Financial Reporting Analysis: Marks & Spencer, IAS 1, and IFRS

This report provides a comprehensive analysis of financial reporting, beginning with an introduction to the concept and its significance in business decision-making. It explores the main objectives of financial reporting, emphasizing its role in investment decisions and management accountability. The report delves into the main principles and conceptual framework, highlighting the importance of regulatory frameworks like IFRS and qualitative characteristics such as relevance and faithful presentation. It identifies the key stakeholders of an organization, differentiating between internal stakeholders like employees and external stakeholders like customers and shareholders, and discusses the value of financial reporting in meeting company goals. The report includes an analysis of financial statements as per IAS 1, including profit and loss statements, statements of equity, and statements of financial position. It also touches upon the differences between IAS and IFRS, the evaluation of benefits of IFRS, and the varying degrees of compliance with IFRS. The case study uses Marks & Spencer as an example, providing real-world context to the theoretical concepts discussed. The report concludes with a discussion on the value of financial reporting to meet companies’ goals, highlighting the importance of income statements, ratio analysis, and balance sheets in achieving these goals.

Financial Reporting.

Contents
INTRODUCTION.................................................................................................................................3
MAIN BODY........................................................................................................................................3
1. Main objective of financial reporting.............................................................................................3
2. Main principle and conceptual framework.....................................................................................4
3. Main stakeholder of an organisation..............................................................................................5
4. Value of financial reporting to meet companies’ goals..................................................................6
5. Financial statement as per the IAS 1:.............................................................................................7
7. Differences between IAS and IFRS.............................................................................................10
8. Evaluation of benefits of IFRS....................................................................................................11
9 Ascertaining the varying degree of compliance with IFRS...........................................................12
REFERENCES....................................................................................................................................14

INTRODUCTION
Financial reporting is the process related to analysing, gathering, posting of useful
financial information within organisation that help to make effective decision so that
performance and productivity can be increased (Financial reporting, 2018). Almost every
company make financial report at a certain time period so that help to determine the financial
strength and market position of company. With the help of report internal manager are able to
make effective decision in order to improve the profitability of company can be improved.
Financial statement is also useful to external manager as they are able to make valuable
investment decision by viewing the position of company. Company taken in this report is
Marks & Spenser which is situated in UK.
In this assignment, main objective of financial reporting, its requirement, main beliefs
of conceptual and regulatory outline, important investor of company is exposed. Assignment
also attentions on worth of statement, interpretation of last two year statements, significance
of IFRS and actual difference between IFRS and IAS is exposed.
MAIN BODY
1. Main objective of financial reporting
In accounting, all business transaction is needed to be recorded that make ease the
work of internal and external stakeholder. The process of posting accurate transaction in to
right book is known as financial reporting. These reports are prepared by the internal
department that provide the appropriate and current data related to the companies. External
stakeholder view the financial statement of companies and make valuable investment
decision in order to get the best rate of return depending upon the current financial strength
and market position of company. Manager of on organisation keep the detail information
about overall happing, so that performance of every units, employees can be measured and
improved if required. Business entity financial reporting is defined as a total communication
scheme concerning the firm as issuer, investors and creditors as main users, additional
external employers. The accounting business as procedures and accountants and the company
rule controlling establishments (Aversano and Christiaens, 2014. ). Management of Mark &
Spencer, preserve translucent and correct report or statement, which support stockholder to
collect valuable evidence connected to presentation, effectiveness throughout an accounting

