Financial Reporting: Analysis of Marks and Spencer's Statements

This report provides a comprehensive analysis of financial reporting, specifically focusing on the case of Marks & Spencer. It begins with an introduction to the main purposes of financial reporting and delves into the regulatory and conceptual frameworks that govern it. The report identifies and examines the various stakeholders of a company, highlighting the value of financial reporting for growth and development. It includes an analysis of Marks & Spencer's financial statements, including the statement of profit and loss, changes in equity, and financial position. The report also interprets the financial statements of Marks & Spencer and explores the differences between IFRS and IAS, evaluating the benefits of IFRS and ascertaining the degree of compliance. The report emphasizes the importance of financial reporting for investment decisions, internal management, and attracting international investors. The financial statements and analysis provided are crucial for understanding the financial health and performance of the company.

Financial Reporting.

Table of Contents
INTRODUCTION...........................................................................................................................1
1. Main Purpose of financial reporting........................................................................................1
2. Regulatory and conceptual framework of financial reporting.................................................2
3. Stakeholder of company..........................................................................................................3
4. Values of financial reporting for growth and development.....................................................4
5. Financial statements of the organisation..................................................................................5
6. Interpretation of financial statement of Marks and Spencer....................................................6
7 Difference between IFRS and IAS...........................................................................................7
8. Evaluation of benefits of IFRS................................................................................................7
9 Ascertaining the varying degree of compliance with IFRS......................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial reporting focuses to play an important role of accounting standard and principle
that support in creating valuable report and financial statement of company (Financial statement,
2018). This process is relate to examining, gathering and posting financial information into
balance sheet, cash flow statement and other useful financial documents. This support internal
manager to make crucial decision so that financial strength and position of company could be
improved. To understand the importance of financial reporting Mark & Spenser is selected.
In this project report, the main objective of financial reporting, its basic concept,
regulatory and conceptual standard are discussed. Report shows main stakeholder for company,
importance of reporting and interpretation of last two year financial statements. The main
purpose of report is to describe the importance of IFRS and its difference With IAS.
1. Main Purpose of financial reporting.
In accounting, financial reporting is defined as the process of formulating important
financial statements that disclose the financial strength and position of company during an
accounting year. These statement are presented to shareholder, creditor, investor so that actual
creditworthiness of company can be ascertained. With the help of detail report and statement
internal management of Mark & Spenser are able to make effective plan to improve the
profitability and productivity. It is very crucial that report must be create according to the
accounting standard and must be faithful, transparent and free from any misleading transaction.
The main objective and purpose of financial report to Mark & Spenser are described below:
 Financial reporting gives complete and faithful financial information to outside investor
so that they can make investment decision in M&S.
 With the support of transparent report, internal management of M&S are able to examine
performance of company during a particular period.
 It provide actual outcome of the various business activity to the external stakeholder that
increase profit, market share and sales.
Importance of Financial reporting.
 The main significance of financial reporting is to attract international investor so that,
M&S may expand its business at global level (Chae and Oh, 2016).

 Decently managed statements are really crucial for bid, government activity and labour
contracts because it help to give summary of the company and its business operation to
external parties.
So, it is very crucial that Mark & Spenser develop final account and statement, that
support them to manage, control business operation and increase the profitability and financial
position. It is very important to analyse the actual performance of company as it support to
execute further project more effectively (Al-Matari, 2013).
2. Regulatory and conceptual framework of financial reporting.
Regulatory and Conceptual Framework: In present era, it is very crucial that company
should use valuable analytical tool and apply accounting standard and principle prepare financial
statement during an accounting year. So regulatory framework are defined as the set of legal
standard and rules implement by UK legal authority. These framework are to be followed by
each and every company performing business in UK. On the other side conceptual framework
are defined as the tool with some variable that help to analyse the performance of business
operation. With the support of conceptual framework mark & Spenser is able to analyse the
overall performance of different business project and operations. Similarly, with the help of
regulatory framework accountant of M&S are able to create faithful financial statement that
further support to ascertain financial position and status during an accounting year.
Purpose of regulatory and conceptual framework:
 The main significance of Regulatory frameworks is to help internal manager to formulate
statements in suitable manner.
 And main purpose of Conceptual framework is to examine the actual performance of
company that is displayed to stakeholder so that investment decision are made in M&S.
Mark & Spenser is applying different set of regulation to maintain financial record that
are set By IASB that are imposed in the form of IFRS. International financial reporting standard
are set of key principle that are set by authority. Some of Key principle are discussed below:
 IFRS 3: These are related to actual concept of business combination of consolidation and
acquisition. It guide manager to combine all there liabilities and assets that help to pay
debt of company (Duncan, 2014).
 IFRS 9: This is related the set of rules that describe the treatment of different transaction.
It help to protection of accounting and damage of financial assets within company.

