Hind Al Fahad Fatima Al Shahrani Ala Asarhani

Hindalfahadfatimahalshahranialaaalsarhani

Hindalfahadfatimahalshahranialaaalsarhani

Hind Alfahad Fatimah Alshahrani Alaa Alsarhani Hibah Alkhalifah Course project Intermediate accounting 2 A group of 5 students will analyze a selected annual report, and present their work in week 14 during class time. Before the presentation of analysis, each group should hand out a written ( maximum of 5 pages) document that covers the topics mentioned below. Presentation of materials could be done by using paper posters or PowerPoint. The written document should be posted in Blackboard on Saturday 21/4/2018 before 12:00 AM. Nature of the project: Discuss issues we have covered in chapters 13,14,15,21 that relate to financial statements presentation, notes to financial statements, financial ratios …… etc.

In addition, students are expected to relates topics covered in the (discussion and reflection papers) to information in an annual report. Examples of topics to cover: • Short term liabilities • Provisions • Contingent liabilities and contingent assets • Long term liabilities • Tax Liabilities • Leases • Fair value option • Ordinary and preference shares and related information • Dividends policy • Notes to financial statements and disclosures • Ratio analysis • Type and recording of leases • Non-financial reporting • Application of technology improvement in the company annual reports • Any differences between GAAP and IFRS in terms of the names, and elements’ presentation of financial statements.

Students are expected to discuss the following issues on each point: • Presentation of information • Analysis of information in deep and connect it to the subjects covered in the course. • Example of analysis could be: o why would a company have a treasury stock? how that affect the financial position of a company?........etc. o Why would a company choose one kind of lease over the other, and what affect would that cause on the presentation of financial statement?.......etc. o What kind of liabilities a company has and how that affect the financial position of a company?.....etc. Hind Alfahad Fatimah Alshahrani Alaa Alsarhani Hibah Alkhalifah Each group will choose one of the following annual reports: • Debenhams • Costa • Audi • Tesco • Adidas • Seiko Hind Alfahad Fatimah Alshahrani Alaa Alsarhani Hibah Alkhalifah Individual evaluation rubric: Name: section: Evaluation of the poster or power point presentation: 3 • Professional presentation of the poster ( self confidence, speaking clearly, show high level of understanding) • High level of Creativity • discussion 2 • Reasonable presentation of the poster ( self confidence, speaking clearly, show some level of understanding) • Creativity • Reasonable discussion 1 • Reasonable presentation of the poster( low self confidence, un clear speaking, show low level of understanding) • No creativity • Insufficient or no discussion.

0 • Non presentable Hind Alfahad Fatimah Alshahrani Alaa Alsarhani Hibah Alkhalifah Evaluation: You will be graded based on different criteria as indicated below: Score (7-5) the mark will be based on your achievement of these points · A group shows fully understanding of the assignments. · A group includes all the main points that is required in the project description. (Introduction, main body and conclusion). · A group shows excellent explanation of the importance of each point and linked to what has been studied in the course. · the paper shows excellent clarification of the difference between GAAP and IFRS in terms of presentation of financial statements. · Ideas and thoughts have been expressed clearly in the paper. ·A student hand over on time. score (4-3) the mark will be based on your achievement of these points · A group shows resendable understanding of the assignment. · A group does not include all the main points that are required in the project description. (Introduction, main body and conclusion). · A group does not show excellent explanation of the importance of each point and how this linked to what has been covered in the course. · the paper show good clarification of the difference between GAAP and IFRS in terms of presentation of financial statements.. · Ideas and thoughts have not been expressed clearly ·A group hand over after due date. score (2-0) the mark will be based on your achievement of these points · A group shows no evidence of understanding the assignment. · A group does not explain the required main points clearly. · A group does not follow the correct format in writing the paper. · A group hand over after due date or does not hand over.

Paper For Above instruction

Introduction

The analysis of annual reports provides critical insights into a company's financial health, accounting policies, and compliance with financial reporting standards. This paper aims to analyze a selected annual report—specifically, the Tesco PLC annual report—focusing on various aspects like financial statement presentation, notes, financial ratios, and the differences between GAAP and IFRS. The purpose is to evaluate how the company reports its financial position, manages its liabilities, and adheres to international accounting standards, providing a comprehensive understanding of these concepts in practice.

