Financial Reporting: Marks & Spencer Financial Performance Analysis

This report provides a comprehensive overview of financial reporting, commencing with its definition and purpose, and proceeding to examine the conceptual and regulatory frameworks, emphasizing key principles and their significance. It identifies and analyzes the main stakeholders of an organization, detailing their benefits derived from financial information. The report underscores the value and importance of financial reporting in achieving organizational growth, followed by a detailed explanation of the financial statements as per IAS 1, including the income statement, statement of equity change, and the statement of financial position (balance sheet). It also clarifies the information presented in cash flow statements compared to income statements and balance sheets. Furthermore, the report interprets the financial performance of Marks & Spencer plc, discusses the differences between IAS and IFRS, outlines the benefits of IFRS, and identifies the varying degrees of IFRS compliance across different nations. The report concludes with a summary of the key findings and insights.

FINANCIAL REPORTING

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Explaining the content and purpose of financial reporting.....................................................1
2. Examining the conceptual and regulatory framework with the need and the key principles
and its purpose............................................................................................................................2
3. Explaining the main stakeholder of the organisation and their benefit from financial
information..................................................................................................................................4
4. Explaining the value and importance of the financial reporting in achieving the
organisational growth..................................................................................................................5
5. The financial statements as per IAS 1....................................................................................5
a) Income statement....................................................................................................................5
b). statement of equity change....................................................................................................6
c) Statement of financial position or Balance sheet....................................................................7
d). Explaining the type of information that cash flow presents as compared to income
statement and balance sheet........................................................................................................7
6.Interpreting the financial performance of Marks & Spencer plc.............................................7
7. Explaining the difference between IAS and IFRS..................................................................9
8. Explaining the benefits of IFRS............................................................................................10
9. Identifying the various degree of IFRS compliance by organisation across the nations in
world.........................................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial reporting can be defined as the process which helps in disclosing and providing
the information of the financial results and the financial performance to the management of an
organisation. Financial reporting is concerned as the process of preparation of the financial
statements of the organisation in the specific period of time. These financial statements are
crucial for the stakeholders in evaluating the financial performance and position in a specific
period of time.
As a junior auditor in an organisation the present report is made which will help in
understanding the importance of financial statements and financial reporting system. The present
report will help in understanding the important and purpose of preparing financial statements
which also helps in achieving organisational goals. The importance and different requirement of
conceptual and regulatory framework in accounting. Further, the benefits of financial reporting
to the stakeholder is also discuss in file. Present report will also includes different ratios of M&S
Ltd as per IAS 1. Furthermore, the difference between the regulatory board of accounting will be
presented with their advantages in the financial accounting.
MAIN BODY
1. Explaining the content and purpose of financial reporting.
It can be referred as the process which helps in communicating the financial information
of the company with the help of financial statements. The financial statements of the company
includes all the financial transaction that can be useful to the management of the company and to
external users of financial statements (Chen, Zhang and Zhou, 2018). The financial report is
essential for the external users such as investors, stakeholder in order to analyse the financial
performance of the company it will assist them in order to make decisions of investing in the
company or not. It is mandatory for all the company to prepare and publish their financial reports
in a specific amount of time. Financial reports are usually prepared on the quarterly or yearly
basis.
Financial reporting content all the information of the financial performance and financial
condition that are essential for the external as well as the stakeholder of the organisation. The
content of the financial reporting are as follows:
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Balance sheet: It is a financial statements that helps in showing the company's total assets and
total liability at a specific period of time. Balance sheet is the most important financial
statements that helps in showing the company's current financial position of the company.
Income statements: It is also an important statements which helps in showing the total revenue
and expenses of the organisation in an accounting year (Amiram and et.al., 2018). This report
helps in getting information about the total sales and other expenditure which shows the net
income of a company.
Cash flow statements: it is the report which help in showing the total cash inflow and outflow
of a company. This statements helps in knowing the cash flow condition of the company.
The purpose of preparing the financial reporting are:
 To provide the information of the financial condition of the company to its management
and stakeholder so that they can take decision regarding investment in the company.
 Financial reports essential which helps in getting accurate and timely information
regarding the financial condition (What is Financial Reporting? , 2018). It will help in
making the planning, budgeting and strategies in order to improve financial performance
of the company.
