Discuss about the Code of Practice on Business and Financial Reporting Requirements.
The importance of a code of practice and corporate governance in aggressive business scenarios cannot be denied. It acts crucial to the achievement of the new frontier of profitability and competitive advantage. The main objective of the code of practice for governance is suggested actions to companies, state bodies with a view to facilitate access to capital and improving their performances. The code of best practice of corporate governance is dependent on accountability, transparency and fairness (Price, 2017). Having said that, the there pillars helps in communicating the real situation of company positions, leadership, strategic decision-making which gives a glimpse of how the company is being governed by the Board of directors. In relation to above subjects, the current paper throws light on the implementation of the code of practice in terms of business and financial reporting. Meeting the code of rules and policies and procedures enacted by state bodies allow the executives to meet highest standards of corporate governance. The report will compare and contrast the codes of practices followed by ESB, commercial state body with the 2016 code requirements for business. Another question will assess qualitative characteristics of FRS 102 with respect to ESB.
Code of practice by state bodies and public spending codes brings in details of the obligations, states bodies are entitled responsible for spending public money that incurs in planning and expenditure in near future. The public spending as per code requirement applies to current and capital expenditure. In terms of Government department, the public bodies must have the receipt of public funding and transactions held that satisfy itself annually whether the company is in compliance with the code (Chartered Accountants Ireland , 2017). According to the annual report of ESB 2016, the Board of directors provides direction and leadership to the entity as a whole who is responsible for all kinds of activities required for long-term success. The decisions relate opportunities, changes, risks, and services are made only after examinations and authenticity of appropriate information available to Board members. The board members ensure that all the business activities are constructed in accordance with optimising the allocation of capital in investments opportunities across ESB portfolios. The organizations networked business successfully delivered capital and maintainance programmes in accordance with regulatory standards and contract. Therefore, comparing according to the code of practices, the company is using the national resources effectively economically that meet community appraisal requirement and allow the Irish citizens to be familiar with they are getting maximum value for the funds provided with the government body in form of tax. The code states that there are four states of expenditure cycle i.e. Appraisal, Planning, Implementation and Post projects review. The sponsoring agency is held responsible for the approval of the projects. The capital invested in the projects will be sponsored by States company which must have prior approval from the Board of commodities a, management before submission of stationing authority (State Boards, 2017). The sanctioning Authority is none other than Department or Government Minister or public body. According to Code of the practice of government state bodies, it is the fundamental duty of the Board of the company to ensure that true and fair, and balanced view of financial statements submitted to the relevant Minister. The board must also ensure accurate and timely disclosure on material matters regarding the sate body, which reflects on business position, financial performance and governance of the concerned entity. The company ESB Board meets monthly on occasion necessary to review the financial and operating performance of the group to ensure the risk management and integral control. In comparison to the 2016 code requirements, the company’s delegated authority takes decision-related to the management on the ongoing operation and financial reporting done timely and accurate basis. So as to set the financial standards, the company must comply with respective accounting standards the state body, the corporate judgement on materiality, valuation and disclosure give fair and true view of financial reporting structure. ESB has also has prepared the financial statement in accordance with IFRS standards and in provisions of Companies Act 2014 (UK Corporate Governance Code, 2016). The company’s balance sheet was successful in revealed correct facts and figures of liabilities, assets and other financial accounting items. The company has performed audit procedure which consisted of assessment and documentation of evaluation process and controls. The annual report of company discloses with completeness and clarity of disclosures in the financial statements and annual report. According to the code requirement, the boards are supposed to have their financial reports audited by independent auditor. The external audit of any state body is carried by Auditor general and comptroller. For this company, the external independent auditors were KPMG (ESB, 2016). The audits and risk committee of ESB has been keeping the developments and reporting standards updated with EU level in relation to section in audit tenure. The audit report of 2016 is being conducted by KPMG which is supposed to be the last one for ESB and next external auditor has been appointed as Pwc for 2017, 2018 and 2019 financial years. The external auditors continued to provide focus on the implementation of the recommendation which is arising by evaluating the internal audit function. It also focused on improvising the quality of communication in between the board commitment and management.
As far as code requirements in accounting items are concerned, the state body has to have formal records of financial position and financial performances set out in the governing legislation of the state body. For instance, the ESB has covered some aspects of financial issues which are discussed by management during the year and sampled as per audit and risk committees. The key risks are:
For instance: the audit and risk commodities recognises inherent complexities in the accounting of non-derivatives instructress to hedge. The major derivatives use currency contracts, currency swaps, interest rate swaps, etc. whereas according to IAS 39 non- derivatives, as own use are not accounted as a foreign exchange or interest rates, but they are primarily accounted as cash flow hedges. To site this decision, the KPMG group relied on the third party for verification process in conducting a valuation of certain derivatives by using different valuation models. In this way, rest of the risk bearing items have been critically evaluated and reviewed as per IAS 36, IAS 19, IAS 39 (ESB, 2016). This ensures that audit and risk committee of the company has essentially presented the financial information of groups performances in a concise and clear format using robust prices of report framework.
