Financial Reporting Analysis: IAS 1, IFRS, and Stakeholder Benefits

This report provides a comprehensive analysis of financial reporting, focusing on its purpose, objectives, and the benefits it offers to various stakeholders, including investors, shareholders, consumers, and operational managers. It explores the conceptual and regulatory frameworks, principles, and qualitative characteristics of financial reports, with a particular emphasis on IAS and IFRS. The report includes an analysis of the financial statements of Rita plc, such as the profit and loss statement, changes in equity, and financial position, along with interpretations and working notes. Furthermore, it examines the organizational performance of Coca-Cola Co. through ratio analysis, comparing data from 2015 and 2016 to assess liquidity, asset efficiency, and capital structure. The report highlights the importance of financial reporting in meeting business goals, enhancing transparency, and supporting effective decision-making. This analysis, contributed by a student, is available on Desklib, a platform offering AI-based study tools and resources for students, including past papers and solved assignments.

FINANCIAL REPORTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. Financial reporting purpose and objectives........................................................................1
2. Conceptual regulatory framework, principles and qualitative characteristics of financial
reports.....................................................................................................................................2
3. Benefits for stakeholders of organisation...........................................................................2
4. Importance financial reporting in meeting business goals.................................................3
5. Financial statements in accordance with IAS 1..................................................................4
6. Organisational performance of Coca-Cola Co...................................................................6
7. Analysing the differences between IFRS and IAS.............................................................8
8. Importance or benefits of IFRS..........................................................................................9
9. Factor which are affecting the compliance of IFRS standards...........................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Disclosure and preparation of the financial reports are the main source and technique to
gather the attraction of large numbers of stakeholders. In the present assessment, there will be
analysis of various financial statements of Rita plc such as financial position, change in equity,
profit and loss comprehensive income statements etc. Hence, report will shed some lights on the
various accounting standard which are facilitated by IAS and IFRS to give the regulatory
framework. Thus, the ratio analysis of Coca-Cola Co. will be analysed over the financial
disclosure provided by the organisation.
1. Financial reporting purpose and objectives
The main motive of preparing the financial reporting is to record, track, analyse as well
as provide information relevant to each business transaction. Hence, these will help executive
professionals in the organisation to manage the cash flow, utilisation of resources as well as
operational activities to achieve the business targets (Capkun, Collins and Jeanjean, 2016).
However, apart from internal uses it will be beneficial in external environment such as the
disclosure of financial health of organisation will attract maximum numbers of investors and
they will be able to analyse the growth of firm by comparing data set of current year and
previous years. Hence, these will help them in getting information regarding ability of firm in
meeting debts and making the payments of dividends. Thus, the main objectives of preparing
financial reports are as follows:
Facilitate Information to Stakeholders or investors:
The main users of such data set are the investors of the organisation. Hence, they will
evaluate the annual turnover of the firm as well as analyse the actual financial strength of the
firm in meeting the operational expense. Hence, on the basis of which they can be able to analyse
the actual strength of the firm in paying the dividends.
Analysing Cash flow in the firm:
For internal control of the organisation there will be analysis of the cash flows in the
operational activities. Hence, it helps them in analysing income and operating expense incurred
during the annual years. Thus, such reporting techniques will help professionals in making
decisions relevant to control of costs or expenses of the firm (Rostami and et.al., 2016).
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Analysing the financial health of the entity:
It helps the organisation in getting information relevant to the Assets, liabilities as well as
equity capital gathered by firm. Hence, it will also help in executing uses of resource in
production or manufacturing the goods.
2. Conceptual regulatory framework, principles and qualitative characteristics of financial reports
In accordance with preparing an effective report there are various regulatory and
conceptual frameworks, as well as qualitative techniques developed by several accounting
boards.
Principles: There are several principles which are facilitated for providing guidelines to
accounting professionals as well as auditors to make the financial reports in an adequate manner.
Hence, in accordance with facilitating framework, GAAP has facilitated various standards which
are based on procedure of preparing such data set as well as compiling them in a single
document. However, in accordance with IAS which has awarded th guidelines as well as various
regulations over preparation of such financial data set. Thus, IFRS has developed the framework
or authenticated formats on which the professionals could make such reports as well as it is
universally accepted by all the firms or investors (Rossi and Hanni, 2016).
