Financial Reporting: M&S Financial Performance, IFRS, and Stakeholders

This report provides a comprehensive analysis of financial reporting, focusing on Marks & Spencer (M&S). It begins by defining financial reporting's context and purpose, emphasizing its role in communicating financial information to stakeholders, including investors, creditors, and management. The report then delves into the regulatory and conceptual framework, highlighting the importance of key principles and qualitative characteristics in ensuring reliable financial information. It identifies M&S's main stakeholders and the benefits they derive from financial reporting, such as informed decision-making and performance evaluation. The report explores how financial reporting contributes to organizational growth and objectives, emphasizing its role in attracting investment and guiding strategic planning. It includes interpretations of financial statements, including the statement of profit or loss, statement of changes in equity, and statement of financial position. Furthermore, the report analyzes M&S's financial performance over two years using financial ratios. It also differentiates between IFRS and IAS, highlighting the benefits of IFRS and the degree of compliance across the world. Finally, the report concludes by summarizing the key findings and implications of financial reporting for M&S.

FINANCIAL
REPORTING

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Context and purpose of financial reporting.............................................................................1
2. Analysis of regulatory and conceptual framework and key principles and qualitative
characteristics makes the financial information more reliable....................................................2
3.Main stakeholders of Marks & Spencer and benefits from financial information...................3
4. Value of financial reporting for meeting organisational growth and objectives.....................4
5. Interpretation of Financial statements as per IAS...................................................................4
6. Interpretation of last two years financial statement of the company for financial
performance.................................................................................................................................5
7. Differences Between IFRS and IAS.......................................................................................6
8. Benefits of IFRS......................................................................................................................7
9. Degree of compliance with IFRS by organisation across the world and the factors in a
nation...........................................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial reporting is the procedure of producing statements that bring out an
organization's financial information to the several stakeholders about the financial performance
and financial position of the company over a specified period of time. Companies stakeholders
are creditors, investors, debt providers and government (Hope, Thomas and Vyas, 2013). In this
report taken company marks & Spencer, it is a retail sector industry that selling of clothing,
home products and luxury food products. In this report consist of context and purpose of
financial reporting for meeting organisational objectives, development and growth. Interpret
financial statements and evaluate financial reporting standards and concepts. Identify difference
between IAS and IFRS.
MAIN BODY
1. Context and purpose of financial reporting
Financial Reporting
It is a framework that involves to discover all financial information to management and
the public about the company related to particular accounting period for showing how company
perform business activities. Financial reports are prepare on the basis of quarterly and annual
basis for for identify activities according to situations. In financial report consist of profit and
loss account, balance sheet and cash flow statements. On the basis of these reports management
are taking effective decisions and public ready to invest in the company.
It is commonly considered as end product of accounting because it is mainly prepared by
professional accountants in the end of year as well as quarter. The objective of provide accurate
and reliable information that shows financial performance, position and changes of the
organisation that is helpful to a broad range of users in making economic decisions (Fu, R., Kraft
and Zhang, 2012). For preparing these reports using International accounting standards that are
identify to reasons for taking different items according to financial position.
Purpose of Financial reporting
The main purpose of financial reporting is to presenting financial information to the
stakeholders and lenders of the business. According to FTES financial reporting have many
purposes are as following -
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a) Financial reporting are provide information to management for taking effective decision to
achieve organisations objectives ad goals. And it is helping to know strength and weakness of the
company.
b) It is helping to company for preparing strategies according to overall performance.
c) Financial reporting giving crucial information that are related to financial health and activities
of the company to its stakeholders as well as shareholders, government regulators and
consumers.
d) It is providing information that how to company operating & using various resources.
e) To provide essential data to the management of the organization to show how an association is
utilizing and obtaining diverse assets.