 Financial reporting also helps in determining the tax of the particular year.
2. Examining the conceptual and regulatory framework with the need and the key principles and
its purpose.
The accounting conceptual frame working can be defines as the set of objectives and
principles that has been set up by IASB. The conceptual framework helps in ensuring the
uniformity in interpretation and preparation of the financial statements of companies. The
conceptual framework helps in ensuring the detail preparation of financial statements that can be
understood by the users across the nation (Describe Conceptual Framework of Accounting ,2018
). It ensures defining one language of accounting that helps in better comparing and
understanding of the financial statements of all the companies across nation.
The regulatory framework of accounting helps in framing the basic rules for the
treatments of financial transaction in the book of accounts. It helps in ensuring that the
accountant seeks to follow the same set of rules which enables the comparison of the financial
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statements of different companies. The regulatory framework of accounting consist of the
various accounting standards which includes the accounting standards set by IASB, the company
law and the conceptual framework of the accounting. The regulatory framework of accounting
helps in dealing with the issues regarding preparation of the financial statements of the company.
The conceptual framework helps in identifies the four basis qualitative characteristics. It
is very important for the companies to prepare the financial statements with the following
characteristics of conceptual framework:
 Relevance: The conceptual framework helps in guiding the company in preparing the
financial statements which will help the stakeholders in getting the relevant information
about the company's financial performance and financial position of the company
(Cheng, Cho and Yang, 2018).
 Reliability: As the per the standards of the framework the information that are presented
in the the financial statements should be free from any errors and accurate as oer the
financial transaction in the specific year.
 Comparability: the conceptual framework guides the company to prepare the financial
statements in a way so that the external users and stakeholders can easily compare with
different financial statements of the companies.
 Understandability: the financial statements that should be prepared which can be easily
understand b the external users.
The regulatory framework helps help in ensuring the purpose of preparing the financial
statements that helps in serving the users and the stakeholder in fulfilling their needs from the
financial information of the company. The purpose of the conceptual framework are:
 To ensures that the need of the external users of the financial statements should get the
best possible information about the company's financial performance (The regulatory
framework , 2018).
 To ensures that the information must be easy to compare and understand by the external
users which help them in making their decisions regarding investing in company.
 To attract the more investors towards the company which helps in increasing the funds
for proper management of the business activity and operations.
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3. Explaining the main stakeholder of the organisation and their benefit from financial
information.
The financial statements is being prepared not only for the internal use by the top level
management but also for the external users. These external users are the shareholders, investors,
suppliers, customers etc. They are the individuals or the groups which have concerns with the
business activity and performance. The financial statements help them in providing crucial
information which help in settling their benefits from the organisation (Andriof and et.al., 2017).
Following are the different stakeholders of the company and the importance of financial
information for them:
Shareholders: they are the investor in the company who has invested their money in order to
earn the profit in form of return from the company. The financial statements of the company will
help them in providing the information about the company's performance and financial position.
These financial statements will help them in ensuring their return from the statements of the cash
flow in form of dividend.
Customers: they are the main source of generating revenue of the business. The company helps
in providing goods and services to the customers. The financial statements of the company is
beneficial for the customer in knowing the company's profitability and the ability to be continue
in provide the goods and services in future also (Bendell, 2017). Financial statements will help in
providing the effectiveness of the company financial position which also helps in creating the
goodwill for the customers in market.
Employees: The financial information is important for the employees as they can know the
stability of the company's position. Employees are the essential part which are responsible for
the growth and development of the company which help the company in increasing its financial
performance.
Management: Financial statement will help the management of the company in estimate the
company's cash flow, its net income and expenses in the particular year. This help the
management in making the appropriate strategies in order to improve and increase the financial
performance of the company which will lead the company to growth and development.
Suppliers: They are the individual who are providing the raw material for the manufacturing
and production of the goods and services in the organisation (Weetman, 2018). The financial
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statements will help the suppliers in getting the information of the company's cash flow which
helps them in ensuring of getting their amount on time.
4. Explaining the value and importance of the financial reporting in achieving the organisational
growth.