Conceptual framework: In accordance with various accounting standards IFRS has
facilitated the basic framework and concepts which helps Auditors in preparing such data set
which highlights all the transactions held in an annual year (Conceptual Framework for
Financial Reporting, 2010).
Qualitative characteristics: There has been various qualitative characteristics of
financial reporting which will help the accounting professionals analysing the operational
functioning of the firm.
3. Benefits for stakeholders of organisation
Disclosure of financial reporting is mainly prepared for attracting attention of
stakeholders such as shareholders, consumers, owners as well as employees of firm. Hence, this
data set helps the internal unit in making decisions related with the operational activities. Thus,
such planning will help them in identifying loopholes of business operations as well as
accordingly taking effective actions which will enhances the firm's performance.
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Owners of firm: On the basis of company's financial results owners and the top
managerial heads will be able to analyse growth of firm as well as get informed about areas of
weaknesses. Hence, they will identify requirements of funds in several departments as well as
take necessary steps to have better funding for them (Leuz and Wysocki, 2016). Thus, these
reporting mainly beneficial for owners in case of investments or monetary decisions.
Shareholders: These are main sources for a company in raising capital funds. Hence,
such financial statements are prepared mainly to attract them. Their monetary interest in the
organisation will be helpful in enhancing market share of organisation. Thus, here the entity need
to develop effective dividend policies which in context with helping shareholders in having
adequate interest over their investment (Sikka and Stittle, 2017).
Consumers: In ralation with financial data set the buyers will be benefited in analysing
the profitability of firm as well as it generates the favourable goodwill or brand image. Hence, it
will be beneficial in improving the prices of the products and then the company will be able to
earn maximum revenue (Cohen, Krishnamoorthy and Wright, 2017).
Operational Managers: Requirement of the funds for the effective business operations
as well as production or processing of the products are to be analysed by such financial results.
Hence, there are many departments of several units in an entity as well as there will be variations
in the requirements of funds for them. Thus, these reports are being prepared by analysing all the
department's accounts and the transactions made by them. However, these data sets will help in
analysing actual or level of requirements in a particular unit and they will make the
benchmarking and small goals that motivate the workforce to perform well (Bishop, DeZoort and
Hermanson, 2016).
4. Importance financial reporting in meeting business goals
IAS or IASB, they have facilitated legal or authenticated framework which will help firm
in enhancing operational ability. Thus, with the help of such data set professionals of an entity
will be informed about the costs required for completion of an activity. Hence, they will make
strong decisions related with lowering the costs as well as improvements in the quality of the
work. There are several objectives of the financial reporting which in turn helps the firm in
obtaining the business objectives such as:
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 It brings transparency in business operations which in turn helps in stakeholders in
having effective or reliable information relevant with firm. Thus, this will help in
improving the flow of capital as well as strengthening the capital structure.
 It will enhance managerial decisions in generating effective pricing policies which in turn
helps firm in meeting all the demands as well as earn profits.
 These standards help Accounting professionals and auditor to prepare the financial
statements which must be in authenticated manner so it would easily be understand by the
investors.
 Such data set reflects actual position of firm as well as provides information relevant with
major transactions held in financial year (Financial Reporting, 2015).
 There will be effective productivity of the firm as well as provokes better employment
planning such as recruitment, training and development etc.
5. Financial statements in accordance with IAS 1
In accordance with the various rules and regulation that have been facilitated by IAS all
the data set which are prepared by organisation must consists of such formate and framework
that it will be treated as the legal or reliable disclosure. Hence, these are the financial statements
of Rita plc which includes changes in the equity capital, Profit and loss statements and the
financial position of the firm together with working notes and adjustments.
1. P&L statement of Rita plc:
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Interpretation: As per the table listed above which considers all the income and expenses
held in the year of Rita plc. Thus, the revenue generated by firm was 285100 which includes the
cost of manufacturing or selling the products for 191700. The depreciation over assets will be
charge at 4225 which will be described in the following working note that has been shown in the
following table. Hence, after adding or subtracting all the operating income and expenses the
profit obtained by the firm which is 42720. The corporate tax will be levied over such profits is
amounted to 12000 which brings net profit of 30720. However, it can be said that the firm is
having positive revenue as well as with the good use of such financial statements all the results
are reflecting transparency and reliable.