Qualitative features of financial reporting.
Relevance: It is key significance that companies should record financial data into
financial account and statement that aid to compare actual performance and position. Financial
report are help that recorded information is more reliable and accurate.
Faithful Presentation: This is beneficial for M&S as financial reporting assist to give
detail appropriate information to external shareholder so that investment decision are made.
3. Stakeholder of company.
Stakeholder are defined as the valuable part for company as they make important
investment decision in company that support to run business operation in appropriate manner.
These external and internal parties have full right to get correct financial information about
company business. M&S have different kind of stakeholder such as investors, manager,
employees government etc. Financial reporting provide valuable benefit to these stakeholder that
are defined below:
Internal: These stakeholder are directly related to different business operation performed
in Mark and Spenser. Some of these are :
Shareholder: These group of individual are the owner of business that gives suitable
amount to run business activity of company (Eker and Aytaç, 2016). In M&S, with the help of
accurate financial statements shareholder analyse and figure out that weather money is
effectively used and give best result in future.
Manager: In M&S Manager use financial statement to analyse the performance of
different business operation and employees. In case if company is lacking because of any reason
then manager make effective plans to improve the performance.
External: These stakeholder are not part of company but have right to get the financial
information for an accounting year.
Investor: These group of individual make investment in companies in order to acquire
higher profit. Financial information help inverter to ascertain the financial status of of Mark &
Spenser and make investment decision. As company is doing well so there are more number of
investor.
Customer: They are consider to be the backbone for company. As more number of
customer company is going to earn more profit. Financial information help customer to

determine the market status and image of Mark & Spencer so that they may attracted to buy
product.
Creditor: These are people who provide raw material and goods to Mark & Spenser.
With the help of financial information supplier are able to ascertain the pay back ability of
company.
4. Values of financial reporting for growth and development.
Financial reporting support to accomplish main objective and determine the growth and
development opportunities for companies (Elbayoumi and Awadallah, 2017). As, main objective
of M&S is to build best goodwill, attract more creditor, customer and expand business operation
at global level that will further support to maximise profit. These all certain objective could be
achieved if financial report and statement of companies are transparent, accurate and provide
valuable information to all external parties. It is very common that investor are attracted to those
companies which are performing well in market and provide return at high rates. Some of the
basic objective of Mark & Spenser are discussed below:
Profit maximisation: Financial statement help Mark & Spenser to analyse that they are
performing well in market. Accurate and appropriate statement will support to earn competitive
advantage in market and earn huge profit. Closing accounts of Marks and Spencer aid to examine
organisational efficiency and profits during a period. The internal manager ascertain the actual
position of funds that are used by M&S and determine the expenses on different project that help
to enhance sales and maintain profit.
Customer satisfaction: Customer are satisfied when company provide valuable goods
and services at faithful rate and with best quality. Financial statement help new customer to
ascertain that M&S have good market image, as they are providing best quality of goods.
Therefore large number of consumer will move to use product and services provide by M&S.
Build global image: Financial statement help companies to determine the position in
market and support them to build strategies to grow business and expand business at global level.
With the good market image Mark & Spenser are able to attract more number of consumer and
attain higher market share (Formisano, Fedele and Calabrese, 2018.).
5. Financial statements of the 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 P&L account it has been determined that gross profit for year is 93137.
Operating profit for year shows the amount of 9475 and profit before tax is equal to 8645 and
after tax 8645. Various modification to be made to figure out profit for company like plant and
equipment balance, property, expenses related to cost of good sold that are connected with
operating activity.
(b)Statement of changes in equity for the year ended 31st December 2017
Particular
Ordinary
share
capital
Revaluatio
n reserve
Retained
earnings Total
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
Financial Statement