period. This benefit to attain programmed administrative objectives that are crucial to achieve
dissimilar business task in company. There is various objective, purpose of financial
reporting that are described underneath:
Purpose of reporting.
(a) Investment Decision-Making:
The simple aim of financial writing is to deliver material convenient to stockholders and new
users in creation sound outlay decisions.
(b) Management Accountability:
The second aim of reporting is to deliver information on organization accountability to
review organization’s efficiency in using the funds and managing the operation of company.
Importance of report.
 In Mark & Spenser manger make analysis of performance of staff member and
business operation with the help of detail information.
 Financial reporting is vital for the businesses that support to stakeholder to examine
the financial performance throughout an accounting period.
 It is cooperative for investor to investigate that weather their money will give better
result or not.
2. Main principle and conceptual framework.
In business world every company requires to follow a certain guidelines or a set of
regulation to perform their business operation or record these business transactions into
books. So, basically the regulatory framework or standard are defined as the set of rules that
has to be implemented by every company to record with business transaction. In UK,
government have formulated different kind of rules for small and large company that guide
manager to make transparent record. Similarly, the conceptual framework is defined as the
kind of analytical tool that has variable quantity and textual matter. With the support of this
tool organisation are able to collected information and compare performance of different
business activities and employees working in company. It also used to make intellectual
differences and arrange business ideas so that valuable plans are made to improve the actual
differences. In M&S it has been noticed that principle that are formulated by IASB are
followed that support in formation of appropriate and transparent statements. These are

imposed in the form of IFRS (Dyreng, Mayew and Williams, 2012). International financial
reporting standard are recognized by IASB that are monitored by businesses and are usually
called ethics of regulatory and conceptual frameworks. Some of these are described below:
 IFRS 1: It is connected to the principle that firms accept at very first time. These
established of IFRS guides the manager of Mark & Spenser to frame financial
statements precisely and efficiently.
 IFRS 3: Conferring to this technique the acquisitions recognizable assets and
liabilities necessity be measured and noted at their definite values on the date of
purchase.
Qualitative characteristic
Relevance: So that it creates a variance to the conclusions about a company made by users of
the declarations. Thus, In M&S different investor come across to male investment depending
on the financial reports.
Faithful presentation: Financial statements are complete and free from bias and error. So In
M&S manager are able to make effective budget for upcoming period.
3. Main stakeholder of an organisation.
Stakeholder are individual or group of people those are willing to investment within company
in order to get a return on investment are a predefined rate of interest. These stakeholders are
categorising according to their interest and involvement in company. These are divided in
external and internal according to their impact on business performance. Some of the main
stakeholders are creditor, director, employees, shareholder, employees, suppliers and the
society from which company uses different resources (Flower, 2016. ). These are describing
below:
Internal stakeholder: These types of investor have direct impact on the business
performance and they directly participate in business operation. Such as
Employees: these are the group of people those are working in Mar & Spenser. They
help to run business activities effectively in order to maximise profit and attain predefined
goals and objectives.
Financial reporting has different advantages to the internal stakeholder that are discussed
below:

 To create dividend judgement.
 To determine that security must be traded, holder or carry more stake of the
corporation.
 Likewise aids to regulate the constancy and efficiency of managers and other
employees.
External stakeholder: These people or investor is also important for companies as they
make investment decision deepening upon the actual position and financial strength. Such as
Customer: They are consider to be the backbone for company, as if there are more
number of customer then company will be going to earn more profit. So M&S produces best
goods that satisfy customer.
Shareholder: These groups of individual wants to invest in company in reference to
get the best result that will double their money (Lee and Parker, 2014. ).
Financial reporting has its advantages to the external stakeholder like:
 To ensure that disbursement of provisions are cleared on agreed date
 This also assistances government to collect tax and related sum from business
entity on a particular date.
4. Value of financial reporting to meet companies’ goals.
For companies it is very important to have a predefined goals and objective that help
them to perform well in the market to ascertain those goals. Thus manager of Mark and
Spenser focuses to develop transparent and accurate financial reports and statement at the end
of every quarter so that effective plans are formulated. As discussed above the process of
recording finance related information in right books is known as financial reporting. In
general, reporting aids in formulation of crucial financial statement, balance sheet and cash
flow statement during an accounting year. From the M&S point of view the main impartial of
these yearly reports is to deliver beneficial statistics to the current and probable stockholders
so, they make effective decision to various investments.
It is observed that there are basically three types of financial statements that support
management of firm to determine either the goals are attain or they require some more effort
to attain those goals. With the aid of these annual report manager also comes to know about
the financial position and outstanding debts for a complete year. Generally, three statements