Financial reporting plays a vital role in providing various financial information to the
investors, creditors and other stakeholders. Financial statements helps the stakeholder in
evaluating financial information that leads them in making effective decisions regarding their
investment in the organisation (What Is the Importance of a Company's Financial Statements?
,2018). The investment by the shareholder and investors will help in receiving funds that will
leads in enhancement of the company's operational activities that will leads to the growth and
development of the organisation.
Financial reporting will also helps the management in reviewing the efficiency of the
company's operational activities (Crowther, 2018). The income statements will help the
management in taking various decisions and action in order to control the cost of operations and
increase the revenue. The cash flow statement will help the management in evaluating the cash in
flow and outflow activities. It will help the management in making stargates which will enable
the optimum utilization of the available resources. It will help in cost effective production and
leading the organisational ton the sustainable success.
5. The financial statements as per IAS 1.
a) Income statement
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b). statement of equity change.
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c) Statement of financial position or Balance sheet.
d). Explaining the type of information that cash flow presents as compared to income statement
and balance sheet.
Cash flow statements of the company helps in providing the current position of the
company's cash flow with the help of operating activity investment. The cash flow statements
help in identify the total expenses and revenue activity. Whereas, the income statements will help
in showing the net profit that has been generated buy the company within a specific year. But,
balance sheet of company help in identifying the financial position of the company. The balance
sheet will include the information of the total asset and liability of the company in an accounting
year.
6.Interpreting the financial performance of Marks & Spencer plc.
Profitability ratio:
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Particulars Formula 2017 2018
Operating profit 691 671
Net profit 116 29
Sales revenue 10622 10698
Operating Profit ratio 6.51% 6.27%
Net Profit ratio 1.09% 0.27%
Interpretation:
By above calculation, it can be interpreted that operating profit ratio of M&S Ltd has
been reduced from 6.51%in 2017 to 6.27% in 2018. it can be said that the company's net profit
has been reduced which leads to increase in operating expenses. It can also be said that the net
profit ratio has been drastically reduced from 1.09% to .27%
Liquidity ratio:
Particulars Formula 2017 2018
Current assets 1723 1318
inventory 759 781
Current liabilities 2368 1826
Current ratio 0.73 0.72
Quick ratio 0.41 0.29
Interpretation:
As per the above calculation it can be said that company's current ratio is decreasing
which leads to affect its efficiency to pay its short-term obligations. The company's current ratio
has been reduced from .73 to .72. however, it can also be said that company's quick ratio has
been decreased from .41% to .21%.
Efficiency ratio:
Particulars Formula 2017 2018
Cost Of Goods Sold 6534 6651
Average stock 780 770
Sales revenue 10622 10698
Average assets 6,792 6,401
total assets 8,385 7,922
inventory turnover ratio 8.38 8.64
Fixed assets turnover ratio 1.56 1.67
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Total assets turnover ratio 1.27 1.35
Interpretation:
It can be interpreted from the above calculation that the efficiency ratio of the company
has been increased which shows the better efficiency of the company in generating sales from its
assets.
Investment ratio:
Particulars 2017 2018
Earning Per Share 0.14 0.03
Dividend Per Share 0.35 0.38
Interpretation:
It can be said that the company's earning per share has been decreased from .14 to .03
which indicates poor investment return to shareholder. Also, it can be said that dividend per
share has increased.
7. Explaining the difference between IAS and IFRS.
IFRS can be defines as the set of accounting standard and principles which helps in the
preparation of the financial statements of the company. IFRS states the proper guidelines which
includes the treatment of the financial transaction and the way it has to be recorded in the
financial statements of the company (Ashjaei and Nagaraja , 2018). IFRS has been issued by the
IASB boards. IFRS helps in ensuring a common accounting language across the globe. It helps
in providing a common principles for all the companies in preparing and disclosing their
financial statements.
However, International Accounting Standard is the same standard which has been
replaced by IFRS. The main purpose of the IAS is to make a single set of rules for all the
companies across the nations. It is very essential for their investors that wishes to invest in
different countries in another country to have a financial statement that can be easy to compare
and understand.
The differences between IRFS and IAS are as follows:
 IFRS helps in providing guidelines to accountant that helps in guiding the accountant in
maintaining the financial transactions in books of accounting. Whereas, IAS helps in
providing rules to prepare the financial transaction under one accounting language.
