Financial Reporting: Regulatory Framework, Stakeholders, and IFRS

This report provides a comprehensive analysis of financial reporting, focusing on its purpose, regulatory and conceptual frameworks, and key stakeholders within an organization. It delves into the value of financial reporting in meeting company goals, examining the importance of financial statements like the income statement, balance sheet, and cash flow statement. The report also explores the application of IAS 1 and the differences between IAS and IFRS, evaluating the benefits of IFRS and compliance. The report includes an examination of financial statements from Mark & Spencer. The report aims to demonstrate how financial reporting helps in interpreting and communicating financial performance and its impact on various stakeholders, including investors and management. The report provides a detailed overview of the financial reporting landscape and its significance in business operations.

Financial Reporting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Purpose of financial accounting..............................................................................................1
2. Requirement and key principal of regulatory and conceptual framework..............................2
3. Main stakeholder of an organisation.......................................................................................3
4. Value of financial reporting to meet companies’ goals. ........................................................4
5. Financial statement as per the IAS 1:......................................................................................5
6.Use of financial statements of a company to interpret and communicate financial
performance.................................................................................................................................7
7 Difference between IAS and IFRS...........................................................................................8
8. Evaluation of benefits of IFRS. ..............................................................................................8
9 Ascertaining the varying degree of compliance with IFRS.....................................................9
CONCLUSION..............................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
In accounting, financial reporting is defined as the method of making financial statement
within company during an accounting period. Reporting mean to post transaction into accounting
book and it also help in preparation of income statements, balance sheet and cash flow
statements (Aversano and Christiaens, 2014). This method of posting support manager to take
internal decision and also help investors to form strategies and make investment decision.
Company taken in this report is Marks & Spenser which is situated in UK.
In this project report, purpose of financial reporting, its requirement, purpose and key
principles of conceptual and regulatory framework, important stakeholder of company is shown.
Report also focus on value of financial statement, statements of last two year, importance of
IFRS and actual difference among IFRS and IAS is Shown.
MAIN BODY
1. Purpose of financial accounting.
The process of recording all business transaction in the statements that help stakeholder
to company performance and financial position of company. Report gives appropriate and
transparent data that help companies to execute business operation effectively. In Mark &
Spencer, manager keep transparent and accurate statement that help stockholder to gather useful
information related to performance, profitability during an accounting year. This helps to achieve
predetermined organisational goals that are essential to perform different business operation in
company. Some of the basic purpose and importance of financial reporting are discussed below:
Main purpose:
 Financial Reporting help the company to facilitate the better formation of strategic
decision so that goals of Mark & Spencer may achieved.
 This support in making effective planning for future year.
It is useful to analyse the result of activities that has been performed during a particular period of
time (Dyreng, Mayew and Williams, 2012).
 Gives best information to the outside stakeholder so that investment decision are made,
which increase sales, profit and market share of company.
Importance.

 Financial reporting is essential for the companies to examine the financial performance
during an accounting year.
 When companies raise foreign capital and investment than transparent report can support
to attract international investors.
 Financial reporting is helpful for stakeholder to analyse about their money if it is used
effectively or not.
 Manage of Mark & Spenser use the report to analyse the actual performance, market
position so that future strategies can be formed.
2. Requirement and key principal of regulatory and conceptual framework.
The accounting board have developed conceptual framework that is a type of analytical
element which have some variable quantity and textual matter. This helps companies to analyse
the overall performance and actual position of company and also used to make abstract
differences and arrange business ideas. Regulatory frameworks are defined as the set of laws and
regulations that are set by government of UK for all companies those perform business operation
(Flower, 2016). It is observed that Mark & Spencer follows all standards that are set by IASB
while formation of their financial statements. These are imposed in the form of IFRS that are
described underneath:
IFRS: Standard that are established by IASB that are followed by companies are called
interactional financial reporting standard. Some of the IFRS are explained underneath that are
commonly called principles of regulatory and conceptual frameworks:
 IFRS 1: This is related to the standard that companies adopts the very first time. These
set of IFRS directs the Mark & Spenser to formulate various financial statements
accurately and effectively.
 IFRS 3: This principle is connected to business combination that should be done as per
the purchase method of accounting. According to this method the purchases identifiable
assets and liabilities must be measured and recorded at their actual values on the date of
acquisition date.
 IFRS 9: This financial reporting statement is related to standard that are followed for
financial statements. Basically it contains three key topic such as measurement
andWenger, E., 2014. Artificial intelligence and tutoring systems: computational and
cognitive approaches to the communication of knowledge. Morgan Kaufmann.

