Financial Reporting: Analysis of Mark & Spencer (UK) for 2017 and 2018

This report provides a detailed analysis of financial reporting, focusing on the case of Mark & Spencer (M&S) located in the UK. It begins with an introduction to financial reporting, defining its purpose and importance in providing accurate financial information for decision-making. The main body of the report covers the purpose of financial accounting, the regulatory and conceptual frameworks, key principles, and the main stakeholders of an organization. It examines the value of financial reporting, presents the financial statements (profit and loss, and financial position), and discusses the use of financial statements. Furthermore, the report explores the differences between IAS and IFRS, evaluates the benefits of IFRS, and discusses the varying degrees of compliance. The report concludes by analyzing the financial performance of Mark & Spencer, highlighting the importance of financial reporting for internal management and external stakeholders. The financial statements and balance sheets provide a comprehensive overview of the company's financial health.

FINANCIAL REPORTING

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Purpose of financial accounting...............................................................................................1
2. Requirement, purpose and key principles of regulatory and conceptual framework.............2
3. Main Stakeholders of an organisation and their benefits from financial information............3
4. Value of financial reporting ....................................................................................................4
5. Financial statements of the organisation.................................................................................5
A: Statement of profit and loss:...................................................................................................5
B: Statement of financial position:..............................................................................................5
6. Use of financial statements.....................................................................................................6
7. Difference between IAS and IFRS..........................................................................................7
8. Evaluation of benefits of IFRS...............................................................................................8
9. Ascertaining the varying degree of compliance......................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial reporting, is consider to be the process of analysing, collecting and posting
useful information in financial report that help internal management to make effective decisions.
This process help in formation or accurate and faithful cash flow statements, balance sheet and
income statements (Al-Matari, 2013). With the help of detail statements manager are able to
make decision and improve performance of company if required. For this report Mark and
Spenser is selected that is located in UK.
In this project report the purpose of financial reporting and its requirement is analysed.
The main stakeholder and the value of reporting for growth of company is shown and
formulation of financial statements and comparing of two years statements are covered under
this report. Report focuses on difference between IAS and IFRS and various benefit of IFRS.
MAIN BODY
1. Purpose of financial accounting.
The main purpose of financial reporting is to give exact detail about the performance of
company. It display the financial position and changes in the market position of company.
According to IASB the activity of maintaining financial records about a company is known
financial reporting. It is very important for company to record and display their financial status to
external shareholder do that they are able to make investment decision (Chae, and Oh, 2016).
Report must be liable, faithful and transparent enough that shows the current status about an
organisation. There are various objective of financial reporting for M&S that are discussed
below:
 It provide suitable information to external shareholder and other investor to make
effective investment decision.
 This report help auditors to conduct proper audit to ascertain the financial position of
company.
 With the help of appropriate report manager are able to analyse and measure performance
of operation and employees of company.
 Financial report gives information to stakeholder about the performance management of
Mark & Spencer, that how ethically they are executing job work.
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 It help in providing the detail information about the utilization of various resources in
different activity.
 External stakeholder are able to analyse or examine that weather their money is
effectively used or not (Duncan, 2014).
 Decently managed financial reports are crucial for invitation, labour contracts and
government supplying, as it give summary of the enterprises to outside parties.
 Generic aim of financial reporting is to examine the result of those activity that have been
performed by company during a particular period.
2. Requirement, purpose and key principles of regulatory and conceptual framework
In accounting, it is very important for an organisation to follow the quantitative and
qualitative framework in order to prepare their annual statements. So the regulatory frameworks
involves set of legal guidelines and regulation that are formed by UK legal authorities. So
companies are bounded to follow these rule as it help in ascertaining actual position at a
particular time. On the other side conceptual frameworks is defined as a analytical tool that is
implemented by an organisation in order to determine the entire information about performance
during an accounting year. In Mark & Spencer the regulation formed by IASB are followed
because, it support stakeholder to examine and measure the overall performance. The basic need
and purpose of framework are described below:
 It help companies to prepare annual financial statements with the application of IFRS.
 These framework are useful in development of Future IFRS and set rule for existing one.
 This help manager to make a specific accounting treatment and avoid other alternative for
recording various transaction that happened in company (Eker and Aytaç, 2016).
The conceptual and regulatory frameworks have some advantages for companies that are
discussed below.
Qualitative features of financial information: The main features of financial
information that helps to make the content more reliable. It can be understood with the help of
following points:
 Relevance: It is very crucial for the institution to post applicable data in the financial
report so that it may assist to examine actual execution and financial position.
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 Faithful representation: This attribute help to advantage trust of shareholder like
capitalist and stockholder as it assist them to ensure that structure is in good status and
they may get long term welfare like investments.
So M&S follows these standard that assist company to operate their business at global
level. This will also support company to increased investment and expand market share.
