International Corporate Reporting Assignment Sample

Analyzing International Corporate Reporting: Assignment Sample

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Introduction Of International Corporate Reporting

One of the biggest and most important things in a company's financial statements is its revenue. The revenue figure is frequently used in accounting to determine the value of a firm and has an impact on important financial measurements and indicators. To address many of the revenue recognition concerns, IASB and FASB worked together to develop IFRS 15 Revenue from contract with clients (Napier and Stadler, 2020). The report provides information of global economic reporting standards (IFRS) in the analysis of the corporate financial statements of Vodafone plc. The documents that summarize a company's financial circumstances are recognized as its financial statements. Financial statements are comprised of four different reports. The income statement, the statement of retained wages, the balance sheet, and the cash flow statement are these reports, in that order of preparation.

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Vodafone Plc is an international; telecommunication business company which is originated in British. It is not shocking since Vodafone has performed incredibly well for customers. Vodafone is a worldwide telecommunications corporation based in Newbury, Berks, England (Patents Court, 2020). It now operates in 22 countries and has partners in an additional 48 countries including Asia, Europe, Africa, and Oceania, and is where it is most dynamic. When Millicom and Rascal Electronics establish a joint venture called Racal in 1981, Vodafone officially come into form. Rascal Electronics is a industry that specializes in military radio technology. This joint venture ultimately evolve into Vodafone. They will have 93,000 employees working for them as of 2020 (Kerr and Moloney, 2018).

Background of the study

The IASB and FASB released IFRS 15 - Revenue from Contracts with clients in May 2014, which denotes a innovative method for recognizing returns. IAS 11 - Construction Contracts, IAS 18 - Revenue, and any connected interpretation are all superseded by IFRS 15, which is put into effect on January 1st, 2018, after first being applicable for periods commencing on or after that date (Marco et.al. 2019). For investors, revenue has always been single of the mainly critical financial indicators in their managerial procedure because it shows the development and growth of business. As a outcome, it was regularly the goal of tampering. Changed incentives are a critical constituent in returns exposure to exterior stakeholders and revenue supervision, according to current studies.

Aims

The main aim of the report critically assesses the implementation issues and challenges of revenue recognition policies in Vodafone plc.

Objective

  • Provide an understanding of international financial reporting standard
  • Determining issues and challenges of revenue recognition policies implementation
  • To understand the implication of change in accounting standards on various aspects of business

Research questions

Given the aim of the study, the subsequent research question is set to be answered in our study:

  • How useful are international financial reporting standards in the analysis of corporate financial statements?
  • How to apply international financial reporting principles in Vodafone plc.
  • What are the changes made in international accounting standard and their implication on financial reports?

Literature Review

The analysis of corporate financial statements by using international financial reporting standard

The reporting of precise kind of business and events in financial statements is governed by a position of secretarial standards called International Financial Reporting Standards (IFRS). The International Accounting Standards Board formed and maintain them (IASB). The IASB desires the policy to be functional again and again more or less the humanity so that investor and previous user of financial statements can contrast the financial performance of widely trade company with that of their international nobles on an equivalent footing (Robinson, 2020). Additional than 100 nation, counting the European Union and more than two-thirds of the G20, currently use IFRS. International Accounting Standards (IAS), which was extra customary standards that IFRS replaced in 2000, is irregularly incorrect for IFRS. Analysis of corporate financial statements becomes easy with knowledge and application of international financial reporting standards.

IFRS provides standards for the following financial statement.

Numerous accounting procedures are covered under IFRS. The IFRS has mandatory guiding principle for some part of company manner.

  • The balance sheet or statement of financial position: How a balance sheet's elements are reported are influenced by IFRS.
  • Statement of inclusive Income: This report can be accessible as a single statement or broken behind into a profit and loss statement and a statement of other income, which include returns from property and equipment (Weygandt al. 2018).
  • Equity Statement of Changes: This statement, which is often referred to as a declaration of reserved income, particulars the company's alter in income or income for the specified financial period.
  • A statement of cash flows: breaks down the company's financial transactions for the specified period into three categories: operation, investing, and financing.

By applying IFRS knowledge analysis of financial statements can be done while considering the following points:

Fair presentation and compliance: The financial circumstances, financial presentation, and cash flows of an body must all be "presented fairly" in the financial statements. According to the Framework's definition and acknowledgment principles for assets, obligations, income, and expenditure, fair disclosure necessitate the faithful treatment of the impact of dealings, additional events, and circumstances. The statement is that the performance of IFRSs will offer financial statements that attain full disclosure, with extra in sequence where necessary (Palepu et.al. 2020). A business must openly and unambiguously reveal in the explanation that its economic statements fulfil with IFRSs per IAS 1. Financial statements must remain to all IFRS standards to be deem obedient with those standards.

Accrual basis of accounting: Apart from for cash flow statements, IAS 1 mandate that an organization accumulate its financial statements to use the accumulation method of accounting (Alrawahi and Sarea, 2016).

Uniformity of arrangement: From one stage to the next, the presentation and arrangement of objects in the financial statements must be maintained unless a change is required by a revised IFRS or is validated by a alter in the situation.

