Comprehensive Analysis of M&S Financial Reporting Under IFRS Framework

This report provides a comprehensive analysis of financial reporting, focusing on the application of International Financial Reporting Standards (IFRS) to the financial performance of M&S. It begins with an introduction to the context and purpose of financial reporting, emphasizing its role in providing u...Read More

International Financial
Reporting

Contents
INTRODUCTION...........................................................................................................................1
1.Context and purpose of financial reporting:........................................................................1
2. Purpose and principles of Conceptual and regulatory framework.....................................2
Q3: Determination of primary stakeholders of M&S and their benefits:...............................3
Q4: Value of financial reporting for meeting organisation goals...........................................4
Q5: Various financial statement analysis...............................................................................5
A: Statement of profit and loss:..............................................................................................5
B: Statement of equity:...........................................................................................................6
C: Statement of financial position:.........................................................................................7
Q6: Interpretation of financial performance of M&S.............................................................8
Q7. Difference between IFRS and IAS..................................................................................9
Q8. Benefits of IFRS............................................................................................................10
Q9: Identification of the varying degrees of compliance with IFRS....................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Every firm’s performance is measure by making and analysing the financial and
management accounting. As this is the tool which is used by the investors and other stakeholders
for taking their rational decisions. The performance of the business is totally relied upon the
performance of the company. Financial statement is made by financial experts which helps to the
investors for taking their rational decisions (Shah, Liang and Akbar, 2013). Financial reporting
assumes a great role in international economies. Its main aim is to render appropriate and helpful
information to the business owners and other stakeholders so that they could take their decisions.
1.Context and purpose of financial reporting:
Financial reporting plays an important role for making the business objectives sustainable
and reliable. The main aim for making the financial reporting is to render a useful and justifiable
information to the diverse stakeholders. This occurs mostly in public limited companies, where
share capital is traded to the general public via stock exchange (Walton, 2012). With the help of
financial reporting, annual reporting is made and it plays an important role for making their
business objectives in an effective manner. With the help of annual return, owners can make
strategy for long term and short term. The owner gets an annual statement which main aim is to
summarise the performance and position of their firm.
Without this reporting system, investors will be lower inclined to part with their capital as
they are going to have no way of monitoring how efficient being run by the directors. The chosen
interns of the company are assuming to be the operating in the best interests of the shareholders.
For satiating the requirements of the users of the financial statements, organisations are
required to applied accounting systems which renders the information related requirement. This
is likewise crucial that financial reporting system is regulated in order to ensure that the
information rendered to the users is in an effective manner and that it is implemented to their
informational needs.
The main purpose of financial reports is to track the financial performance of the business.
As this will help out for knowing about the profit amount is making. the main aim of the
financial reporting is to render this information to the lenders of the business.
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2. Purpose and principles of Conceptual and regulatory framework
This is used to elaborates the nature and aim of the financial accounting and reporting within the
business context. This covers the diverse theories and conceptual factors that are implemented in
the firm’s context. This covers the theories and conceptual factors that are implemented in the
financial reporting. This is a system which helps the layout of the accounting standards and
principles. This is a systematic format of forming information and reflecting in the report format.
This is assuming to the statement of forming of GAAP which renders a layout of assessment of
current accounting and financial practices. Information that are given under conceptual layout
which is based on the theories and practices. Information which are rendered according to the
conceptual framework which is formed as per the theories and concepts (Walton, 2012). This
assists in forming decisions, strategies, assessment of economic layout.
There is a contingency plan which is found in considering conceptual frameworks to
emerge specific information related to the financial statements. Conceptual framework is needed
to form financial reports and standards in the absence of this framework diverse defects could be
emerged. Some of them are mentioned hereunder:
 There is an inner inconsistency found among the diverse concepts which influence the
transactions and income statement.
 There are various chances of misrepresentation of reports subject to financial position
statements, financial position statements.