Depreciation adjustments Working Note:
2. Change in equity statements:
Interpretation: On the basis of the changes in the equity of the firm it can be said that the
business has opening balance of retained earnings of 23300 as well as net profit from the P&L
statements of Rita plc which is amounted to 30720. Hence, the company has paid dividends for
6670 out of the ether shares. Thus, there will be added the issue of share capital to the firm is for
40000. Hence, the total changes in equity capital of organisation is stands for 47350.
3. Financial position of firm
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Interpretation: By considering the above listed table which indicates the financial
position of Rita plc for the year ended 31st December 2016. Hence, it can be said that the fixed
assets of the business were revalued and have listed in such data set which brings the information
relevant to the total assets of the company at 151150. Thus, in accordance with the liabilities and
the equity capital of the firm it can be said that there is total equity revenue for 87350. Thus, the
firm has obtained an effective earning through individual investments. It indicates that the firm is
on good phase as well as will able to have better operating activities in the coming period.
6. Organisational performance of Coca-Cola Co
In context with analysing the growth, profitability as well as financial position of the firm
there is need for having a good ratio analysis. Hence, in the following table there will be analysis
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of Coca-Cola Co. On the basis of two year's information as 2015 and 2016. Thus, this analysis
will help the stakeholders in making the effective decision relevant with making the investments
in this company as well as analysing the profitability and ability of paying the dividends.
Financial Analysis of
Coca-Cola Co 2015
RATI
OS 2016
RATIO
S
LIQUIDITY RATIOS
CR Current Assets 33395 1.24 34010 1.28
Current Liabilities 26930 26532
QR Current Assets- Stock 30493 1.13 31335 1.18
Current Liabilities 26930 26532
ASSET EFFICIENCY
RATIO
Asset Turnover Revenue 44294 0.32 41863 0.31
Ratio Average Net Assets 137069.5 133728
Times Debtors Turnover Revenue 44294 6.88 41863 7.13
Average Trade Debtors 6436.5 5869
CAPITAL
STRUCTURE RATIOS
Debt to Equity Ratio Total Liabilities 90093 35.25% 87270 37.81%
Equity 25554 23062
Equity Ratio Equity 25554 28.36% 23062 26.42%
Total Assets 90093 87270
Interest Coverage EBIT 12431 -7.53 10656 8.55
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Ratio Net Finance Costs -1649 1246
PROFITABILITY
RATIOS 0
ROE
Profit Available to
Owner's Equity 12431 39.34% 10656 28.73%
Average Equity 31597 37085
ROA Profit 12431 0.91% 10656 0.80%
Average Net Assets 137069.5 133728
GP Profit 26812 60.53% 25398 60.66%
Revenue 44294 41863
Interpretation: In accordance with the ratio analysis of Coca-Cola Co. which reflects the
growth of firm in 2015 and 2016. Thus, such reflect the profitability on the basis of ROE, ROA
and GP ratios. In 2015 the ROE of the company is 39.34% while in 2016 it reduced to 28.73%.
Hence, it can be said that in the recent year there are fewer investments generated through
Owners of the entity as well as the also there is increase in the average equity which effects the
return of equity ratio. There ROA of the firm in 2015 was 0.91% while in 2016 it is 0.80%. The
GP margin in 2016 is 60.66% and in 2015 it was 60.53% so the profitability of the firm increases
in the recent year which indicates, there will be favourable revenue growth by organisation in
such year.
However, the Liquidity of the firm on the basis of Current and Quick ratios, it can be said
that there has been changes in such results but it doesn't fluctuate that much. Hence, the CR for
the 2015 was 1.24 and in 2016 it is 1.28 as well as the QR in 2015 was 1.13 while in 2016 it is
1.18. Thus, it can be said the firm is having better liquidity as well as it is able to meet the debts
on required period.
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7. Analysing the differences between IFRS and IAS
These are the guidelines facilitated by IASB in context with legal or authenticated
framework of preparing the financial reports. Thus, there will be difference between IAS and
IFRS and in their functioning which are as follows:
BASIS IFRS IAS
Evaluation It is the part of IASB It was established by IASC
Motive To facilitate Financial
reporting framework and
involves various regulations.
