilities in year 2018 are 4596000 that are decreased as compare to year 2017.
Total shareholder’s equity for year 2017 were 3156300 that are decreased up to 2357500 in year
2018.
7: Difference between IFRS and IAS
IFRS (International Financial Reporting Standards): These were induced by IASB
which is international accounting standard board that are introduced for the organisations to
provide guidance while recording transactions in financial statements. It is very important for all
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the companies to follow all the regulations for accounting so that reports can be formed
appropriately as they are presented to external shareholder in order to formulate decisions.
IAS (International Accounting Standards): All the standards under IAS are introduced
by International Accounting Standards Committee (IASC) in which organisations are direct to
implement accounting standards in accounting process. It helps to record appropriate information
in the books of accounting (Feng, 2018).
Difference between IFRS and IAS:
IFRS IAS
It stands for international financial reporting
standards.
It stands for international accounting
standards.
IFRS are mainly introduces to resolve all the
consequences that are faced by organisations
by using IAS.
These were introduced to resolve accounting
related problems.
All the standards under IFRS are issued by
IASB.
Accounting standards are issued by IASC.
IFRS were issued in year 2001 to resolve
issues that are taking place due to IAS.
IAS were issued in year 1973 for the purpose
of guiding companies to use accounting
standards in accounting system.
8: Benefits of IFRS
IFRS: These are the set of standards that are mainly related to financial reporting in
which organisations are directed to follow all the rules and regulations of government that are set
for the reporting procedure of financial transactions (Benefits of IFRS, 2017). All the benefits of
IFRS are as follows:
 It is a technique that may contribute in the enhancement of economy by providing good
opportunities to the investors.
 Directs organisations to record appropriate information in financial statements so that
shareholders may analyse that their money is used effectively or not.
 It helps companies to set benchmark for themselves and attain competitive advantage in
the market.
 As these standards are related to international financial reporting hence they help to
attract foreign investment so that business can be operated smoothly.
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 It helps to set a global language in which investors from all around the world may
become part of an organisation.
 IFRS is launched to guide companies so that accurate and appropriate financial
statements can be formulated and managers may analyse actual financial status of the
company and take effective decisions according to the conditions of the company.
All the IFRS are very beneficial for Marks and Spencer because they are the best standards
that may help the managers and other stakeholders to take effective decisions that may result
positively for the organisation. According to law it is essential for the companies to follow all the
rules and regulations of government so that business can be operated effectively.
9: Varying degree of compliance of with IFRS by organisations across the world
There are various types of standards that are introduced by government for the business
entities and all of them are required to follow the standards because all of them may help to
formulate financial statements appropriately. As Marks and Spencer is operating its business all
around the world hence it is not possible to implement the accounting rules of all the countries
hence IFRS are the best options as they are related to international accounting. This helps the
organisation to attract foreign investors toward the organisation so that investments can be
enhanced (Alyousif and Kalenkoski, 2017).
Main purpose of IFRS is to direct organisations so that they may formulate financial
accounts in appropriate manner and their investors may take investment related decisions. All the
standards are related to the financial transactions and their treatment in the financial reports.
Firstly, IAS were introduced by the IASC and then different complexities are identified in the
IAS. To deal with all such complexities IASB introduced IFRS so that it may facilitate
organisations to record all the financial information accurately. These standards may help to
attain organisational goals and objectives such as enhanced investments, satisfied customers and
increased sales. For Marks and Spencer, it is very important to implement all the standards that
are induced by IASB so that the business can be operated legally and according to the financial
requirements. If an organisation is not able to follow the rules and regulations that are published
by IASB than it may take strict action against that organisation. IFRS is very helpful for the
organisations who are operating business all around the world and have to formulate financial
statements in consolidated form. GAAP accounting standards are used in the UK, while IFRS is
the used in almost all over 110 nations all over the nation. GAAP is the combination of
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authoritative standards and commonly accepted as well as reporting with certain accounting data.
It consists of principles of regularity and consistency.