 Few of the standards constant biased according to the nature of transactions which
covers the direction of standards and quality of reporting standards.
According to International Accounting Standards Board, conceptual framework is needed to
up-to date and relevant to the financial records.
Purpose of conceptual and regulatory framework:
 Emergence of ethical layout of firm in respect of financial reporting and accounting
standards are the key objective of this concept.
 This helps to emerge IFRS and assist IFRS and likewise stimulate mandatory
accounting regulations and standards implemented in financial accounting.
 Conceptual framework is a planned layout handle discipline in accounting practice.
 This main aim is to renders a path to auditors, financial managers, investors and
stakeholders to assess the financial layout of a firm.
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Qualitative characteristic related to financial information:
 This assist to determine the objective of financial statements.
 Helps producer of publishing the financial reports.
 This forms reliable information and records to the people of a firm.
 This assist to segregate assets, liabilities, income and expenditure. All these
standards and policies are elaborated under regulatory and conceptual framework
constant relevant to capital and revenue maintained.
Q3: Determination of primary stakeholders of M&S and their benefits:
Stakeholders are required to recognised as independent bodies those are accountable for firm’s
decision-making process (Shah, Liang and Akbar, 2013). They could influence by diverse firms’
policies and objectives. Some of the crucial stakeholders are creditors, members, government
and supplier from which complete operation of business draws its resources. There are main
party of a company those are having few common interest in it. They could influence by
decision- making those are required to be completed by M&S for emerging better brand image in
the market. In addition to this, the modern theory goes beyond this primary notion to oversee
additional stakeholders like government.
They could form direct or indirect effect on the work execution of M&S. As, internal
stakeholders are having curiosity in the firm as this emerge via direct relation. While on the other
hand, external stakeholders are the outsiders and they do not perform actively in the company’s
operations but they are connected to the company in some point by actions and consequences
(Pelger, 2016). Each stakeholder is accountable forming enhancing competence and productivity
of M&S. They are advantages for them to have each information regarding capital invested and
profits they are getting from total investment. They are advantageous for them to have each
information related to capital invested and return they are achieved from total investment. They
implement to assess diverse financial reports.
Advantages to company:
 Stakeholders helps the firm to make transparency in the company which would further
help out to look the growth of the firm.
 They are linked with decision making process and to eliminate the process and also
eliminate the risk which emerge in a firm because of not implementing appropriate
measures.
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 Stakeholders by taking help of financial statements, can create the portfolio on the basis
of them. There are various objectives that can be achieved by using diverse tools.
 Being an effective role model for employees, they are ever ready to enhance the moral of
workers and other people.
 As per the financial report, they could emerge future investment decision. This would
assist M&S firm to monitor their functions in a most prominent manner.
 By the help of financial reporting, stakeholders could identify existing position of the
nation for facing the competitors those are selling in the similar business line.
 They are the person which can participate in the firm’s general meeting and could
determine capital structure of the firm.
Q4: Value of financial reporting for meeting organisation goals
Accounting report is considering as one of the indispensable section of an enterprise because it
keeps the records of entire expenditure whatever is incurring in an association which is helpful in
decision making process (Navarro Galera and Rodríguez Bolívar, 2011). In fact, department of
report is significant for management team as it aids while planning and during allocation of
resources. However, it plays a crucial role in making strategies, policies designing as well as
selection of optimum alternatives for development and growth of an association. Therefore, it
includes various essential statements such as; cash flow statements, financial positioning, income
statements, expense incurred in an enterprise, factory account, profit and loss account. Thus, all
these significant statements are concluded in single format in order to design summary of entire
project. For instance, accounting statements of selected form highlight the entire turnover of a
company and return on investment. Along with this, it aids managers while summarising the data
and designing a conclusive project with the consideration of necessary terms (Markelevich,
Shaw and Weihs, 2011). Additionally, it supports an enterprise in evaluating the recent financial
status or capital overview by which accounting team get succeeded in identifying the financial
strength in order to repay future debts or liabilities. Mainly, these statements are appropriate for
accountants, company auditors, stakeholder and various other members invested in an
association. Hence, three necessary statements are described as follows: Cash flow statement: - It shows the overview of flowing cash internally and externally in
an enterprise into three main segments such as; operating, investing and financial
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 Income statement: - Operating and administration expenses are falls under this category.