benefit manager of Mark and Spenser to recognize better almost the business process so that
they might reach the company goals. These are discussed below:
Income statement: It is also identified as the profit and loss report or statement of
revenue and expenditure, the income statement principally emphases on business’s incomes
and expenditures throughout a time frame. The income statement, attentions on the basic four
main items such as expenses, gains, revenue and losses.
Ratio analysis: It is one of the most popular financial analysis tool that manger of
M&S to make evaluate, measure the performance, liquidity during an accounting year.
Balance sheet: The systematic record of assets and liabilities of company that help to
calculate the actual financial position of Mark & Spenser in known as balance sheet. This
also help manager to determine the capability of numerous project that aid to produce cash
flows that benefit to attain the desired goals.
5. Financial statement as per the IAS 1:
A: Statement of profit and loss:
Particular Amount
Sales 385100
Less: Cost of goods sold 291700
Gross profits 93400
Rent income 5600
Loss on revaluation of investment
property 3300
Loss on sale of inventory 400
Operating expenses 43100
Profit from operation 44600
Bank interest 830

Preference dividend 1330
PBT 42240
Tax expenses 12000
Profit after tax for equity shareholders 30240
Working note:
Calculation of Depreciation: Amount
On Land and property:
Property 4000
Plant and equipment 48000-22400*12.5% 3200
Total 7200
Charged to cost of sales 3600
Charged to operating expenses 3600
Profit and loss statement gives the detail explanation about revenues and expenses of
company throughout a financial year. This also benefits to figure out the complete income
after removal all tax expenses and other adjustment.
From the above mention statement, it shows gross profit of 93400, profit after subtracting
operating outlays is 44600. It is observed that profit before tax is 42240 and after deducting
tax the actual profit for year is 30240.
B: Statement of equity:

Statement of change in equity
Particulars Ordinary capital Retained earnings
opening balance 26700 23300
Dividend paid -5340
Profit from current year 30240
Closing balance 26700 48200
B: Statement of equity:
Statement of change in equity
Particulars Ordinary capital Retained earnings
opening balance 26700 23300
Dividend paid -5340
Profit from current year 30240
Closing balance 26700 48200
The statement of equity assistance in determinative the total sum a firm has to give to
stockholders at a particular time. From the calculation above the opening balance was 26700
and sun of retained earnings shows amount of 23300. The dividend financed in a year is
equal to sum 5340. Thus the actual revenue for year is 30240. The statement of equity
specifies the closing capital sum of 26700 and final retained earning sum of 48200.
C: Statement of financial position:
Statement of changes in financial position

Particulars Amount
Current Assets
Inventory 12930
Trade receivables 18000
Bank -530
Total current assets 30400
Non-Current Assets
Investment property 18000
Land and property 80000
Plant and equipment 22400
Total non-current assets 120400
Total assets 150800
Liabilities and equities:
Current liabilities
Trade payables 15700
Provision for tax 12000
Deferred taxation 6900
Total liabilities 34600

Equities:
Revaluation reserves 28000
Retained earnings 48200
Ordinary shares 26700
10% redeemable preference shares 13300
Total equity 116200
Total equities and liabilities 150800
6. Two year statements.
7. Differences between IAS and IFRS.
In today’s world, every company need a set of predefined rules and regulation to
execute its business transaction and record these in their books. This help business firm to
bring effectiveness in their business operation and generate more profit. Thus result to attract
large number of customer and increase market position in a long run. International accounting
standard (IAS) are consider to be the set of qualified standard or principle that support firms
to record each business dealing at right place. On the other side IFRS are the newly
developed rules that guides accountant of company to maintain transparent financial
statement to avoid the possibility of false recording. It is observed that many time
accountants got confused with the concept of IAS and IFRS. But there is a basic difference
between these two that is shown below:
International accounting standard International financial reporting standard.
These were recognised to be old and main
significant principle of accounting followed
companies (Martínez‐Ferrero, Garcia‐Sanchez and
Cuadrado‐Ballesteros, 2015. ).
It is defined as the newly specified principle
that is followed at world-wide level by almost
every small and big companies. This advantage
bookkeeper to record business transaction into
final account at right time.
International accounting standard committee
analyse the all relevant decision, if any
International accounting standard board is the
legal authority to make an analysis and