Another code requirement is about the application of governing legislation, application of accounting standards in relation to the operation of boards, the name of Chairperson, or CEO, termination payments and agreements, hospitality expenditure, travel and subsistence. According to the code of practices, the state body is entitled to disclose the details of agreement and payments in value excess of €10,000 in the reporting period. The recording of value must cover pension purposes, grants, etc. In contrasts to the ESB, the company operates various pensions’ schemes in the Republic of Ireland which are funded by trustee administered funds (ESB, 2016). The Group operated two pension schemes that are: ESB defined contribution and ESB Defined benefit pension schemes. In electricity business majority of pension schemes is funded through contributor’s pension scheme. The fund is vested in trustees nominated by ESB and its members for sole benefits of employees and their dependents. According to IAS 19, employee benefits, pension scheme is not ‘balance of costs’ scheme. The company does not want any deficit to arise in future so, any further contribution to ESB will be will intend to be on–going contributions and balance of €591 million on company’s additional contribution which was committed in the year 2010 (ESB, 2016). There are three methods of evaluation of Scheme, out of which the company selected to uses Ongoing Actuarial Valuation method that review both company obligations and schemes continue in existence for foreseeable future. Therefore, the above instances showed that company was transparent enough in disclosing its past services contribution in 2010 and present ongoing contributions recognised in the income statement.
The reporting requirements mentioned in code 2016 for state bodies are the publication of the annual report for external users of a financial statement like foremost in not later than four months after the end of financial year. The reporting also intends to cover about Broad fees, Board attendance sand meetings, disclosure of remuneration of Key personnel management, pension liabilities consultancy costs, web publications, etc. On the basis of above reporting requirements , it can easily compared that ESB has complied with all the mentioned guidelines and code of practice because the company has disclosed complete details on Key personnel management remuneration and compensation like Salary of Chief executives, which is recorded as €295,000 annually (ESB, 2016). The qualification details and work experience of each of the Board member are disclosed in page 66 to 67 of the annual report of ESB 2016. This section of the annual report gives material disclosure on company’s corporate governance, effectiveness, the interest of transparency and salary and non-salary related remuneration paid to CEO and board members. For ESB, good governance laid the foundation stone for long-term value creation. The management has the expertise and knowledge for the operational requirements of business which indicates the role of each member towards the progress of the company. In the presence of highly professional and experienced members, the best decisions are put forward in pursuits to comply with the code of practices in reporting of business and financial statements. The department has ensured appropriate measures to comply with state code that continuously updates and review the policies and procedures made by audit and risk committee. ESB has adopted its own code of ethics which sets out ethical and responsible business behaviour out of individuals. The code of ethics adheres to loyalty, confidentiality, integrity and fairness to the highest standards possible that meets all legal and regulatory requirements. As far as board effectiveness is concerned, the Board members continuously strive to improve its effectiveness by conducting informal discussion basis among board members and provide feedback to company secretary and Chairman. The company also conducted an independent evaluation at every their year which is facilitated by ICSI Board evaluation with results expected in 2017. Another important element of the code of practices highlights on board meetings and attendance. According to this provision, there should be at least the annual general meetings held. ESB has conducted 11 General Broad meetings in 2016, which has reported the attendance of board members at all the meetings. On analysing it was found that except one or two members are have attended only 2- 3 meetings while rest of them have above 90% attendance. These figures indicate how dedicated the members are towards reporting and revealing the business operations to achieve the right balance of governance, risk management, strategy, people and finance within the business (Hancock, 2017).
Therefore, from the above comparison, it can be drawn that from the above provision and 2016 codes has been successfully disclosed all the relevant financial and non-financial information and data which was mandatory to the code of practices for state bodies in business and reporting of financial statement. The company published this reports on websites and other public portals to make the report available for extra investors and rebate to assess the economic progress and development of the public organization. Therefore, the ESB diversified business and strong financial position are possible only due to a solid commitment to maintaining high sets standards of corporate governance, reporting structure, sustainability, growth, code of ethics, to disclose the balance and true and fair view of the financial performance of the company (IBGC, 2017).