Thus, high level of income over expenditures are considered as profit and vice versa.
 Financial position statement or balance sheet: - Amount of company assets and
liabilities are falls under this statement which is further bifurcated into two different
parts. Therefore, recent or fixed assets are falling under assets side of balance sheet
whereas current liabilities are on other side.
Q5: Various financial statement analysis
A: Statement of profit and loss:
Particular Amount
Sales 285100
Less: COGS 191700
Gross profits 93400
Rental income 1600
Loss on revaluation of investment
property 3300
Loss on sale of inventory 400
Operating expenses 43100
Profit from operation 44600
Bank interest 1030
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
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Charged to cost of sales 3600
Charged to operating expenses 3600
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
C: Statement of financial position:
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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
Cash flows are the key factors which is made for incorporating of reporting statements of M&S.
Cash comprises of regular transactions that are reported by firm in the financial year. This can be
observed that each financial transaction is incorporated by consuming cash (Gras-Gil and et. al.,
2012). These are developed via diverse activities like- operating investing ad financial activities.
According to financial statements total amount is includes of bank interest, sales and dividend.
Each amount is achieved from total earnings and expenditures being for efficient decision
making. Spending that are incurred which earn by way of cash which demonstrates slowly.
Q6: Interpretation of financial performance of M&S.
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Ratio analysis: This is the perfect tool which are used to analyses the financial
statements of a firm. By taking assistance, directors will emerge to incorporate efficient strategy
with the help of ratio analysis. Ratio analysis assist to form to incorporate a report under which
company’s financial soundness could be addressed more efficiently. This is a part of financial
statement analysis which are implemented for more indication of firm’s execution in the various
areas.
Valuation 2016 2017
Net tangible assets Per share 1.27 1.27
Profitability operating margin % 5.53 2.38
Profit margin % 3.85 1.1
ROE % 12.25 3.55
ROCE % 9.04 3.27
Interest cover 5.84 2.76
Quick ratio 0.24 0.33
Current ratio 0.69 0.73
EPS growth % 0.24 0.07
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Cash flow per share 0.47 0.35
As per above-mentioned information of financial statements, it can be said that operating
porfits of the cited company in 2016 was 3.8 while in 2017, this was drop out and come to 1:1.
This is developed due to extra expenses incur by the firms via the year (Dhole and et. al., 2015).
Cited organisation operating margin was come to the previous year. ROE of the M&S was
12.25% in 2016 which was drop to 3.55 in 2017. Which reflects reduction of 8.5% since last
year. While, ROCE rate is 9.04% in 2016 and 3.27 in the current year.
Q7. Difference between IFRS and IAS
IFRS: International financial reporting standards are issued by IASB which is considered
as the common accounting language which is used by the organisations globally regarding
preparation of their accounts which are easily understandable and comparable in all over the
world. These are called as accounting standards which provides the direction to the public
companies regarding preparation and disclose of their financial statements.
IAS: These are also accounting standards which are given by IASC which provides
direction regarding involvement of different transactions and events in financial statements
(Council, 2013). International accounting standards are the older form accounting procedures
which are replaced by IFRS as the large number of benefits are derived by the organisation
globally in comparison to IAS.
Difference between IFRS and IAS
IFRS IAS
All the standards which are made after 2001
are called IFRS.
All the accounting standards which are made
between 1973 to 2001 are called IAS.
IFRS are provided by International accounting
standards board (IASB)
IAS are provide by International accounting
standards committee.
IFRS includes new rules regarding
identification, measurement, present and
disclosure of non-current assets.