Financial Statement Presentation and Notes

Treasury stock, though not frequently discussed, plays an essential role in a company's capital management strategy. Tesco’s annual report reports treasury stock under equity, reflecting its impact on earnings per share and overall shareholders' equity. The presentation of financial statements follows IFRS, with a clear distinction between current and non-current liabilities, assets, and equity. Notes accompanying the financial statements elaborate on significant accounting policies, commitments, and contingent liabilities.

One notable aspect of Tesco’s disclosures is its handling of provisions and contingent liabilities. Provisions are recorded based on probable future obligations, such as restructuring costs. Contingent liabilities are transparently disclosed, explaining the nature of possible obligations that depend on future events, thereby providing users with a comprehensive risk assessment. The notes also detail long-term liabilities, including lease obligations, which are recorded based on the current lease accounting standards—IFRS 16, which requires lessees to recognize right-of-use assets and lease liabilities.

Financial Ratios and Analysis

Ratio analysis plays a significant role in understanding Tesco’s financial stability and operational efficiency. Key ratios include debt-to-equity, liquidity ratios (current ratio, quick ratio), return on assets, and dividend payout ratio. These ratios help evaluate how the company funds its operations, manages liquidity, and distributes profits. For example, Tesco’s debt-to-equity ratio indicates its leverage level and financial risk. Liquidity ratios show its ability to meet short-term obligations, critical during economic fluctuations.

Leases constitute a crucial element of Tesco’s liabilities. The company’s transition to IFRS 16 has significantly affected the presentation of lease obligations, moving from operating leases to recognized liabilities and right-of-use assets. Analyzing these changes reveals how companies balance lease payments and their impact on financial statements, influencing indicators like asset turnover and debt ratios.

Accounting Standards: GAAP vs. IFRS

One of the critical differences between US GAAP and IFRS relates to the classification and recognition of leases. Under IFRS 16, most leases are recognized on the balance sheet, whereas GAAP distinguishes between operating and finance leases, with different impacts on financial metrics. Tesco’s adherence to IFRS standards ensures greater transparency but also increases asset and liability recognition.

Disclosures related to fair value measurements and non-financial reporting—such as corporate social responsibility initiatives—are also detailed in Tesco’s annual report. The company employs technological innovations to improve reporting accuracy and timeliness, reflecting ongoing efforts to enhance transparency and stakeholder communication.

Discussion and Deep Analysis

The presence of treasury stock within Tesco’s equity hints at strategic buyback programs aimed at optimizing shareholder value. Share repurchases can affect earnings per share positively and may signal management’s confidence in the company’s prospects. However, they also reduce available cash, impacting liquidity and financial flexibility.

Regarding lease accounting, the shift to IFRS 16 means more liabilities are recognized upfront, impacting key ratios like debt-to-equity and asset turnover. This change enhances transparency, providing a clearer picture of the company’s obligations. Companies might prefer operating leases under previous standards for off-balance-sheet financing; however, IFRS’s approach offers a more comprehensive view of liabilities.

Analyzing liability composition reveals that long-term obligations, such as bonds and lease liabilities, significantly influence Tesco’s leverage and risk profile. The management’s strategy of balancing short-term and long-term liabilities affects liquidity and operational flexibility. Effective liability management ensures that Tesco maintains a healthy financial position and sustains stakeholder trust.

Differences between GAAP and IFRS, particularly in revenue recognition, lease accounting, and financial reporting format, influence how stakeholders interpret financial statements across borders. The transition to IFRS aligns Tesco’s reporting with international standards, facilitating comparability and transparency, which are fundamental for global investors.

Conclusion

The analysis of Tesco’s annual report illustrates the intricate relationship between financial statement presentation, accounting policies, and international standards. The shifts in lease accounting standards under IFRS 16 have notably affected the company’s financial position, emphasizing the importance of transparent disclosures. Strategic management of liabilities, treasury stock, and compliance with IFRS strengthen stakeholder confidence and align financial reporting with global best practices.

References

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