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 IFRS was published by IASB in 2001. however, IAS has been formulated by IASC in
1973.
8. Explaining the benefits of IFRS.
IFRS can be defined as the single set of accounting, it has been adopted in 110 countries.
All the companies listed in IFRS has to follow the regulatory framework in preparing the
financial statements of the countries (Cascino and Gassen, 2015). IFRS helps in ensuring the
comparability of the financial statements that helps the investor in deciding in which company
has to invest across the borders. The benefits of IFRS are as follows:
 IFRS helps in providing relevance in the financial statements of the company. It helps in
ensuring that the users of financial statements to get true and fair information about the
company's financial position.
 IFRS ensures the improvement in the comparability of the financial statements of the
company. All the companies has to follow the rules and guidelines that are set by IFRS,
which helps in the preparation of the financial statements easy to be compared with other
company.
 IFRS is beneficial for the investors, with the adaptation of the financial statements all the
companies prepare the financial statements which helps the company's financial
information more accurate and comprehensive. The financial statements of the company
that has adapted IFRS will have more accurate and understandable for the investors in
order to compare the statements with another companies statements.
 IFRS helps in providing better quality of information to investors which help in reducing
their risk and company's cost of equity capital (Juhmani, 2017).
9. Identifying the various degree of IFRS compliance by organisation across the nations in world.
IFRS is the internationally recognised set of standard which helps in ensuring the
transparency, accountability and efficiency to the financial market around the world. With the
increasing of the globalization, businesses are depends on the international business transactions.
IFRS helps in bringing the common language around the nations which makes it easy for the
international business to different companies (Marton, 2017). Apart from the several benefits, the
IFRS are facing some challenges in various countries which are as follows:
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 The companies which are adopting IFRS needs too have proper funding and skilled
employees which can easily access the guidelines of IFRS. It can be possible that
developed countries will dominant the developed countries of the IFRS.
 With the changing in culture and business environment it is being difficult for the proper
implementation of IFRS in many countries. The different regulatory and accounting
professional, different culture keeps changing with the political participation which has to
be faced by IFRS.
 Adapting IFRS in country will have to implement the new regulation in the country
which will requires more resources , training the staff and will need to hire more
employees which will increase the cost of the company (Maradona and Chand, 2018).
 One of the challenges that IFRS adaptation is facing is that is not yet globally adopted.
As not all countries has adopted the IFRS, it means that accounting by a foreign
companies that are operating in other countries will prepare difficulty in facing their
financial statements using such standards.
CONCLUSION
By concluding the above report, it can be summed up that financial reporting plays a
significant role in the organisation. Financial reporting includes the preparation of the financial
statement that helps in showing the financial performance of the company to the external users.
The above report has concluded the content of the financial reporting, different type of financial
statement and their purpose in financial reporting. The importance of conceptual and regulatory
framework in preparation of financial statement has been concluded. Further, different
calculation of financial statements is included. Report has concluded the difference between
IFRS and IAS with the benefit of IFRS.
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REFERENCES
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Companies. Asian Journal of Research in Banking and Finance. 8(4). pp.48-60.
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Cascino, S. and Gassen, J., 2015. What drives the comparability effect of mandatory IFRS
adoption?. Review of Accounting Studies. 20(1). pp.242-282.
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discretionary investments, and financial reporting practices: Evidence from a natural
experiment. Journal of Accounting and Economics. 65(1). pp.41-60.
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information environment: Evidence from SFAS 142. Review of Accounting Studies. 23(1).
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Crowther, D., 2018. A Social Critique of Corporate Reporting: A Semiotic Analysis of Corporate
Financial and Environmental Reporting: A Semiotic Analysis of Corporate Financial and
Environmental Reporting. Routledge.
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Maradona, A. F. and Chand, P., 2018. The Pathway of Transition to International Financial
Reporting Standards (IFRS) in Developing Countries: Evidence from Indonesia. Journal of
International Accounting, Auditing and Taxation. 30. pp.57-68.
Marton, J., 2017. The role and current status of IFRS in the completion of national accounting
rules–Evidence from Sweden. Accounting in Europe. 14(1-2). pp.207-216.
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Weetman, P., 2018. Financial reporting in Europe: Prospects for research. European
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