Financial Reporting: Glazers Chartered Accountants Financial Analysis

This report provides a comprehensive analysis of financial reporting, focusing on the context, purpose, and key principles of financial reporting, including the conceptual and regulatory frameworks. It examines the main stakeholders of an organization and the benefits they derive from financial information, such as employees, managers, investors, and creditors. The report explores the value of financial reporting in meeting organizational objectives and fostering growth, detailing the preparation of main financial statements, including the profit and loss statement and the statement of changes in equity, based on provided information. It also covers the interpretation and communication of financial performance, including the differences between International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), and the advantages of the international financial reporting system. The report concludes by assessing the degree of compliance with international financial-reporting standards.

FINANCIAL-
REPORTING

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1.Context and purpose of financial reporting..............................................................................3
2. Conceptual, regulatory framework, key principle and qualitative characteristics..................4
3. Main stakeholders of an organisation and the benefit they get from financial information.. 5
4. Value of financial reporting for meeting organisational objectives and growth.....................6
5. Preparation of main financial statements on the basis of given information..........................7
6. Interpretation and communication of financial performance..................................................9
7. The difference between international Accounting Standards (IAS) and if international
Financial Reporting Standards (IFRS)......................................................................................14
8. Advantage of International financial reporting system.........................................................15
9. Degree of compliance with international financial-reporting standards...............................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
The financial reporting may be defined as a method of analysing and spreading
information of financial position to external and internal stakeholders of companies (Chen,
Zhang and Zhou, 2018). This is necessary for companies to prepare financial reports at the end of
a particular financial year. It is so because by help of these reports, external stakeholders can
assess the information about financial condition and on the basis of it make investment. As well
as, the external stakeholders can also take many crucial decisions on the basis of information
provided under financial reports. For better understanding, a large accountancy firm is selected
that is Glazers Chartered Accountants. This company is located at London, UK and provides
financial services to a vital range of clients. Under the project, objective of financial reporting
and interpretation of these statements are done. In addition, evaluation of financial reporting
standards, models are detailed along with differences in international financial reporting. .
MAIN BODY
1.Context and purpose of financial reporting.
Financial reporting can be defined as preparation of reports on the basis of analysis of
financial statements in an effective manner. This is essential as with the assistance of this,
company’s manager can able to evaluate the actual position in context of finance so that as per
this, they can formulate effective decisions (Saccon and Dima, 2015). Moreover, financial
reports consist several statements like balance sheet, income statement and many others. In
addition to this, it is also related with the regulatory framework. Also, the respective reporting
includes accountabilities as well as duties of accountable individuals of organisation. Glazers
Chartered Accountants formulate this particular report for assessing their financial position and
also for analysing the field where improvement is required. The main purpose of financial
reporting is to aids firm to follow various types of regulations.
 Financial reporting facilitates detailed data in context of firm's financial position.
 This helps in assuring that companies are applying same regulations.
 Also, financial reports are vital for enhancing the capital of the organisation. This is so
because by help of these reports companies can analyse need of future capital to
accomplish the operations and on the basis of it raise the capital.

Therefore, these are the essential financial reporting purpose. Thus, in Glazers Chartered
Accountants this particular reporting plays whole all give roles effectively and efficiently.
2. Conceptual, regulatory framework, key principle and qualitative characteristics
Conceptual and Regulatory Framework- Financial reporting is defined as preparation
of different types of financial data for making better decision and plans to achieve goal and
objectives of organisation (Setia, Abhayawansa, Joshi and Huynh, 2015). The stakeholders such
as customers, suppliers, government, authorities always keep their eyes on respective
organisation financial performance in order to do investment accordingly.
The term conceptual is associated with process of preparation of various kind of financial
reports on particular time period. Eventually, ideal time to prepare and present financial reports
at end of financial year.
Regulatory Framework- This is defined as preparing financial report by using proper
accounting principles and standards which assist in getting consistency and accuracy for
financial statements. Glazers Chartered Accountant Company has to follow proper standards,
principles and rules of accounting according to international financial reporting.
Principals of financial reporting:
 Materiality- According to this principle, only material and realistic information should
be included in financial statement. Glazers Charted Accountant Company has to include
such principle in their report for correct and accurate outcomes. It is usually implemented
in such situation where accounting effect is less than financial reports. As
 Full Disclosure- According to this principle, it is essential to provide full and complete
information in financial statements. In case of any hidden or not disclosed information is
included in report then it leads problems in decision making. The respective organisation
has to included all relevant information while preparing financial statement to achieve
goal and objectives of business. The purpose of this is to include all kind of financial
information as well as transactions that occurs during a particular time period.
Qualitative Characteristics of Financial Reports
In order to prepare financial reports, there are some characteristics which has to be used
by respective organisation. They are described below:

 Comparability- This is a kind of characteristic of financial reports which defines that
financial reports can be compared with previous years reports. Here, there is comparison
of reports from one year to another. This is possible through using of common accounting
principle for whole financial years. It helps in providing more reliable information to
users.
 Understandability- The financial report should contain information which should be
understandable by both internal and external stakeholders for knowing about financial
performance of organisation (Marshall, Schroeder and Yohn, 2018).
3. Main stakeholders of an organisation and the benefit they get from financial information.
Stakeholders are considered to be the person who reflects its interest within firm's
financial performance. So, it is essential to understand that stakeholders can be effected through
the modification into the company's policies as well as plans. Whole stakeholders of the firm are
not similar as all has several aim. For example: In Glazers, Chartered Accountants company has
generally two types of stakeholders such as external and internal. Both of them are discussed
below: Internal stakeholders: These stakeholders are the people or group who are involved
within the internal operations of organisation or who are directly impacted through
management decisions. Few internal stakeholders are staff, customers and others. All
these are important for the organisations as business activities and functions are
performed through them. Few kinds of Glazers Chartered Accountants internal
stakeholders are discussed below:
◦ Employees: These stakeholders are associated with accomplishing the activities of
firm where they perform (Velte and Stawinoga, 2017). Employees are considered as
essential for organisation as if staff does not work effectively then it can drive
towards ineffectiveness in performing task. The employees are benefited from
financial informations in order to take decision whether they should sustain in
company or not. This is so because if companies financial position is weak then
employees will not prefer to sustain due to risk of lower future growth. Therefore,
Glazers Chartered Accountants staff can check financial performance of several
activities to ascertain either they have to continue its work with respective company
or not.

◦ Manager: These types of internal stakeholders are very essential for organisation as
they are related with policies as well as plans formation for managing the resources
such as financial and human effectually and efficaciously. The success of the firm is
based upon the managers which shows that how they handle its subordinates. The
managers are get benefited from financial information because by help of utilisation
of proper financial informations they can make future plans and policies. As well as
can modify current years plans effectively. External stakeholders: These are the one who regularly analysis firm's financial
position for taking decision related to investment. These stakeholders do not get impacted
with the modification within the policies as well as plans of organisation as its objectives
is to accumulate data regarding financial performance as well as spends money
consequently. Few Glazers Chartered Accountants external stakeholders are discussed
below:
◦ Investors: This external stakeholder are the one who do investment within
organisation's projects as well as operations according to the financial situation
(Szabó and Sørensen, 2017). Its objectives is to obtain higher return on amount that is
invested by them. They obtain advantage from the firm's financial data to develop
decisions regarding investment as if they do not have any ideas about financial
position then this can be the risk for them. So, Glazers Chartered Accountants
investors analysis its financial condition as well as then do investment.
◦ Creditors: These stakeholders are associated with facilitating monetary help to firm
on credit. They take advantage from the financial data of organisation in respect of
deciding the financial status. Therefore, with the assistance of financial information
respective organisation can ascertain their credit score.
4. Value of financial reporting for meeting organisational objectives and growth
Financial reporting is considered as the essential aspects in order to attain the objectives
of the company and their development. It is so as with the assistance of financial reporting
evaluation firms can able to analysis the changes that are to be performed for attaining goals.
Financial reporting in order to meet objectives of firm: Financial reporting is related with
the organisational objectives as firm's manager can ascertain that what type of strategy is
required to be executed for achieving the goals (Pan and Patel, 2018). Glazers Chartered

Accountants attain its objectives effectually through usages of financial reports. This becomes
possible as this particular reports show the actual results of several types of business practices
and according to this effective actions are taken through the manager of respective organisation.
Financial reporting for attaining growth: The another purpose of financial reporting is to
aids firm for future development as well as growth as this facilitates firm's present situation and
according to it they approximate the upcoming growth. For example: In this above, Glazers
Chartered Accountants company managers handle as well as sustain its growth with the
assistance of financial reporting. Thus, this can be considered that this particular report are
significant for the organisational growth.
Apart from it, there are some objectives of financial-reporting are mentioned in order to meet
objectives and attain growth :
 Improved debt management- This is one of the important purpose of financial-reporting
which is linked with process of managing debts. It becomes possible because by help of
assessing information about taken short and long term loans, managers can aware that
which debts are needed to pay instantly. By this companies become able to attain growth.
 In addition, the financial reporting is crucial for providing complete information about
external shareholders so that companies can make plans and policies to complete
objectives.
 As well as the financial-reporting is beneficial for improving social welfare by
considering interest of employees. It overall leads to equal growth of employees and
organisation.
So these are the objectives of financial-reporting that are linked with achieving organisational
goals and objectives.
5. Preparation of main financial statements on the basis of given information.
A) Profit and Loss statement
31.12.18
(£'000)
Continuing operations
Particulars Amount
Revenue from Operations (A) 585100

Cost of goods sold (391700)
Cost of providing services -
Gross profit 193400
Less: Operating expenses 80500
Less: Depreciation (W.N. 1) 26715
Less: Other Income (9600)
Operating profit 95785
Less: Bank interest 1200
Profit before exceptional items and tax 94585
Exceptional Items Nil
Profit before tax 94585
Less: Income tax expense 9500
Profit after tax 85085
Add: Other Comprehensive income -
Total Comprehensive income 85085
Working Note:
Calculation of depreciation expenses:
Land and machinery: 150000/16 = £9375
Plant and equipment: 148000-32400 = £115600
115600*15/100 = £17340
Total depreciation = 9375+17340 = £26715
B) Statement of changes in equity for the year ended 31 December 2018
Particular
Ordinary
share capital
Revaluation
reserve
Retained
earnings Total
As per trial balance 86700 40000 45500 172200
Total Comprehensive income - 85085 85085
Preference dividend -2500 -2500
Ordinary dividend -4500 -4500
86700 40000 123585 250285
C) Statement of financial Position.