3. Main Stakeholders of an organisation and their benefits from financial information.
Stakeholder
The internal and external parties of an enterprises that have the power to receive and
examine the current and accurate financial statements of an accounting year are known as
stakeholder. They are categorise in various types such as creditor, employees, supplier,
government bodies and other investor from where company utilize its resources. Whenever
company perform an action, set policies and objective stakeholder might get affected. All
corporate stakeholder requires statements that help them to analyse equity investment which
support to take informed decision. Basically there are two types of stakeholder for company that
are described below:
Internal stakeholder:
Those individual or group that have direct relation with company are internal stakeholder
(Elbayoumi and Awadallah, 2017). They are basically employees, board of director etc. which
formulate effective plans, produce good and manage project and operation. Some are discussed
underneath:
Board of director:
They have the power to control and investigate the internal management of company.
They gather information for different sources within organisation to analyse the performance of
employee and make plans for improvement. Board of director of M&S requires financial
information and statements to make effective decision.
Auditor
An auditor examine the financial statements of an enterprises that help them to ascertain
the difference in statement and make modification to resolve these differences.
External stakeholders
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Those stakeholder those are not effected by the business directly. External stakeholder
make a large impact on the decision making process of company. Some of these are described
below:
Customer
Customer are consider to be the backbone of company and their decision have a direct
impact on the business of company. These external stakeholder prefer to make investment or buy
product for companies that have good financial position and produces goods that satisfy them
most (Formisano, Fedele and Calabrese, 2018).
Shareholder
Shareholder or owner are the one who buy company share and make direct impact on the
company. Therefore it is very crucial for company to provide accurate financial statements that
make shareholder aware about the financial status and market position of company.
4. Value of financial reporting
In present era, it is very crucial for company to prepare a detail, accurate, faithful
financial statements that help in attainment of annual goals and determine opportunities for
growth and development. These statement must be prepared by applying General accepted
accounting standard so that business can be performed at global level. In M&S internal manager
formulate financial statements for external stakeholder so that they show more interest in
company and make investment decision. It is very common that a company that display more
accurate financial report and statements and performing well in market have possibility to have
large number of investor.
As Mark & Spencer prepare and keep appropriate record of their overall dealing, this aid
stakeholder to examine their performance and make investment within company. It is possible
that if customer are more satisfied with the company product then market share will be going to
expand for M&S. With the help of accurate and transparent financial statement manager able to
measured competitive advantages in market. One more advantage of financial statements for
M&S that it help in maximising profit by performing good in market and producing those
product that are mostly demanded by customer (Guo, 2018). Manager of company are able to
ascertain the development possibility and grab them in order to make effective plan to achieve
these possibility.
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5. Financial statements of the organisation
A: Statement of profit and loss:
Consolidated statement of profit or loss
Continuing operations
Revenue 385100.00
Cost of sales of goods 291700.00
Gross Profit 93400.00
Operating Expenses 78500.00
Operating Profits 14900.00
Finance Income 5600.00
Finance Cost 830.00
Profit before income tax 19670.00
Income tax expenses 15000.00
Profit after tax 4670.00
Dividend
Equity 830.00
Preference 2330.00
Retained Earning 1510.00
P&L account are prepared by the companies in an accounting year in order to determine
the actual profit. The profit is ascertain by making all relevant adjustment like, tax and other
expenses. From the above mention Profit and loss account the gross profit for company is 93400
and operating profit is 14900. The profit of company before deducting income tax is 19670 and
the actual profit of company after deducting taxes is 4670. The P&L statements shows retained
earning of amount 1510 (Haneef and Smolo, 2014).
B: Statement of financial position:
Financial Statement
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Assets
Land & Property 160700.00
Less:Depreciation -185100.00 -24400.00
Property 88000.00
Less:Depreciation -8000.00 80000.00
Investment property 23300.00
Plant & Equipment 78000.00
Deferred tax assets 8900.00
Other assets
Total non-current assets 165800.00
Inventories 17230.00
Accounts receivable 68000.00
Other assets
Short-term investments
Cash and cash equivalents 1500.00
Total current assets 86730.00
Total assets 252530.00
Equity and liabilities
Equity
Equity share capital 86700.00
10% Pref. Share capital 23300.00
Revaluation Reserve 42800.00
Retained Earning 33610.00
Total non-current liabilities 186410.00
Provisions
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Accounts payable 66120.00
Total current liabilities 66120.00
Total equity and liabilities 252530.00
The above mention balance sheet describe the actual cash position of company during an
accounting year. The balance sheet shows the total assets and liabilities held within company at a
particular time. Total current assets of company shows the balance of 86730 and non current
assets are equal to 165800 during a year. And the balance of total assets are 252530. The total
balance of non current liabilities are 186410 and current assets is 66120. And the total equity and
liabilities for an accounting year are 252530.