CONCLUSION
From the above project report, it has been concluded that financial reporting is a method
which is used by organizations to record all the financial information in the financial statements
so that financial performance can be measured. All the companies are required to follow all the
standards of IFRS and IAS so that all the transactions can be recorded accurately. Stakeholders
of the business entities determine financial strength so that they may pass judgement on their
investing decisions. Shareholders analyze that their money is used by the company in appropriate
manner or not. Financial information helps the stakeholders to analyze financial statements and
then pass judgment on financial position of the organization.
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REFERENCES
Books and Journals:
Alyousif, M. and Kalenkoski, C. M., 2017. Who seeks financial advice?.
Feng, A. X., 2018. Bank Competition, Risk Taking, and their Consequences: Evidence from the
US Mortgage and Labor Markets. International Monetary Fund.
Hung, C. T. and Chuang, F. C., 2012. The Influence of Global Economic Crisis towards the
Financial Performance of the Shipping Industry. In Applied Mechanics and
Materials (Vol. 145. pp. 480-484). Trans Tech Publications.
Jayasinghe, P., 2014. Incorporating Exchange Rate Exposure Asymmetries: A Firm Level Study.
Khanzhyn, V., 2012. Three essays on the role of financial development. The University of
Nebraska-Lincoln.
Kimbro, M. B. and Xu, D., 2016. Shareholders have a say in executive compensation: Evidence
from say-on-pay in the United States. Journal of Accounting and Public Policy. 35(1).
pp.19-42.
Lemieux, V. ed., 2012. Financial analysis and risk management: Data governance, analytics
and life cycle management. Springer Science & Business Media.
Lu, T. and Fang, S., 2013. Sovereign Debt, Real Interest Rate and Gold Pricing.
Lu, T. and Fang, S., 2013. The Value of Gold as a Super-Sovereign Zero-Coupon Bond.
Mir, M.A., 2013. GLOBAL FINANCIAL CRISIS AND INDIAN ECONOMY: CAUSES &
CONSEQUENCES. Annamalai International Journal of Business Studies & Research.
5(1).
Russo, N., Mitschow, M. and Schinski, M., 2015. FOR WANT OF A NAIL: A CONCISE
EXPLANATION FOR THE ONGOING FINANCIAL CRISIS. Journal of Theoretical
Accounting Research, 10(2).
Singh, S. P., 2015. STATUS AND SCOPE OF FUTURE COMMODITY TRADING IN
INDIA (Doctoral dissertation, Institute of Agricultural Sciences, Banaras Hindu
University, Varanasi).
Online
Benefits of IFRS. 2017. [Online]. Available through:
<https://blog.trginternational.com/bid/152116/key-benefits-of-ifrs>
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APPENDIX
Income statement of Marks and Spencer:
particulars 2018 2017
Revenue 31/03/18 01/04/17
Total revenue 10698200 10622000
Cost of revenue 6745600 6629300
Gross profit 3952600 3992700
Operating expenses
Selling general and administrative 3324700 3348600
Others -49500 -63200
Total operating expenses 10020800 9914700
Operating income or loss 677400 707300
Income from continuing operations
Total other income/expenses net -610600 -530900
Earnings before interest and taxes 677400 707300
Interest expense -95400 -100200
Income before tax 66800 176400
Income tax expense 37700 60700
Minority interest -2500 -5900
Net income from continuing ops 29100 115700
Net income 25700 117100
particulars 31/03/18 01/04/17
Current assets
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Cash and cash equivalents 207700 468600
Net receivables 144800 137800
Inventory 781000 758500
Other current assets 10900 167700
Total current assets 1317900 1723300
Long-term investments 43600 51500
Property plant and equipment 4393900 4837800
Goodwill 77400 78400
Intangible assets 521800 630600
Other assets 1195600 970900
Total assets 7550200 8292500
Current liabilities
Accounts payable 872900 967500
Short/current debt 125300 517600
Other current liabilities 222600 224300
Total current liabilities 1826000 2368000
Long-term debt 1622900 1663400
Other liabilities 1099400 1062400
Minority interest -2500 -5900
Total liabilities 4596000 5142100
Stockholders' equity
Common stock 406200 406200
Retained earnings 6560400 6617600
Treasury stock -4426300 -4283900
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