These are older form of accounting standards
which have some drawbacks.
Total IFRS are 9 Total IAS are 41
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Q8. Benefits of IFRS
There are large number of benefits are derived by the management of organisation due to
the implementation of IFRS in preparation of the accounting records which are define below:
Use of IFRS by the organisation globally in preparation of their accounts helps in development
of the organisation which in turn provides the development of economy of country (Cayanan and
Valderrama, 2016).
 The accounts which are prepared with the use of IFRS are easy to understandable and
comparable by the investors and drawing out valid conclusions which enhance their
decision making.
 Use of IFRS helps in ascertainment of the confidence of foreign investors and helps to
raise capital at lower rate.
 Helps to increase flow of foreign capital in an economy.
Q9: Identification of the varying degrees of compliance with IFRS
There is huge importance of management and compliance structure for M&S. This
includes the use of IAS and IFRS in preparation of their financial statements and their effective
disclosure in front of investors (Barth and et. al., 2013).
IAS 18 is accounting standards which provides the information regarding the compliance
structure required to adopt by organisation. This defines about accounting standards, realisation
of assets and liabilities etc. IAS 18 helps in recognition of revenue and probability of generation
of profit.
All the financial accounts of organisation are prepared on accrual basis and accounting
assumptions. In development of accounting structure IFRS is used (Akintoye, 2012).
Large number of benefits are derived by multinational organisations like M&S due to use
of IFRS like determination of the economic structure of organisation, identification of financial
position etc.
CONCLUSION
It has been concluded from the above report that, there is huge role of financial reporting
in resolving the many issues. IFRS and IAS are the two accounting standards which are used by
the organisation in preparation of their accounts and financial statements. Large number of
benefits are derived due the use of IFRS by organisation, stakeholders and country.
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REFERENCES
Books and Journals:
Akintoye, I. R., 2012. The Relevance of Human Resource Accounting to Effective Financial
Reporting. International Journal of Business Management & Economic Research. 3(4).
Barth, M. E., and et. al., 2013. Financial reporting for employee stock options: liabilities or
equity? Review of Accounting Studies. 18(3). pp.642-682.
Cayanan, A. S. and Valderrama, H.A.S., 2016. Financial reporting practices of listed Philippine
firms. Philippine Management Review. 7(1).
Council, F. R., 2013. Financial Reporting Council.
Dhole, S., L and et. al., 2015. Effects of the SEC's XBRL mandate on financial reporting
comparability. International Journal of Accounting Information Systems. 19 . pp.29-44.
Gras-Gil, E., and et. al., 2012. Internal audit and financial reporting in the Spanish banking
industry. Managerial Auditing Journal. 27(8). pp.728-753.
Markelevich, A., Shaw, L. and Weihs, H., 2011. Conversion from national to international
financial reporting standards. The CPA Journal. 81(3). p.26.
Navarro Galera, A. and Rodríguez Bolívar, M. P., 2011. Modernizing governments in
transitional and emerging economies through financial reporting based on international
standards. International Review of Administrative Sciences. 77(3). pp.609-640.
Pelger, C., 2016. Practices of standard-setting–An analysis of the IASB's and FASB's process of
identifying the objective of financial reporting. Accounting, Organizations and Society.
50. pp.51-73.
Shah, S. Z.A., Liang, S. and Akbar, S., 2013. International Financial Reporting Standards and the
value relevance of R&D expenditures: Pre and post IFRS analysis. International Review
of Financial Analysis. 30. pp.158-169.
Walton, P. ed., 2012. The Routledge companion to fair value and financial reporting. Routledge
Online
Benefits of IFRS. 2017.[Online].Available through:
<https://webcache.googleusercontent.com/search?q=cache:BQ6_Ux5AmYwJ:https://
www.morganmckinley.ie/article/5-benefits-ifrs+&cd=3&hl=en&ct=clnk&gl=in>.
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