6. Use of financial statements.
From the appendix, it has been analysed that Mark & Spencer were 10622000 during
2017 and increase to 10698200 at the end of year 2018. It has been observed that profit for year
2017 is 3992700 and increased up to 3952600 in year 2018. The balance of total operating
expenses were 10020800 in 2018 and income from operation has diminished to 6677400 in
2018. Net profit has been decreased from 2017 which was 117100 to 25700 in year 2018. cash of
company has been also decreased up to 207700 (Li and Yang, 2015). The balance of total current
assets of company has been decreased as current assets were 1723300 in year 2017 that reduces
to 1323300 and total assets shows the balance of 7550200 in year 2018. It has been observed that
capital surplus for both year were same and the shareholder equity have been decreased up to
2956700 in year 2018. There are many other related information gather from financial statements
that shows that financial year 2018 is not good for company. Manager need to formulae effective
polices to overcome losses.
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 0.2940306 0.4073057
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expenses/ Current liabilities 681 432
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
7. Difference between IAS and IFRS.
There are various types of standard that a manager of company must follow to prepare
report and statements. Mostly these standard are set by international accounting standard board.
On the other side IAS are set of those principle that guide in posting of a transaction and other
dealing in financial statements. After 2001 the new set were introduced called international
financial reporting standard (IFRS) (IFRS, 2018). So it is observed that many companies have
started following the IFRS to record their transaction as IAS have been outdated. There is a basic
difference between IAS and IFRS that are discussed underneath:
International financial reporting standard International accounting standard.
It essentially describe as set of newly formed
standard that help auditor to post dealing in
final report.
These were produced to provide the basic
accounting standard to the business firm.
In IFRS, all essential applicable judgement are
executed by IASB.
It is ascertained that all incidental decision are
performed by IAS are examined by IASC.
IFRS were established in 2001 by international IAS were launched in 1973 by international
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accounting standard board. accounting standard committee.
There is same main significance valuable noting, is that any rule inside IFRS found to be
conflicting, that will be definitely regenerate those of the IAS. Basically, when opposed
standards are published, older ones are normally regard.
8. Evaluation of benefits of IFRS
In present era, business world is becoming focused in respect to apply different rules and
regulation in order to record and maintain financial statements. The manager of company
consider all the related guidelines and rules to perform various business activities. Recently
almost every companies apply generally accepted accounting standard principle towards
international financial reporting standard (IFRS). These IFRS state that every business happing
within an organisation is going to be posted in financial statements. It also explain in detail the
method related to posting of a transaction in annual statements and report. Thus, with the support
of these IFRS organisation are ease to resolve the accounting issue, detect error, within the
statements that might be a reason for diminishing profitability of company. IFRS help manager
of company to make effective plans and strategies that aid in maintaining long term, financial
sustainability. The execution of IFRS sort establishment businesses statements clear and
appropriate that benefits stockholder and capitalist to recognise more of company financial place
in current market. There are various advantages of IFRS that are described below:
 Organisation implementing IFRS gives better display of their financial status to
shareholder. This support in making right investment decision (Mohd Nasir and et.al.,
2012).
 The main advantage of IFRS is to create a language that is accepted at global level. This
will benefit investor to look at company financial potion at make decision from any part
of world.
 The chief importance of using IFRS is that it assist in accelerator the money from the
abroad market at very cheap rate.
9. Ascertaining the varying degree of compliance
Nowadays it has been observed that IFRS are considering at the global level. These are
accepted by almost each nation that help various business enterprises manager to form and
represent financial statements. In recent time, there are 13 international financial accounting
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standard and 29 IASs that have to be followed by every companies at global level. Companies
weather small or big in finance have to follow the set of rules (IFRS) in order to prepare annual
statement. So manager of Mark & Spencer are have applied the standard of IFRS that will be
supportable in preparation of financial statements. This guide stakeholder so that they make
investment decision of investment in M&S. These regulation influence organization and the rule
of the revelation target entities offend of distinctly setting the minimum conformation level. So it
is has been measure that IFRS rules are set reported to the disclosure of the conformity in the
circumstance of both specific disclosure needs and the enhancing level of principle of disclosure.
For instance, accounting rules are followed by almost every companies. Each regulation
may impact the investor decision related to investing as they are able to examine the financial
statements of company. In UK government have enforced different accounting standard for
institution that support Mark & Spenser to formulate statement for an business year.
CONCLUSION
From the above assignments report it has been concluded that financial reporting is the
activity related to formation of financial statements that are needed to examine companies
performance and actual position. So companies requires to formulate and edit statement at
regular basis so that clear picture of company can be displayed to companies shareholder. This
support in taking effective investment decision. All the enterprise are directed by IFRS while
they are making their financial report as it may help them to develop proper and close
statements.
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