company applies IAS in their accounting
treatment.
measure the performance of company if IFRS
are implemented to record transaction.
International accounting standard was principal
introduced in 1973 by IASC. Therefore many
these are becoming out-dated and company
moving to IFRS.
International financial reporting standard were
established in 2001 by IASB. These are
becoming famous at global level and every
country accepted these principles (Walton,
2012).
Thus above mention difference shows that both these standard are supportable for
companies to record its transaction into correct books. This makes the work easy for manager
of Mark & Spenser as they can easily review the statements and develop effective plans to
attain the specific goals. Accountant of M&S are more bounded to follow the standard of
IFRS as company operate its business in different part so they do not face any problem at the
time of formation of records.
8. Evaluation of benefits of IFRS.
In present era, it is very important for companies weather small or big to apply a set of
suitable standard that help in preparation of annual financial statement during an accounting
year (Nobes, 2014). This is because financial statement is considered to be the most important
report that describes the actual status, position and strength of company. These transparent
statements also add values to decision making process of internal manager so that goals can
be achieved. Statement related to financial status and strength also significant for external
stakeholder as they make effective investment decision. In recent time it is very common to
notice that company are moving to newly developed standard IFRS in order to prepare their
books and formulate financial statements. International financial accounting standard are
established by IASB in 2001 that are being accepted by almost every company at global
level. IFRS are basically the most specific rules of accounting that guides accountant of Mark
& Spenser how to deal or record a transaction within correct books. There are various
advantages of International financial accounting standard to M&S that are discussed below:
 IFRS benefit Mark & Spenser to decide solution for different financial problem
or other concern that may be a reason for decrease of profitability and
productivity.

 These are implemented to formulate appropriate, authentic and truthful financial
statement. It also supports different stockholders to take a valuable investment
decision in M&S.
 IFRS help business entity such as Mark & Spenser to effortlessly notice
problem in their financial statement so that proper measure could be made to
remove those false record (Shivakumar, 2013).
 The key significance of International financial accounting standard is that it
provisions to enhance the money from the international market at a very cheap
rate.
 With the proper financial record, overseas stockholder create accurate decision
of investment so that they have the better result in future.
 One of the most effective advantage to M&S is that IFRS help to create Global
Language that help them to operate business in different part of world.
9 Ascertaining the varying degree of compliance with IFRS
In present time the significance of IFRS is going at a very fast pace and these standard
are followed by almost every country. These usual of belief deliver beneficial evidence to
internal bookkeeper of businesses around in what way to make monetary report. And in what
manner to hold these statement in front of different stakeholders. Essentially there are 13
International financial accounting standards and Twenty nine standard of IAS which have
been implemented at global level by every company (Zeff, 2013). Manager of Mark &
Spenser have appreciate the significance of IFRS. It guide auditor to track precise rules to
formulate financial statement of an accounting year.
As an outcome more sums of shareholders will be fascinated to capitalize within
company or use different services provided and buy product produces by Mark & Spenser.
The principle support companies and the standard of the revelation objective bodies infract of
clearly situation the least compliance level. It has been evaluated that new IFRS principle are
usual conferring to the revelation of the compliance that means that every statement are
accurate and do not hurt the ethic of accounting.
CONCLUSION
From the above assignment, it has been concluded that financial reporting is the
process that help to collect, gather, post, measure the financial information of company

during an accounting year. Statements must be formulated during accounting year which
support customer, financiers, owner to make their investment decision. Totally now days
every business companies are concerned with using IFRS as they are making their statements
that support them to advance proper plans for achieving goals.