The FRS 102 denotes the financial reporting standards which are applicable in Republic of Ireland and UK. The FRS aims to provide the enterprise with succinct financial reporting requirements based on International Accounting Standards Board’s (IASB) to apply the general purpose financial reporting of entities including which are not constituted as companies and non-profit oriented. These general purpose financial statements intend to highlight the common financial information needs that required by various financial users like the public, government, investors, shareholders, etc. Under FRS 102, the each accounting topic is addressed as a separate number which is further cross-referenced in paragraphs and section numbers. All paragraphs have equal authority. These sections and paragraphs form as an integral part of FRS, while others the guidance or examples concerning the application of each status. The FRS 102 intended to give a true and fair view of the financial progress of reporting enterprise through profit and loss for a period. In concerned ESB financial statements, the company has disclosed the financial position through income statement reporting revenue of €1327 million in 2016. The return on capital employed is 6.1% (ESB, 2016).
FRS 102 implies IAS regulations to prepare consolidated financial statements in accordance with EU adopted IFRS. ESB has followed the EU adopted accounting standards i.e. IFRS consolidated financial statements are prepared and disclosed in notes to financial statements. Besides, it does not cover any publically traded shares with 100% holdings. Therefore, there is no requirement security commission or other regulatory bodies issuing ordinary shares in public. There are other quantitative characteristics like fair values calculations of portfolio, derivatives, fair value of deferred tax and deferred liabilities, financial instruments, hedge accounting, etc. The shareholders are keen in disclosure on exemptions which may be served on quantifying entity in accordance to the specified timeframe. The company management ensures that they pay measurement, recognition and discloses needs of FRS. The disclosure summary on each accounting is shown under notes to the financial statement which gives a brief summary of exemptions, disclosure, a consolidated group of financial statements, the name of parents groups and others. This quantifying entity gives details of cross-references paragraphs and section that has been talked about in above explanation. In case of ESB, the company has successfully provided the materiality of Group’s Financial statement and has determined the profit by considering principle business assets and liabilities, company’s revenues which evaluates the assessment and expectations of organization operations over next five years. The disclosures in financial statement give an estimated figure on the going concern basis of accounting which provides information based on historical prices. The revenues, assets, non-current assets, current liabilities, operating income, etc some of the accounting items which separated with different headings and prepared in accordance with Companies act 2014 and IFRS accounting standards (The Financial Reporting Council Limited , 2015).
Conclusion
To sum up, the above report on the code of practices on Business and financial reporting statement disclose the need to report the financial information of the company in accordance with providing accounting guideline san code of practices to ensure true and fair view which can be compared with other competitors to assess the financial progress of the firm. Reporting of financial information by following the accounting standards ensures transparency, reliability, fairness and accountability of operational activities taking place within the firm. Thus, following code of ethics and practices avoid conflicts of interests among investors and shareholders.
References
Chartered Accountants Ireland . (2017). Financial reporting requirements of company law in Ireland. Retrieved Sep 2017, from /www.charteredaccountants.ie: https://www.charteredaccountants.ie/Member/Technical/Irish-and-UK-Financial-Reporting/Company-Law-accounting-requirements/Accounting-requirements-of-company-law-in-Ireland
ESB. (2016). Annual Report and Financial Statements 2016. Retrieved Sep 2017, from www.esb.ie: https://www.esb.ie/who-we-are/investor-relations/financial-reports-and-calendar
Hancock, C. (2017, Feb). C&AG notes 2014 financial statement delays of State bodies. Retrieved Sep 2017, from www.irishtimes.com: https://www.irishtimes.com/business/economy/c-ag-notes-2014-financial-statement-delays-of-state-bodies-1.2984230
IBGC. (2017). Code of Best Practice of Corporate Governance. Retrieved Sep 2017, from https://www.oecd.org/: https://www.oecd.org/corporate/ca/corporategovernanceprinciples/1824495.pdf
Price, N. (2017, APr). Importance of Corporate Governance in an Organization. Retrieved Sep 2017, from //diligent.com: https://diligent.com/blog/importance-corporate-governance-organization
State Boards. (2017). Code of Practice for the Governance of State Bodies. Retrieved SEP 2017, from https://www.stateboards.ie: https://www.stateboards.ie/stateboards/code_of_practice.htm
The Financial Reporting Council Limited . (2015, Sep). FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. Retrieved Sep 2017, from www.frc.org.uk/: https://www.frc.org.uk/accountants/accounting-and-reporting-policy/uk-accounting-standards/standards-in-issue/frs-102-the-financial-reporting-standard-applicabl
UK Corporate Governance Code. (2016, Sug). Code of Practice for the Governance of. Retrieved Sep 2017, from /www.google.co.in: https://www.google.co.in/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwjRnKOc0rjWAhUCSY8KHfraBhsQFgg0MAA&url=http%3A%2F%2Fwww.per.gov.ie%2Fwp-content%2Fuploads%2FBusiness-and-Financial-Reporting-Requirements.pdf&usg=AFQjCNHD9B5q9pr9Cn
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download