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Financial Reporting Master

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The observance of accounting standards in reporting is mandatory in all countries as per the direction of Accounting Standard Board (ASB). All countries have developed their own accounting standards and in the absence of a standard in any occasion, Generally Accepted Accounting Standards (GAAP) can be followed. This report has four sections, namely A, B, C, and D. Section ‘A’ deals with the specific accounting policies adopted by Tesco, Sainsbury and Morrison, followed by the comparison of the same between one another. It also throws light on whether there are any differences in the accounting policies followed by these companies and if any, what are they. Section B is meant to present the financial analysis of all the three companies’ financial statements for a 5 year period using profitability ratios, liquidity ratios, debt ratios, activity ratios, gearing. Section C is for detailing the major limitations of ratio analysis in the light of given companies. Section D provides a report on the performance of a company of Morrison Plc. Based on the ratios calculated in Section B.
The company prepares and presents it financial statements comprising of income statement, balance sheet and cash flow statement in accordance with applicable accounting standards, under the historical cost convention, and are in accordance with the Companies Act 1985 (Accounting…
Basis of Consolidation
The company prepares its consolidated financial statements comprising of statements of parent company and that of its subsidiaries. It has been made mandatory for the Continental European companies to prepare financial statements prior to the preparation of the same of the group so as to ensure timely preparation and reporting. As regards the excess/deficiency of purchase consideration is concerned, it shall be adjusted in reserves. It is therefore necessary for all subsidiaries to adhere to the accounting policies of the group with the aim of attaining consistency in the accounting policies.
Stocks
Stocks in stores are calculated at retail prices and reduced by appropriate margins to the lower of cost and net realizable value.
Money market investments
Money market investments are shown at cost price. All income received from these investments is included in the profit and loss account.
Fixed assets and depreciation
Depreciation is provided on an equal annual installment basis over the anticipated useful working lives of the assets, after they have been brought into use, at the following rates:
Leasing
items such as plant, equipment and fixtures and fittings are shown in the financial statements as tangible assets. These assets are subject to depreciation as per the depreciation policy of the firm.
Sainsbury Plc.
International Financial Reporting Standards (IFRS)
Sainsbury will follow IFRS for financial reporting though it will have a small adverse impact on reported profit after tax. This impact excludes the effect of IAS 32 and IAS 39 – the Group has elected to take a one-year exemption in implementing these standards as allowed under IFRS.
Morrison Plc.
Basis of