Analysis of International Corporate Reporting: JD Sports Fashion

This report provides a detailed analysis of international corporate reporting, focusing on the annual reports and accounts of JD Sports Fashion. The analysis includes a literature review on the importance of annual reports, followed by a critical examination of the income statement, balance sheet, and cash flow statement. The income statement analysis highlights revenue trends, profitability, and earnings per share, while the balance sheet assessment evaluates the company's assets, liabilities, and shareholders' equity. The cash flow statement review focuses on cash generated from operations, financing, and investing activities. The report uses the 2019 annual report of JD Sports Fashion to illustrate key concepts and concludes with a summary of the relevance and importance of annual reports and accounts to stakeholders, particularly shareholders. The report emphasizes the significance of financial reporting in decision-making and the role of annual reports in providing meaningful financial information to stakeholders.

Running head: INTERNATIONAL CORPORATE REPORTING
International Corporate Reporting
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Table of Contents
Introduction......................................................................................................................................2
Literature review: Importance of the Annual Reports and Accounts..............................................2
Critical review of the Income Statement.........................................................................................5
Critical analysis of the Balance Sheet.............................................................................................9
Critical analysis of the Cash Flow Statement................................................................................13
Overall discussion..........................................................................................................................16
Conclusion.....................................................................................................................................17
References and bibliography.........................................................................................................18

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Introduction
The main objective of all the financial accounting is to prepare meaningful reports for the
users of financial information. Annual report of a company includes financial reports or financial
accounts and financial statements as well as various other information relating to the operations
and governance of the company. Hence, annual report is having a great significance in meeting
the objective of the financial accounting and reporting. Information relating to the financial
performance of a company such as revenue, profitability operating margin and net profit are
mainly presented in the income statement of a company (Elshandidy&Neri2015).Information
relating to the financial position of a company are shown in the balance sheet, such as total
assets, total liabilities and equity of the company. Lastly,the cash flow statement of a company
presents the cash generated from operating activities, cash raised from financing activities and
utilization of cash in investing activities of a company (Dichev 2017).
In this report the annual reports and accounts of a FTSE listed company have been
analyzed to understand the use and objectives of annual reports and accounts, the relevance of
the income statements to the shareholders and stakeholders, the usefulness of the balance sheet to
the shareholders and lenders and lastly the objectives and advantages of cash flow statement to
the shareholders. For this discussion and analysis, the JD Sports Fashion company has been
selected which is a FTSE listed company. Based on such an analysis a conclusion has been
drawn to justify the relevance and importance of the annual report and accounts to the
stakeholders of a company.

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Literature review: Importance of the Annual Reports and Accounts
Annual report of a company includes some important statements, reports and information
related to the financial performance, financial position, operations of the company and its
governance. Every company has some specific accounting policies and code of conducts for their
business operations. Performance of a company for a complete financial year are presented in the
annual report and accounts of a company, based on which, different stakeholders of a company,
make decisions related to the company.
The objective of whole of the accounting process is to keep a track of the financial
performance of a company and to prepare meaningful information in the form of financial
accounts and statements to help the stakeholders in making important business decision.
Therefore, the very first objective of the accounting and reporting describes the importance of
annual report and account that is to provide meaningful information to the stakeholders. On the
other hand, it helps the management of the company to assess and analyze the performance of
their company and to make business strategies for future accordingly. Few authenticated journals
and reports can be reviewed to understand the importance and usefulness of the annual reports
and accounts as follows (Dichev 2017).
The article “The Importance of Financial Reporting to Capital Market Development in
Ghana” by Atuilik&Salia, 2018 tries to analyses and present the importance of the financial
reporting, financial statements and accounts on the decision making of the investors in a capital
market. The main outcome of the article is that investors depends and rely upon the published
financial reports and statements to understand the financial performance and financial position of
a company and based on that they make their investment decisions. As financial statements are
published in the annual report of a company, the importance of the annual report and accounts

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have also be justified in this article. Though the reports only focuses on the importance of
financial reporting in relation to the investors and capital market it also highlights the importance
of annual reports and information published in annual reports along with the financial accounts
and statements (Atuilik&Salia 2018).
Another article “The Economic Importance of Financial Literacy” by Lusardi& Mitchell,
2014 also emphasized the importance of uniform financial reporting practices and the usefulness
of financial accounts and reports. The article outlined the need of financial accounting and
reporting and the need for uniform accounting principles and practices. As the annual report is
the one where all the financial performance and positions are reported along with the accounting
principles and practices, the article highlights the importance of the annual report and accounts
from the perspective of the internal and external stakeholders (Lusardi& Mitchell 2014).
Every business organization with the objective of making profit have various business
strategies and plans. In case of companies, they have to raise funds from various sources for
financing those businesses and projects. Every individual, institutions and organization which are
related with the company in any means are known as the stakeholders of that company. In
general, the stakeholders of a company includes, shareholders which finances the business,
lenders, suppliers, customers, government and the society as a whole in which they operate their
business. Each of such stakeholders have their own and specific interest to the company and they
are working towards achieving their objectives. As the have to make various important business
decisions related with the company, they must understand the financial performance of the
company, current financial position of the company, operational performance and future growth
of the company. In case of some important and futuristic business decisions they have to make
projection of the financial performance and financial position of the company too to make a