classification of instrument related to financial, impairment of assets and border
accounting.
 IFRS 10: This principle basically outlines the needs for preparing and presenting of the
consolidated financial statement in situation when one business firm has control over the
one. It defines the standard of control as the basis for consolidation and set to determine
whether the stakeholder controls the investee.
These IFRS are useful in providing useful,transparent, accurate information to stakeholder of
company as they could make valuable decision of investment.
3. Main stakeholder of an organisation.
In business term, a person, group of people that have an interest within an organisation
are defined as the stakeholder. Some of the main stakeholders are creditor, director, employees,
shareholder, employees, suppliers and the society from which company uses different resources.
These are basically divided in two kind internal and external stakeholders according to the role
over the organisation. In mark & Spenser they manager needs different stakeholder in order to
make any possible determination such as if they needs to modify any of their business operation,
stakeholder are involved in development meeting where the process are discussed. The manager
also focus that stakeholder also keeps satisfied so that regular investment keeps on going (Lee
and Parker, 2014). So the duty of internal accounts department is to prepare accurate and
transparent financial statement that will attract more number of investor within company.
There are various advantages of appropriate and accurate financial statement for the
stakeholder such as:
 To get knowledge about the company functioning during an accounting year.
 To determine and check Weather Company has earned more revenues than their
expending.
 This helps them to ascertain the valuable strategic and plans of management.
 Financial statement gives information to stakeholder to make effective decision about the
investment in company.
 It reduces the chance of dissimulations and corruption within the organisation.
As stakeholders are divided into two sector internal and external both have different set
of advantages from the annual financial statement of company. Such as internal stakeholder
needs:

 To make dividend decision.
 To develop overall aims and periodical targets of company.
 To ascertain that investment must be sold, hold or bring more share of the company.
 This also helps to determine the stability and productivity of employers.
Advantages to external stakeholder:
 To make sure that payment of supplies are cleared according to the date given.
 To ascertain the competitive supplier of company.
 This also helps government to gather tax and other amount from company on fixed dates.
 Financial statement help customer to know about the cost structure of the goods that are
produced within company.
4. Value of financial reporting to meet companies’ goals.
Financial reporting is the method of posting all relevant transaction that is important form
companies’ point of view (Values of financial reporting, 2017). Basically reporting help in
formation of important statement, cash flows and balance sheet for an accounting year. The main
objective of these annual reports is to provide useful data to the present and potential investors
that further help to make effective decision to various investments in Mark & Spencer. These
statements makes manager to easily determine the trends within company by focusing and
comparing the ratios from different time frame and types of statement prepared during an
accounting year. It is observed that the main three types of statement that helps manager to
known the how far the actual goals are as known as balances sheet, income statement and cash
flow statements. These statements tell the exact position about the value of business operation
within a year. So there three statement help manager of Mark and Spenser to known better about
the business operation and also help to reach the company goals. Importance of financial
reporting is:
Income statement: the most vital element to give detail about the value of the business.
As income statement help to match the total expenses and total revenue during an accounting
year, thus deliver the suitable measure o manager ability to make best utilisation of available
resources in the generating of profit. It further helps manager of Mark & Spenser to calculate the
consistency and efficiency of the various business operations performed during an accounting
year.

Balance sheet: These types of financial reporting statement help to calculate the actual
position or picture of company at a given period of time. As it provide the detail information
about assets, equity, liabilities etc. Further it helps manager of Mark & Spencer to determine the
actual financial position and ability of various project run that help to generate cash flows that
support to achieve the predefined goals of business.
Ratio analysis: In companies manager used to make accurate financial statement in order
to calculate different ratio as these are consider to be the most popular financial analysis tool.
The analysis of different ratio help manager of Mark & Spencer to calculate the performance and
compares with another companies, standard and improve if required (Nobes, 2014).
5. Financial statement as per the IAS 1:
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
Profit and loss description about company during a financial year benefits to determine
the entire profit after editing all alteration such as tax expenditures etc. Company shows gross
profit of 93137, organisation operation profit is equal 9475, profit before tax 8645 and after
deducting tax it is equal to 7125.

B: Statements of change in equity.
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
The declaration of equity aid in formative the total sum business is donation to its
stockholders in a particular era of time. The statement defined above displays the ordinary share
capital shows the balance of 86700 and revaluation reserve shows the sum of 42800 by adding
total comprehensive income. The preferred dividend funded during financial year is 2330 and
ordinary were 4340. The amount of retained earning is 32575 during the year (Walton, 2012).
C: Godwin statements showing financial position.