2. Analysis of regulatory and conceptual framework and key principles and qualitative
characteristics makes the financial information more reliable
Regulatory and conceptual framework
The conceptual and regulatory framework of financial reporting elaborate of objectives
and concepts. It will using as technical tool to help it develop standards and make abstracted
discrimination and organize opinions. In different words this structure incorporates the
requirements of financial related attributes and valuable financial data for substantial limits. With
the help of regulatory framework defined set of regulations while preparing of financial reporting
and provide financial information. Marks & Spencer adopted regulatory and conceptual
framework to follow rules and regulations and also principles to properly execute business
activities without government interference (Skaife, Veenman and Wangerin, D., 2013).
Purpose
1. The primary purpose of regulatory and conceptual framework is to guide company to
prepare their financial statements in suitable manner because it is present transparent
image of the company can be presented in front of shareholders.
2. Other purpose of these framework is to help companies to attract foreign investors so that
business can be operated in more effective manner.
All the above rules and standards are required to be followed by Marks and Spencer as they may
help to attain organisational objectives.
Principles
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 The principle of framework related to income and expenses and according to that it was
categorised according to statement of profit and loss.
 Income and expenses according to principle consist of other comprehensive income in the
head of recycling to describe that one period are recycled to the statement of profit and
loss
The qualitative characteristics
Faithful Representation – Financial reports are present in right way because it will helping to
enhance trust of shareholders and investors. If company time to time provide reliable information
so it will helping to achieve trust from management side.
Relevance – In this characteristics provide relevant information that are effected to management
decision and helping to know predict vale of actual vale (Botzem, 2012). These information
making difference to making decision according to situation.
Understandability – When recording transaction in financial statements that are understanding
by management easily, not create any misunderstanding.
3.Main stakeholders of Marks & Spencer and benefits from financial information
Stakeholders
These are important part of any organisation because with the help of them organisation
are operate in effective way. After analysing performance of the company they are taking
strategic decisions. In every organisation have two types stakeholders are as follows -
Internal stakeholders – All the internal stakeholders are that persons who analysis organisational
situation and decisions according to sales and profit. In this including internal stakeholders are
shareholders that are provide funds to company and helping to execute business activities,
managers are those persons who mainly connected to decision making processes and keep an eye
on daily transactions (Cohen and et. al, 2013).
External stakeholders – All external stakeholders are seeing business activities in different
manner. In this including Creditors, investors, governments and customers.
Benefits from Financial information to stakeholders
Stakeholders obtain a set of financial statements as a right and are the only stakeholders
take benefits from that, they are as following -
Providing Information
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It will helping to provide needful information that are using by management for effective
decisions. In these information including of ratios, net profit, investments and business activities
according to the situation.
Measure of performance
With the help of this companies are measures performance of the company by financial
report as well as employees performance. After measuring where need to improve so apply
strategies.
Decision making
On the basis of financial statements management of the company taking decision and also
helping to predict cost for future time period.
4. Value of financial reporting for meeting organisational growth and objectives
Financial reporting help to accomplish organisational goals but it is possible when
company record all transactions in appropriate manner. Marks & Spencer is a large retail sector
company in UK that retail of luxury products, clothes (Gomariz and Ballesta, 2014). For
organisation growth Marks & Spencer decided various goals to attract foreign investments,
investors, satisfy of customers and increasing sales. There are some points are helping to
organisation to accomplish growth and objectives -
1. With the help of financial reporting know actual financial position of the company that
are helping to the management for taking effective and appropriate decisions.
2. It is helping to attract foreign investment as well as large number of investors.
3. On the basis of these reports preparing strategies and policies for Marks & Spencer for
achieve objectives.
4. It is using as technical tool to improve efficiency of the company as well as employees.
5. It helps to Marks & Spencer to raise capital both domestic and overseas and serve as an
accounting database for future deferences (Benefits of IFRS, 2018).