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rational decision. All the information which are required for such analysis and interpretation of
the financial performance, financial position and operational efficiency of the company are
reported and presented in the annual reports and accounts of a company. Therefore, the
importance of the annual report and account can be well established from the view point of the
interest of stakeholders in a company as well as from the view point of the overall business
objective of the company. In the following parts of this report some of the important statements
and reports which are reported in the annual report of the JD Sport Fashion company for the year
2019 have been analyzed and interpreted to understand the importance and usefulness of the
annual reports and accounts to the stakeholders mainly the shareholders (Annual Reports.com
2019).
Critical review of the Income Statement
Income statement is the statement of operations of a company. It includes the information
related to the operations and financial results of the company. As all the companies are oriented
towards profits and they make such strategies to maximize their earnings with an overall
objective of shareholders wealth maximization.Business organizations earns revenue from their
operating activities and spend for expenses to earn the revenue. The difference between the total
revenue and total expenses or costs is the net operating result of the business. It might be a profit
or it might be a loss (Dichev 2017).
Income statement is the first part of the financial statement of a company as presented in
the annual report of a company. It is the statement of the financial performance or financial
results of the operating activities of a company. The annual report of the JD Sport Fashion for the
year 2019, includes an incomes statement as the part of accounts reported in the annual report. In

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page 124 of the JD Sports Fashion Annual Reports and Accounts 2019, the consolidated income
statement of the company has been presented. Following is the extract of the incomes statement
of the company as has been reported in the annual report of the company (Annual Reports.com
2019).

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It can be observed that the company is reporting all of its revenue and in the consolidated
income statement following the international accounting standards and international financial
reporting statements. It can be observed that a multi-step income statement format has been used
for preparation and reporting of the financial performance of the company. It shows the breakup

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of profitability in gross profit, operating profit before financing incomes and expenses, operating
profit before tax and profit after tax. It also shows the breakup of profit attributable to the non-
controlling interest and profit attributable to the equity of the company. Further, it can be
observed that, a statement of comprehensive income has also been prepared and presented along
with the consolidated income statement which shows other comprehensive income of the
company and a breakup of earnings available to shareholders (Annual Reports.com 2019).
It can be observed that there is a positive growth in the revenue of the JD Sports Fashion
company which implies the increase in market share and efficiency of the company. JD Sports
Fashion is a well-known and established brand in the sports and fashion industry. With an
intense focus on quality and customer satisfaction, they have been able to capture a huge market
shares which is leading to the increase in revenue of the company. It can further be observed that
there is a significant increase in gross profit of the company, which implies the efficiency in
managing their costs. After considering all the incomes and expenses the profit after tax has also
been increased from the last year. From the breakup of earnings available to the non-controlling
interest and earnings available to the equity shareholders, and the information relating to the
earnings per share, it can be observed that, as a result of increase in revenue and profitability of
the company, there is an increase in earnings per share also (Annual Reports.com 2019).
Apart from the financial performance and financial results which are presented in the
consolidated income statement and statement of comprehensive income, few more important
technical things can be observed which needs consideration. It can be observed that, the income
statement has been prepared and presented in 52 weeks basis as well as in 53 weeks basis ending
at 2nd February and 3rd February respectively. It helps in better understanding the financial
performance and operating results in the ending period of the financial year.

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It can be observed from the reported financial statement and note to the financial
statement as attached to the annual reports and accounts, that they have followed international
accounting standards for accounting treatments in the books of accounts and the international
financial reporting standards have been used for reporting of the financial results of the company
(Tsagas2017). The company has applied exemptions under IFRS 101 with respect to the
disclosures including the cash flow statement. The adoption of IFRS 16 has no impact on the
cash flow similarly it has no impact on the evaluation of the store investment opportunities. They
have also used UK accounting standards for preparation of the financial books of accounts
(Annual Reports.com 2019).
From the statement of directors’ responsibility it can be observed that, the directors gives
a consent that the respective and applicable accounts have been used for preparation of the
financial statements and the financial statements show a true and fair view of the financial
performance and financial position of the company.
Critical analysis of the Balance Sheet
Balance sheet is the statement of affairs of a company. It shows all the assets and
liabilities owned by a company. It includes information relating to the total assets classified into
current and non-current, liabilities classified into current liabilities and long term liabilities and
the shareholders equity. All the items included in each heads of assets and liabilities are
individually reported along with notes explaining it in the annual report. It helps the shareholders
and other stakeholders to understand the current financial health of the company and to assess
the liquidity and solvency of the company. Following extracts of balance sheet from the 2019

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annual report of the JD Sports Fashion company can be used for further analysis of their balance
sheet (Annual Reports.com 2019).

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It can be observed from the above statement of financial position of JD Sports Fashion
company, that all the assets and liabilities of the company has been presented under major heads
of current assets, non-current assets, total assets, current liabilities, non-current liabilities, total
liabilities, net assets and total equity. Under each such heads all the line items of the respective
class have been presented along with detailed explanations and calculations in the notes to the
financial statement (Annual Reports.com 2019).