Statement 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
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
From the above calculated financial statement, it has been ascertained that total non
current assets shows the amount of 177675 and total of current assets is equal to 85300. Balance

of total current liabilities 32200 and total equity and liabilities shows the balance of 262975 that
is equal to total assets.
6. Interpretation of financial statement of Marks and Spencer.
From the appendix, financial statement of M&S shows the total income of is equal to
10698200 in year 2017 and that has increased to 10698200 during year 2018. Cost of sales in
year 2017 is 6629300 and in year 2018 it has increased to 6745600. In year 2018 gross profit of
company has increased up to 3952600 and operating income of company is 677400. from the
balance sheet it has been figure out that current assets of company in 2017 1723300 and in 2018
1317900 which shows that some current assets are used to pay current debt of company. Marks
and Spencer has made investment for long term also. In year 2017 the total liabilities had been
decreased from 2368000 to 1856000. It means that current assets are used to pay liabilities of
company. Total liabilities including current and non current of Marks and Spencer for year 2017
is 5142100 and for the year 2018 is 4596000. So it is a good for company that liability is
reducing continuously.
Ratio analysis
Profitability ratio
Net profit ratio: Net profit / Sales *100
1.0892487
291 0.272008
Gross profit ratios Gross profit/ Sales *100
2.3837318
772
1.4628629
115
ROE Total income/ shareholder equity
0.0224313
278
0.0310481
28
7 Difference between IFRS and IAS.
There are various standard and principle of accounting that help in formation of financial
statement. These basic standard are issued by IASB and imposed in the form of internation
financial accounting standard (Guo, 2018). One the other side IAS are set of rules that provide
guidelines to formulate financial statement. Both are used by accountant but have some
differences that are discussed below:
International financial reporting standard International accounting standard.

These standard describe the process of
recording financial transaction that into final
account.
These were introduced to give the primary
accounting standard to accountant of business
firm.
These are new principle that are introduced in
2001 by international accounting standard
board.
These were introduced in 1973 by international
accounting standard committee. But now are
becoming outdated.
In IFRS, all essential applicable decision are
performed and made by IASB.
IAS related decision are made by IASC has the
closely examined the activities of companies
that implement IAS (Kassem, 2012.).
8. Evaluation of benefits of IFRS.
International financial reporting standard were developed by IASB in year 2001 that help
in maintaining financial statement of company. With the help of IFRS companies are able to
overcome different accounting problems that may be reason to decrease profitability during an
accounting year. Thus, IFRS help accountant of M&S to prepare transparent, appropriate
statement that will provide clear picture of company to external parties (Nurunnabi and Alam
Hossain, 2012.). Investor and stakeholder analyse the financial position of M&S and determine
weather they are able to get best result in future or not. Some of the basic advantages of IFRS are
defined below:
 IFRS plays a crucial role in formulating of transparent and faithful statement and final
account. This support to analyse the financial position of company.
 With the support of accurate statement international investor are attracted towards
company to invest money and ear n good return on investment.
 The M&S acquire large amount of abroad capital, if they could develop belief and
assurance in mind of investor that financial statements are created and follow generally
accepted accounting standards.
 This also support the investor to better understand and determine the investment
opportunities among M&S that have develop financial statement with the help of
accounting standard and principle (Valentinetti and Rea, 2012).

9 Ascertaining the varying degree of compliance with IFRS.
In recent time, financial reporting is used by almost every companies at global level.
These are basically formed with the help of internation financial reporting standard that guide
accountant of companies to prepare and maintain their financial account in appropriate manner.
Recently there are 13 IFRS and 29 IAS that are being implemented by different companies at
world wide level. Companies weather small and big has to follow accounting standard that will
support investor to make investment after analysing the useful information. So Marks and
Spencer has been implementing IFRS to formulate financial statement during an accounting year
and these also very implement al for to take decisions regarding financing and investing (Koh,
2011).
Recently, UK government have applied various crucial accounting rules and standard that
has to be followed by every companies. Marks and Spencer is operating its business at global
level, therefore it is important to use international financial reporting standard in their financial
statement that could be used at global level. These are also accepted universally. So when a
country does not follow any IFRS standard in their reporting then there must be chance of
misrepresentation's of reports and statement.
1102.
CONCLUSION
From the above report, it has been concluded that financial statement plays a crucial role
as it help to analyse the financial status of company to internal and external stakeholder of
company. Therefore IFRS must be implemented by accountant of M&S in order to maintain
accounting report. It is also observed that financial reporting help to attain the objective of
company and determine the growth opportunities. With aid of interpretation of statement
company can draw an helpful decision. There standard which are fit by IFRS and IAS
necessarily to be followed by institution to execute better at global level.

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Online
Financial statement. 2018. [Online]. Available through:
<https://in.finance.yahoo.com/quote/MKS.L/financials?p=MKS.L>