5. Interpretation of Financial statements as per IAS
a) Statement of profit or loss and other comprehensive income
Statement of Profit & Loss and comprehensive income
For the year ended 31.12.2017 (in £000)
Particulars Amount
Sales 385100
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Cost of goods sold (before damage) 297560
Gross profit 87538
Less – Operating Expenses -83443
Total 3875
Other income
Add – Rental Income 5600
Less - Loss in value of investment property 2300
Net profit 7175
Less - Bank interest 830
Profit before tax 6345
Taxation 1500
Profit for the year 4845
b) Statement of change in equity
Date Particular
Opening
share
capital
Revised
reserve
Retained
earnings Total
01/01/17 Balance B/f 86700 32100 118800
01/01/17 Revaluation 40700 40700
01/01/17 Ordinary dividend paid -4340 -4340
Profit for the year for share of equity
holders 2515 2515
31/12/17 Balance C/d 86700 40700 30275 157675
c) Statement of financial position
Particular Amount (£)
Investment in Boland LTD Asso. co. 165000
Sundry Assets 759000
Total 924000
Share capital 240000
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Retained earnings at 1st April 2008 600000
Earnings 2008/09 (38400+9600) 48000
Earnings 2009/10 (21600 + 14400) 36000
Total 924000
6. Interpretation of last two years financial statement of the company for financial performance
Financial ratios of Marks and Spencer
Particular ratios Formula 2017 2018
Liquidity ratio’s:
Current ratio: Current asset/ current liabilities
0.7217415
115
0.7277449
324
Liquid ratio: Current asset- inventory+ prepaid
expenses/ Current liabilities
0.2940306
681
0.4073057
432
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
Efficiency ratio's
Total assets turnover
ratios Net sales/ average total assets
1.0983443
709
1.4169161
082
Fixed assets turnover Net sales/ Averages total fixed assets
1.6169396
578
1.7165412
448
Interpretation – From the financial statements of two years of Marks and Spencer's financial
position are showing by the using financial ratios. It is classified in various categories for easy to
understand and providing information in corrective way. The company preparing financial
statements to showing actual performance of the company and getting information by
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consolidates incomes of their organisation along with their subsidiary organisations. For present
financial situation of the company prepare consolidated income statement, there are present
profit in 2017 was (426.4) and in 2018 is 455.5. Income statement and comprehensive income
statement are individually equipped in order to find out their realisable value. Along with
equilibrium and cash flow statement, this company also prepares their changes in equity.
From the above table of ratios, it has been identified in 2018 company have more than
liquidity to compare 2017. Profitability ratio in 2018 not much more increases compare to 2017
but determine efficiency ratio increasing from 2017 to 2018.
7. Differences Between IFRS and IAS
International Financial Reporting Standards – It is a another standards that are using to
analysis of results of financial rules and standards. These standards are issued by the
international accounting standard board (IASB). It is mostly created to specify that how accounts
should maintain and report their accounts (Laux, 2012).
International Accounting Standard - It is a set of accounting standards that are supervised and
developed by the UK based international accounting standards board (IASB). It will explain to
how they should helping to record and presents financial information of companies. These
standards were written in 1973 and created by the international accounting standards committee
(IASC).
IAS IFRS
IAS standard were issued by the International
accounting standard committee (IASC).
IFRS were introduced by the international
accounting standard board (IASB).
It is used to before the present of IFRS because
it was firstly established in 1973 and after
modification in 2001.
It is advised to organisation for preparation of
financial reporting according to principles and
standards in 2001.
IAS was accepted to bring down mistakes of
accounting regarding to international financial
reporting.
IFRS was established for different
contradictions are origin in the company that
are need to reduce.
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It is mainly connected with managing the
international accounting standards and
estimations.
It will helping to present the international
financial reporting standards and the
provisions.
8. Benefits of IFRS
IFRS plays crucial role in the international accounting and financial rules and regulations.
It is adopted by Marks & Spencer to provide benefit to its investors, customers and other users
are relate to the company. It is helping to prepare financial reports according to accounting
standards and principles. After adopting it helping to reduce the cost of investments and
increasing the quality of providing information (Iyoha, 2012).
Greater Comparability – M&S applying IFRS and prepare according to that financial reports so
it will helping to compare with other companies who adopted different Standards for preparing
financial statements.
Improved tax planning and financial reporting – After following IFRS, company produce a
consistent and standardised set of financial and accounting reports for complying with compact
necessitate and local statutory (Hanlon, Hoopes and Shroff, 2014).
Improved day to day business activities – Marks & Spencer conduct all day to day activities
because maintaining these financial information to helping to improve financial performance.