Materiality and aggregation: Documentation is material if it could be expected that its omission, misstatement, or concealment would affect decisions that the multiple users of audited accounts, which nearby financial data about exacting exposure body, take base on all those financial statements.

Comparative information: Unless another Standard specifies differently, IAS 1 mandates that comparability of information be disclosed concerning the prior era for all amount shown in the economic statement. Both on the face of the financial statements and in its remarks.

Critically evaluate the application of international financial reporting principles in Vodafone plc

In the new era of the international market, the company Vodafone started working on financial reporting standards from the year 2014. The important agreements have been made through the agreements between IFRS 11 and IAS 19 for employees' benefit, which is further revised. The company needs application standards that are retrospective in nature. The financial information of Vodafone is unaudited and then prepared in 2012. The preliminary results are announced on May 21 of the year 2013 by the group through the restatement of information related to finance.

The future of the financial information is based upon the policies made by the previous joint ventures for the revenue and services adjusting the profit of the operations for the free flow of the cash. The major impacts on the company were formed through the adoption of two new standards which are Joint arrangements IFRS 11 and IAS 19. Both the standards have their advantages as well as disadvantages (Burton and Jermakowicz, 2015). The Employee benefits revised in IAS 19 give the return on planned assets of the company with the income statements for the pension plans of employees. The Joint arrangements from IFRS 11 were made during the groups of network infrastructure incorporate economic statement with the employ of equity and accounting methods. Disclosure resolves to be significant to considerate the key assumption primary the computation of a lease compulsion, such as the reduction rate use. Global Financial Reporting Standards 13, fair value dimension in the end of 2018, the IASB available a Post-implementation Review of IFRS 13 Fair Value dimension.

The development of international accounting standards and the implications of changes in those standards on financial reports

The International Accounting Standards Board (IASB), working as an self-regulating organization with headquarters in London, free two sets of regulations. For equity instruments, other than those supposed for trade and delegation reflection in a industry arrangement, the IASB has introduce an unalterable alternative at commencement with the effect of IFRS 9 (Reid, et.al 2019). One instance is the European Commission's demand to the European Financial Reporting Advisory Group to explore the possible effect on enduring reserves in impartiality instruments requirements International Financial Reporting Standards 15, revenue from contract with clients IFRS 15, helps in address sing how and when a business reporting under IFRS will identify revenue and present associated disclosure. The standard offers a solitary, five-step paradigm for recognising all contracts with consumers that is founded on fundamental concepts. For reporting periods starting on or after January 1, 2018, the standard is applicable. Descriptive amendments with the same effective date as the standard itself were released by IASB in April 2016. For periods beginning on or after January 1, 2019, International Financial Reporting Standard No. 16 (IFRS 16) applies. More lease obligations will be recognised on the balance sheet as a result of the implementation of IFRS 16. When acknowledging the lease for the first time with the new requests, the lessee will frequently distinguish between an identical quantity of leased assets and lease liabilities (Mnif Sellami and Gafsi, 2019). In order to highlight what investors should pay attention to, the relevance of IFRS 16.6 and the CFA Institute issue in 2019 that examines current lease disclosure of a select group of company (including either IFRS or the commonly established accounting ideology used in the United States of America) are both relevant.

Methodology

Data collection method

The strategies, approaches, or instruments that researchers employ to achieve their goals are known as research methods. The incident's goal is to inform the audience in a way that will benefit them. Numerous data investigation techniques make use of various data collection tools. The "Qualitative Approach" is the most effective information-gathering technique (Rahman, 2020). There are a lot of options for gathering data and They'll all turn out to be successful for the company. The method is adaptable and may be modified based on study variables, so it will be effective for Vodafone Company. It is the most effective information research technique that uses study data. The qualitative technique can be used to learn much more about the company.

Data gathering method

The act of gathering and analyzing data regarding a determined parameter that was utilized before an agreement is known as data collection (Coe et.al. 2019). The secondary data assembling program can be used to accomplish this. All data will be acquired from authoritative sources such as books, profit and loss accounts, general ledgers, and publications. The company's information is gathered from a variety of sources. The domestic factor will consist of sales, balance sheet, and financial data. Just a handful of the numerous sources include newspapers and official records. Secondary research is thorough and economical. There are many benefits to using this second form of data collection. Researchers can also save time and money by using them.Any deficiencies or gaps in a company's core offering can be filled in by secondary data. The availability of secondary data from a variety of sources increases the productivity of research. The business's strategy for acquiring data is quite successful.

Research approach

These consist of generalization-based methods, procedures, and phases. Advancement in inductive research can help with the intended learning outcome. Using this tactic, the researcher can compile information on the consequences of implementation of international financial reporting standard. The study begins with a progression of ability and development from a wide range of events to particular experiences. Numbers, facts, statistics, and an acquired proof will be the deciding factors. The findings of the Financial Reporting Council's thematic review of IFRS 15 include the impact of IFRS 15 on accounting policies. The report, in the mindset of other things, places of interest that poor images were provide when revenue is documented.