Balance Sheet as at 31.12.18
(£'000)
Particulars Amount
ASSETS:
1. Non-current assets:
(a) Property, Plant and equipment 298000
Less: Accumulated Depreciation 32400
Less: Current Year Depreciation 26715 238885
(b) Investment Property 28000
(e) Deferred tax assets(net) 10000
(f) Other non current assets -
2. Current assets:
(a) Inventories 25200
(b) Trade receivables 78000
(c) Other current assets 10900
Total 390985
EQUITY AND LIABILITIES:
1. Equity:
(a) Ordinary share capital 86700
(b) Other equity (Note) 205585
(b) Preference share capital 26500
2. Non current liabilities:
(a) Deferred Taxation -

3. Current Liabilities:
(a) Trade payables 62700
(b) Bank OD -
(c) Provision for current tax 9500
Total 355985
(d) Information provided by cash flows
In the cash flow statement, information about cash regarding activities is provided.
Basically, by preparation of cash flows companies can know about how much cash they have in
their reserves as well as can assess the activities which are leading of cash outing and generating.
The cash flow is prepared by three kind of activities that are operating activities, financing
activities and investing activities.
6. Interpretation and communication of financial performance.
To complete this task of project report, a company that is listed in FTSE 100 is selected.
The name of company is British American Tobacco. This company's last two years' financial
performance is analysed that is as follows:
Analysis of financial statements
1. Balance-sheet of British American Tobacco:

BRITISH AMERICAN TOBACCO PLC (BATS) BALANCE SHEET
Fiscal year ends in December. GBP in millions except per share data. 2017-12 2018-12
Assets
Current assets
Cash
Cash and cash equivalents 3131 2432
Short-term investments 65 178
Total cash 3196 2610
Receivables 4053 3588
Inventories 5864 6029
Other current assets 853 428
Total current assets 13966 12655
Non-current assets
Property, plant and equipment
Gross property, plant and equipment 8191 8654
Accumulated Depreciation -3309 -3488
Net property, plant and equipment 4882 5166
Goodwill 44147 46163
Intangible assets 73638 77850
Deferred income taxes 317 344
Prepaid pension benefit 1123 1147
Other long-term assets 2965 3017
Total non-current assets 127072 133687
Total assets 141038 146342
Liabilities and stockholders' equity
Liabilities
Current liabilities
Capital leases 5423 4225
Accounts payable 8847 10631
Taxes payable 720 853
Other current liabilities 554 620
Total current liabilities 15544 16329
Non-current liabilities
Deferred taxes liabilities 17129 17776
Pensions and other benefits 1821 1665
Minority interest 222 244
Other long-term liabilities 45518 44884
Total non-current liabilities 64690 64569
Total liabilities 80234 80898
Stockholders' equity
Common stock 614 614
Additional paid-in capital 26602 192
Retained earnings 36983 38557
Accumulated other comprehensive income -3395 26081
Total stockholders' equity 60804 65444
Total liabilities and stockholders' equity 141038 146342
Interpretation- On the basis of above balance-sheet, this can be find out that company's total
assets are increasing in current year 2018 as compare to previous year 2017. Such as in year
2017, the amount of total assets was of £ 141038 GBP million that increased and became of £

146342 GBP million in year 2019. While the total liabilities were of £ 80234 GBP million that
raised and became of £ 80898 GBP million in year 2018. It is showing that company has enough
number of assets to make payment of their liabilities.
2. Income statement of British American Tobacco:
BRITISH AMERICAN TOBACCO PLC (BATS) INCOME STATEMENT
Fiscal year ends in December. GBP in millions except per share data. 2017-12 2018-12
Revenue 20292 24492
Cost of revenue 5033 4550
Gross profit 15259 19942
Operating expenses
Research and development 80 105
Sales, General and administrative 48 25
Restructuring, merger and acquisition 153 145
Other operating expenses 8508 10229
Total operating expenses 8789 10505
Operating income 6470 9437
Interest Expense 1124 1634
Other income (expense) 24245 547
Income before taxes 29591 8350
Provision for income taxes -8113 2141
Net income from continuing operations 37704 6209
Other -171 -177
Net income 37533 6032
Net income available to common shareholders 37533 6032
Earnings per share
Basic 18.36 2.64
Diluted 18.3 2.63
Weighted average shares outstanding
Basic 2044 2285
Diluted 2051 2292
EBITDA 31617 11022
Interpretation- As per the above income statement of year 2017 and 2018, this can be find out
that net profit in year 2017 was of £ 37533 GBP million that decreased in next year and became
as profit of £ 6032 GBP million This is showing that companies current situation is not good as
they are getting lower profit in current year. The reason of this poor financial condition in year
2018 is increased expenditures.