International Financial Reporting: Frameworks, Standards and Analysis

This report provides a comprehensive analysis of international financial reporting, focusing on the application of International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS). It explores the regulatory and conceptual frameworks, qualitative characteristics of financial information, and the role of financial reporting in achieving business objectives. The report examines financial statements, including income statements, balance sheets, and cash flow statements, and provides an interpretation of financial ratios, using Diageo as a case study. It also discusses the benefits of IFRS and IAS, financial reporting and auditing models. The report covers key stakeholders and their needs. This assignment offers insights into the complexities of global financial reporting, making it a valuable resource for students studying finance.

International Financial
Reporting

Table of Content

INTRODUCTION
International financial reporting provides a framework to the business organization to
assess about they way in which IFRS are are applied in order to produce financial statements. A
firm by implementing such reporting system may diversifies its business beyond its domestic
territory. Various standards such as IFRS and IAS are formulated by international board and
committee to regulating and providing assistance in the field of financial reporting. For this
purpose, a company named MAZARS which is engaged in providing accountancy consultancy
services to its clients. This report defines the term international financial reporting and its
several regulatory, conceptual frameworks along with features of financial data. Key
stakeholder of a company and role to them from these information is also explained in this
report.
TASK 1
P1.Context of financial reporting with their regulatory frameworks and governance:
Financial reporting may be defined as framework that provides way to present and
communicate the relevant monetary data to different stakeholders. Financial reporting assist an
organization in preparing its financial statements for particular time period, such financial
statements consists P&L a/c, statement of change in financial position, cash flow statement etc.
It has several conceptual and regulatory frameworks that a company shall require to follow, the
details discussion about these frameworks are as follows:
Conceptual framework:
These frameworks assist the companies like MAZARS in knowing the objectives of the
financial reporting acts as a tool for formulation and issuance of several accounting standards.
Therefore, it assists the MAZARS in developing a essential theoretical foundation so that it able
to evaluate, recording and represent the various financial transactions related to its business
operations. In relation to financial reporting, a conceptual framework may be understandable as
a statement of generally accepted accounting principles (GAAP). These conceptual frameworks
help in evaluating yardsticks as well as determine point of references for comparison and
improvement in current accounting practices. Due to non-availability of these frameworks, there
are chances of increasing numbers of accounting scandals by doing wrong practices to

misappropriate the profits of an organization. In an understanding point of view, they assist an
organization by following ways:
 Improvement in current standards along with issuance of new accounting
standards as per requirements.
 Boost coordination between accounting rules and regulation with several
standards.
 Preparation and presentation of financial statements for various key stakeholders.
Regulatory framework:
These are the frameworks that determine the way through which financial information of an
organization is recorded and reported. in other words, it offers different rules and frameworks of
financial transactions of an organization at international level. These are applicable to all
European listed companies, including UK companies. For issuance of these frameworks, IASB
to offer regulating standards for the companies like MAZARS and in response of this, IASB
issued various IFRS that aims to encourage collaboration, investor engagement and
transparency in accounting process. This framework is considered necessary for correct
presentation of financial information of a company for fulfilling needs adequately of key
stakeholders. In such process IASB issues some IFRS which are as follows:
 IFRS 1: Implementation of IFRS
 IFRS 10 : Consolidated financial Statements
 IFRS 13 : Fair value measurement
The primary objective of regulating framework is to facilitate understanding and
revision of GAAP as well as IFRS (Abeysekera, 2013).
Qualitative characteristics that makes financial information more reliable:
For making financial information more reliable and understandable, companies like
MAZARS shall require to have some qualitative characteristics in its financial information
which are as follows:
 Relevance: It is associated with providing useful information that is included in
the financial statements. Relevance implies that financial information which shall be reported
should add some vale in decision making of users of such financial statements.

 Understandability: This is an important quality of financial information that
enables the users in understanding its significance. For this, such information shall be presented
in such a way that facilitate easy understanding and avoids any incorrect interpretation.
Comparability: A financial information must be capable of providing appropriate
comparison in effective decision making. If information is comparable then it assists the
decision maker to evaluate and estimate the key strengths and weaknesses of an organization
related to its business operations (Albu and Albu, 2012).
P2.Role of financial-reporting to achieve goals and objectives of businesses.
The primary role of financial-reporting is to record and report the key information
regarding business operations, performances and cash flows in a predefined format. Financial
reporting aims is to providing information to the investors, track cash flows of a company like
MAZARS and analysis assets, liabilities and owner’s equity. Thus, it helps a company like
MAZARS in meeting its objectives and assist in its development and growth.
Key stakeholders:

So as to guarantee that such needs are met in full, MAZARS need to deal with all
stakeholder necessities while making financial reports. Moreover, company likewise needs
to remember that correspondence of data is finished with due perseverance and
transparently as it will empower them to look for investment or financing, detail feasible
arrangements or objectives and accomplish their vision in an organised out way (Botzem,
2012)
Type of
Stakeholders
Constituents Purpose and Benefit for using financial
information
Internal Owners,
Management,
Employees
These stakeholders are predominantly worried about
the formulation of strategic arrangements that take
into account the satisfaction of organisational
objectives, improvement and development. For
example, the working staff are interested to know
whether the business is performing great and is
capable enough to pay them remunerations. While
owners and the board are interested on knowing
financial position and productivity to decide future
game-plan.
External Creditors, Govt.,
competitors and
customers
These clients of financial information are interested on
knowing whether MAZARS is:
•Complying with legitimate rules in its activities
(Government);
•Capable enough to reimburse its liabilities inside the
stipulated time (Creditors and Providers);
•Analyse the methodologies and tentative arrangements
of the bank in order to contend successfully (Rivals);
•Profitable enough to give higher return in type
important to the record holders (Clients).

TASK 2
P3. Interpretation of financial statements.
(a) Income Statement:

GODWIN PLC.
Statement of Profit and Loss for the year ended December 31, 2018
Particulars £'000
Revenue 585100
Rental Income from Investment Properties 9600
Total Revenue 594700
Less: Cost of Sales(WN2) 403638.75
Earnings before interest and tax 191061.25
Less: Operating Expenses(WN3)
92138.75
Operating Profit 98922.5
Less: Bank Interest -1200
Profit before tax 97722.5
Less: Taxation Charge -9500

The above statement indicates a detail break-up of equity changes by bifurcating Equity into
Ordinary Share Capital, Revaluation Reserve as well as Retained Earnings. From the above
statement, it can be ascertained that £8,822,500 is the net profit earned by Godwin PLC during
the year which has been completely retained. Whereas the preferential as well as ordinary
dividend worth £2,500 and £4,500 respectively have been paid to the investors from the
retained earnings itself.
(c) Balance Sheet:

Statement of
Financial Position as at
December 31, 2018
Assets £'000 £'000
Non-Current
Assets:
Land and Property 144062.5
Plant and
Equipment 98260
Investment Property 28000
Total Non-Current
Assets 270322.5
Current Assets:
Closing Stock of
Inventory 24700
Trade Receivables 78000
Total Current
Assets 102700
Total Assets 373022.5
Owner's Equity
and Liability

A financial position statement helps in giving an overall view of the business at a given
point of time. The above statement shows a complete break-up of assets, liabilities as well as
owner's equity in a detailed manner so as to enable the user of this information to understand
key short-term and long-term stances of Godwin PLC effectively. Utilizing this statement,
additional information can be derived in relation to liquidity, working capital requirements and
capital structure of Godwin. For this purpose, current assets and liabilities, owner's equity and
non-current liabilities will be considered.
Hence, the aforementioned statements help in communicating a specific type of
financial information to key stakeholders as well as the management which enables them to
make informed decisions from both short-term and long-term perspectives. Additionally,
company may also undertake to prepare another financial statement known as Cash Flow
Statement. This report communicates a detailed account on the applicability as well as
sources of funds that are available to the business. Mainly, it includes cash flow from
operating, investing and financial activities undertaken by business for a given period. Thus,
helping the users to know exactly where their money is being invested to increase the overall
profitability and returns (Davies and Green, 2013).
P4. Calculation of financial ratios and their interpretation:
To the board of management Diageo
Reference: Interpretation of the financial statements (performance appraisal) for 2017 and 2018
Dear sir
Below discussed are the ratio of Diageo that are diversified into four major section such
as:
Gearing and interest coverage ratio
Ratio 2018 2017 Cha

nge in %
Gearing
ratio
0.811 0.63 26.5
6%
Interest
cover
10.47 8.89 17.7
8%
Interpretation: Above respective ratio says that the organization's long-term
obligations are boosted by 26.56 percent compared from last year. The annual interest
percentage also risen by 17.78% as a result of a rise in the quantity of interest taxable on long-
term debt.
Efficiency ratio
Ratio 2018 2017
Chan
ge in %
Inventories days 386.07 365.27
-
3.65%
Receivables days 5.68 5.63 5%
Payable days 113.38 88.95
27.46
%