Better managed resources – These standards are guiding to how should mange resources in
better way and M&S company capable to standardise accounting methods across the company
and helping to decrease cost of financial reports and audits.
Improved financial controls – By following these standards helping to control financial
activities of the business. It is cover all legal activities, risks, difficulties in individual countries.
Lower cost of capital – It is support to high quality Standards are related to financial activities.
After getting financial result is will provide benefit to investors and management of Marks &
Spencer.
9. Degree of compliance with IFRS by organisation across the world and the factors in a nation
IFRS are the set of standards issued by international accounting standard board to
formulated by the government and these are mainly adopted by those companies who are trading
business on international level (Zeff, van der Wel, and Camfferman, 2016). When companies
are prepare to financial statements that time follow these standards because it helping to present
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transparent image of the company in front of their stakeholders. It is constituent for the company
to record reliable and appropriate data in annual report of the company. IFRS guide to businesses
how they preparing effective financial accounts that are present actual situation of the company
in appropriate manner.
For example, Marks & Spencer is operating all business activities all around the world.
The organisation prepare of the facial statements follow the accounting standards and principles
because it helping to provide those information need to organisation for showing actual
performance of the company. IFRS is good option to adopt for prepare finial reports and solve
complexities related to financial terms. It is a technique that help to organisation for accomplish
their goals and objectives (Puspitaningrum and Atmini, 2012).
CONCLUSION
From the above project report it has been concluded that financial reporting important
part of any organisation because without it business can not present financial situation. It is
essential for all the organisations to follow the standards of IFRS because it may help to achieve
objectives and goals of the company like as sales and profits. It is also provide benefits to
management, customers, stakeholders and governments. These standards are issued for those
companies are trading on international level and willing to acquire higher profit. With the help of
reports customers, investors, creditors, shareholders and other user using information for
effective decision and they are become part of business entity who have a good financial health
and market image.
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REFERENCES
Books and Journals
Hope, O. K., Thomas, W. B. and Vyas, D., 2013. Financial reporting quality of US private and
public firms. The Accounting Review. 88(5). pp.1715-1742.
Fu, R., Kraft, A. and Zhang, H., 2012. Financial reporting frequency, information asymmetry,
and the cost of equity. Journal of Accounting and Economics. 54(2-3). pp.132-149.
Skaife, H. A., Veenman, D. and Wangerin, D., 2013. Internal control over financial reporting
and managerial rent extraction: Evidence from the profitability of insider
trading. Journal of Accounting and Economics. 55(1). pp.91-110.
Botzem, S., 2012. The politics of accounting regulation: Organizing transnational standard
setting in financial reporting. Edward Elgar Publishing.
Cohen, J. R., Hoitash, U., Krishnamoorthy, G. and Wright, A.M., 2013. The effect of audit
committee industry expertise on monitoring the financial reporting process. The
Accounting Review. 89(1). pp.243-273.
Gomariz, M. F. C. and Ballesta, J. P. S., 2014. Financial reporting quality, debt maturity and
investment efficiency. Journal of Banking & Finance. 40. pp.494-506.
Laux, C., 2012. Financial instruments, financial reporting, and financial stability. Accounting
and business research. 42(3). pp.239-260.
Iyoha, F. O., 2012. Company attributes and the timeliness of financial reporting in Nigeria.
Business Intelligence Journal. 5(1).
Hanlon, M., Hoopes, J.L. and Shroff, N., 2014. The effect of tax authority monitoring and
enforcement on financial reporting quality. The Journal of the American Taxation
Association. 36(2). pp.137-170.
Zeff, S. A., van der Wel, F. and Camfferman, C., 2016. Company financial reporting: A
historical and comparative study of the Dutch regulatory process. Routledge.
Puspitaningrum, D. and Atmini, S., 2012. Corporate governance mechanism and the level of
internet financial reporting: Evidence from Indonesian companies. Procedia Economics
and Finance. 2. pp.157-166.
Online
Benefits of IFRS, 2018. [Online]. Available through: <https://www.morganmckinley.ie/article/5-
benefits-ifrs>
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