6.Use of financial statements of a company to interpret and communicate financial performance.
From the financial report it has been analysed that profit and loss statement of mark &
Spencer shows the profit before subtracting item is 670.6 and after deducting item the profit is
156.5 pound in year 2018. Profit before tax for the year 2018 is 580.9 and after subtracting tax is
455.5 pound. The comprehensive income statement of company shows the total comprehensive
income for the year of about 91.8 pound. From the consolidated financial statements the non
current assets for the year is 6232.3 and current assets are 1317.9 and total assets are 7550.2 are
in year 2018. The balance sheet shows the current liabilities are 1826 pound, non current
liabilities are 2770 and total liabilities are 4596. the statement shows the total shareholder equity
of pound 2956.7 and total equity at the end of year is 2954.2 pound in year 2018 (Shivakumar,
2013).

7 Difference between IAS and IFRS.
In general International Accounting standard are defines are the set of valuable principle
that help companies to post the right transaction into right books or prepare financial statement
according to set criteria. On the other side International financial reporting standard are the latest
principle that help accountant of company to post every transaction into correct financial
statement or there is a chance of false representation of records. There both are same in many
aspects but also have difference between each other. The main difference between IAS and IFRS
are detailed below:
International accounting standard International financial reporting standard.
This set were established to deliver the main
and important principle of accounting to the
companies.
It is essentially defined as the new principle
that benefit bookkeeper to report business
dealing into final books in proper form.
If a company’s applies the standards of IAS
then all the relevant decision are examined by
IASC.
The Authority to examine and give ideas to
companies that follows IFRS remains in the
hand of IASB.
IAS was first established by IASC in year
1973. So many companies find this principle to
be out dated.
In year 2001 the international accounting
standard board established valuable IFRS.
8. Evaluation of benefits of IFRS.
In accounting, it is necessary for companies to apply valuable set of principle in order to
preparer their financial statement. As financial statement are consider to be the most
important document of company as they provide all necessary information to internal and
external stakeholder. In recent time it has been observed that small or big companies are
becoming responsible to apply the standard while making report that makes treasured and
transparent financial statement. It has been observed that companies have moved from
general accounting standard principle to international financial reporting standard that help
in better formation of financial report. There are various advantages of applying IFRS
within Mark & Spenser that are described below:
 IFRS help company to resolve different financial issue or other problem during an
accounting year that may decrease the performance and profitability.

International financial reporting standard are used to prepare suitable, faithful and
accurate statement (Zeff, 2013). That further support many investors to make their investment
decision.
 With the proper use of IFRS business firm like Mark & Spenser may easily detect
problem in their business operation and create strategies that increase the
productivity.
 One of the chief importance of IFRS is that it support to increase the funds from the
outside market at a very low rate. It will help foreign investor to make correct
decision of investment that will give best result in future.
9 Ascertaining the varying degree of compliance with IFRS
In recent era the importance of international financial accounting standard is going at a
very fast pace and these standard are followed by almost every country. These set of principle
provide useful information to internal accountant of companies about how to prepare financial
statement and in what manner to present these statement to different stakeholders. Basically there
are 13 IFRS and Twenty nine principle of IAS that are implementing by almost every nation in
world where they are accepted. In Mark & Spenser the manager have understand the importance
of IFRS and guide accountant to follow specific rules to prepare financial statement for financial
year. As a result more number of stakeholders will be attracted to invest within company or use
different services provided by them (Martínez‐Ferrero, Garcia‐Sanchez and Cuadrado‐
Ballesteros, 2015). The standard provision companies and the standard of the revelation
objective bodies infract of obviously setting the least obedience level. It has been calculated that
freshly IFRS principle are usual conferring to the revelation of the compliance in the background
of both detailed disclosure wants and the growing level of attitude of disclosure.
The IFRS have important role in developing global languages for different business
company operating their business in various part. This global language help the internal and
external manager of company in order to understand and compare the effectiveness of business
across international boundaries.
CONCLUSION
From the above project report, it has been concluded that financial reporting is related to
the formation of financial statements that benefits to improve the performance and status of

company. Statements must be prepared at regular basis that help customer, investors, shareholder
to make their investment decision depending on the reports of company. All the business firms
are oriented by IFRS while they are creating their financial statements as it may help them to
develop proper and faithful statements.