Research Philosophy

A set of ideas and beliefs known as research philosophy describes how data are perceived and interpreted. The associate must demonstrate their ability to accurately compile information. The researcher has several viewpoints to pick from, such as realism, critique, pragmatism, and utopianism (Cazeaux, 2017). The best research theory in this field is an interpretive framework. It suggests a qualitative strategy that is sympathetic. Planning and job research both benefit greatly from this idea.

Reliability and validity

These core ideas can be used to rate the caliber of the research. The approach or technique utilized to calculate anything will be impacted by these ideas. The accuracy and dependability of a test are referred to as validity. The rapidity of testing is important for reliability. Demonstrating the implication of changes made in international accounting standards has increased the usefulness of the analysis (Heale and Twycross, 2015). It complies with all standards for research. This analysis is appropriate for a certain circumstance and can be used to support the company's notion. Moreover, the sources used to compile the study's data are trustworthy.

Analysis of Findings.

Without restating prior year data, IFRS 15 was implemented for the group's statutory reporting on April 1, 2018 (Napier and Stadler, 2020). This section of the study compares the performance and profitabilityof Vodafone under IFRS 15 and IAS 18.

Figure 1 Vodafone plc operating review

 Vodafone plc operating review

On an IAS 18 basis, Overall revenue for the Vodafone Group amounted to €11.2 billion, of which €9.9 billion came from services. The sale of Vodafone Qatar had a negative impact of 0.8 percentage points and 2.8 percentage points, respectively, on the total revenue, which decreased by 2.1%. this adverse impact majorly comes from the movement of foreign exchange rates. The sale of Vodafone Qatar had a negative impact of 0.8 percentage points and 2.8 percentage points, respectively, on the total revenue, which decreased by 2.1% (Kabir and Su, 2022). Revenue growth climbed 0.3% on an organic basis, indicating AMAP's excellent growth, which was offset by a fall in Europe brought on by the burden of UK handset finance and EU roaming laws. Without these elements, business inEurope expanded by 0.5%.

On an IFRS 15 basis, 10.9 billion Euros were the Vodafone group's total revenue, while 9.2 billion euros were its services revenue. The netting of positive trader fee workings from service revenues is the main reason of the inferior level of earnings when compare to the IAS 18 basis. Moreover, under IFRS 15, income recognition of service is lower since other income, which is accordingly greater, now includes the share of ARPU that is related to the gradual recovery of handset subsidies under IAS 18. In part as a result of the removal of the drag from UK handset funding, organic service revenue growth was 1.1%, better than from the IAS 18 basis (Altaji and Alokdeh, 2019). Excluding the UK, where even the notable drag from handset sources of finance is removed, the implications of IFRS15 fluctuate regarding individual country-level factors like the number of handset subsidies and retailer commissions. In general, organic service revenue rates of growth are not significantly different from the IAS18 model.

An alternative measure of the presentation and effectiveness of the corporation is also done by using, A reconciliation of service revenue and revenue to the statutory IFRS 15 basis for the quarter that ended on 30 June 2018.

Figure 2: alternative performance measure

alternative performance measure

organic growth Those figures in this paper that begin with an exclamation (*) stand for "organic growth," which compares performance based on acquisitions and mergers activity and currency exchange rates (Barba Navaretti et.al. 2022). Although organic growth is neither meant to replace reported growth nor is it better than reported growth, the managers believe that these measurements give investors and other interested parties relevant and necessary information for the following purposes:

  • it offers more details on the company's underlying development without taking into account certain aspects unrelated to its operational performance;
  • it is used for inside performance and profitability analysis;
  • it smooths the progress of comparability of fundamental growth with other any company

Keywords: IFRS 15, Revenue Recognition, Comparability, Disclosures, Earnings Quality, in

Conclusion

This study sheds light on how IFRS 15 affects financial reports. Evidence is given specifically on how enterprises adopted the new norm and how it affected earnings quality and profitability. For the majority of businesses, including Vodafone plc, IFRS 15 had no appreciable consequence on earnings or reserved earnings. For businesses that were materially impacted, the general result was a decline in wages or reserved income, which assorted and did not pursue any industry trend. The report also concluded that before implement IFRS 15, Vodafone plc's contextual relevance of earnings was lower, and it remained lower after switching to the recent norm. In addition, not all of these company transitioned to utilising the traditional approach, which necessitate methodical disclosure and revision of qualified year's data.

The data presented in this essay concluded that there are significant policy issues. First, standard-setters ought to think about limiting transition strategies with minimal disclosures to businesses where the effects of a original criterion won't matter much. They should also be aware that several businesses found it quite simple to alter their transactions and business models to avoid the effects of the new standard, as demonstrated by the research study of Vodafone plc. The problem of whether a substantial change in the standard was essential and whether issues with existing standards might be better handled through routine reviews and updates is also raised if the effects of switching to the new standard are typically insignificant. Could the IASB have amended the current standard to address concerns like bundled products and services, for instance, considering the time and money it required to confirm and applying IFRS 15? That is, would a more evolutionary strategy have offered a chance to solve issues faster, cheaper, and with less impact on financial reporting? Users may experience less uncertainty with a gradual approach, but one should also take into account the resources needed for ongoing standard enhancement.

References

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