To help Accounting
professionals with effective
guidelines.
Objective It works as the international
financial reporting standard
and which will be legal and
authenticated (Antonelli,
D’Alessio and Cuomo, 2017).
It works for the internal
accounting control for the
firm.
8. Importance or benefits of IFRS
The uses of IFRS guidelines which will help the firm in context with having effective
Financial data set. Thus, which in turn will be fruitful for organisation in fetching attraction of
stakeholders as well as attracting them with the best dividend policies. Thus, this will be
beneficial for them in analysing actual strength of organisation as well as fruitful return they will
acquire at the end of each financial period. Hence, with the help of IFRS there will be various
benefits such as:
 It has facilitated universally accepted framework and regulations over preparing the
financial statements. It can easily be understood by stakeholders and they can make
strong decisions relevant with investing in an organisation (Thomson, 2016).
 It brings transparency in such data set as the users can relay the trust upon such
information which are listed in the reports.
 Guidelines or framework will help the organisational professionals in having adequate
information relevant with costs of expenses incurred during such period on specific tasks
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which in turn will be reduced or replaced with innovative ideas or the new techniques
will be used for such activities.
9. Factor which are affecting the compliance of IFRS standards
In accordance with above listed examples of the companies such as Rita plc and Coca-
Cola Co. which indicates that, these organisations have used the such financial reporting
techniques as well as are able to make the effective use of such frameworks. Hence, there will be
various factors which affects the compliance of the financial reporting. In accordance with the
IAS 294A which says if the entity does not prepare the financial accounts on the basis of
universally accepted format or framework then such data set will not be reliable or trustworthy.
Hence, all the financial information must reflect the clear and transparent information of the
transactions held in the current year (Leuz and Wysocki, 2016). These will be beneficial for the
stakeholders in their decisions relevant with investments.
CONCLUSION
On the basis of above mentioned report which shed lights on the uses, importance and
objectives of the legal framework while preparing the financial statements for business. Hence,
there has been use of formats facilitated by IFRS and IAS in preparing the profit and loss, change
in equity as well as financial position statements for Rita Plc which in turn reflects the reliable
information. Thus, ratio analysis of financial informations of Coca-Cola Co. in the year 2015 and
2016 were analysed and have better indications for stakeholders to make their valuable
investments in the firm.
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REFERENCES
Books and Journals
Antonelli, V., D'Alessio, R. and Cuomo, F., 2017. Beyond Stakeholders Theory: Financial
reporting and voluntary disclosure in Italian SME according to a System dynamics point
of view. Economia Aziendale Online. 7(4). pp.285-304.
Bishop, C. C., DeZoort, F. T. and Hermanson, D. R., 2016. The Effect of CEO Social Influence
Pressure and CFO Accounting Experience on CFO Financial Reporting Decisions.
Auditing: A Journal of Practice & Theory.0 36(1). pp.21-41.
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.
Cohen, J., Krishnamoorthy, G. and Wright, A., 2017. Enterprise risk management and the
financial reporting process: The experiences of audit committee members, CFOs, and
external auditors. Contemporary Accounting Research. 34(2). pp.1178-1209.
Leuz, C. and Wysocki, P. D., 2016. The economics of disclosure and financial reporting
regulation: Evidence and suggestions for future research. Journal of Accounting
Research. 54(2). pp.525-622.
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.
Sikka, P. and Stittle, J., 2017. Debunking the myth of shareholder ownership of companies:
Some implications for corporate governance and financial reporting. Critical
Perspectives on Accounting.
Thomson, I., 2016. December. Commentary: A proposal for theoretical models of stakeholder
perceptions of a new financial reporting system. In Accounting Forum (Vol. 40, No. 4,
pp. 316-318). Elsevier.
Online
Conceptual Framework for Financial Reporting. 2010. [Online]. [Available through]
:<https://www.iasplus.com/en/standards/other/framework>. [Accessed on 28th October.
2017].
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Financial Reporting. 2015. [Online]. [Available through]
:<http://www.edupristine.com/blog/financial-reporting>. [Accessed on 30th October.
2017].
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