Organization is accompanied with the complex set of activities in which various functions are performed to achieve the certain goals and objectives. It is considered that financial analysis of company helps in evaluating the business performance and how company has been managing its business throughout the time. In this report, two companies named JB HI-FI and Wm Morrison plc have been taken into consideration.
It is evaluated that JB HI-FI Company is international company which is running its business on domestic and international level. This company has been selling electronic Home appliances and services to international clients to increase the overall turnover. The present stock price of the JB HI-FI Company is JBH (ASX) A$ 25.73 +1.63 (+6.76%). The main headquarter of company is in Melbourne, Australia. The CEO of company is Richard Murray.
In this report analysis has been made by comparing JB HI-FI Company with another company named Morrison Company. Wm Morrison plc is supermarket trading company which is fourth largest chain of supermarket in United Kingdom having headquartered in Bradford, England (Chand, Patel and White, 2015).
It is evaluated that objective of the conceptual frameworks of financial reporting is to disclose all following of its business. JB Hi-Fi Company has recorded all of its assets, liabilities, revenue and expenses by following proper level of harmonization in its GAAP rules and international financial reporting standards.
There are several objectives of conceptual frameworks with its reporting of organization which focus on increasing the transparency of its business, reflecting true and fair views of assets and liabilities of business and follow international financial reporting standards while reporting its assets and liabilities of business. Another objective of conceptual frameworks with its reporting of company is related to encourage standard reporting and accounting frameworks which will help stakeholders to interpretative financial data in best efficient manner (Dinnie, 2015).
JB Hi-Fi Company has followed international financial reporting standards in preparing its financial statement. This company has prepared its financial statement and also reported it’s by maintaining proper harmonization in GAAP rules and IFRS accounting standard. Another company is Morrison plc which has also managed its inventory by following IAS-2 accounting standard. In addition to this, Morrison plc has recorded all of its asset and liabilities by following IAS-136. It has shown that company has charged impairment test in its business to showcase all the true and fair value of its assets. The main differences between JB Hi-Fi Company and Morrison plc are related to maintain conceptual frameworks with its reporting of financial statement. The JB Hi-Fi Company has followed both GAAP and IFRS rules and on the other hand, Morrison plc has followed only IFRS rules while reporting its financial statement (Draft, 2015).
It is considered that cash flow statement of JB Hi-Fi Company has been prepared by following IAS-7. Company has managed to follow indirect method to prepare its cash flow statement. However, company has also used direct method to assess the right amount of cash inflow and outflow in business. In addition to this, IAS-2 has been followed in it’s the conceptual frameworks with its reporting of its financial statement to manage the inventory in its business. Another main provision which JB Hi-Fi Company has followed in conceptual frameworks with its reporting is related to impairment test. This has shown that company has used impairment test in its books of account to show the true value of its assets and liabilities in its balance sheet (Elad, 2016).
It is considered that JB Hi-Fi Company has recognized all of its assets, liabilities, equity and revenue, expenses by following double entry system. It has recorded all of its assets by following proper rules and regulation of IFRS standard. Company has satisfied all the accounting standards and proper rules while recording its assets, liabilities, equity and revenue, expenses. In addition to this, IAS-136 has also been followed by company to showcase the true and fair view of its assets. Nonetheless, impairment loss arises from revaluation of its assets, liabilities, equity and revenue, expenses in its business is being charged by company from its cash generating units. In addition to this, JB Hi-Fi Company has followed FIFO methods in its inventory management by following proper IAS-2 rules and regulations. It is further observed that all the financial information provided by company is mainly used to help its internal and external outsiders to understand all the key factors of business in determined approach (Garrett, Hoitash, R. and Prawitt, 2014).
In addition to this, JB HI-FI has been reporting its all the financial information and annual report on international level due to its international business functioning. On the other hand, Morrison plc has also followed only IFRS rules and standards while recording of its assets, liabilities, equity and revenue, expenses in its financial reporting frameworks. For instance, company has implemented impairment test as per the IAS-136 which allows company to charge all of its impairment loss arise from revaluation assets. In addition to this, company has charged all of its impairment loss from its goodwill amount and rest amount of losses has been charged from the cash generating units in proportion basis. This is the main differences which have been found while analyzing the annual report of both companies. Nonetheless, it is observed that JB HI-Fi is more efficient in complying with all the rules, regulations and international accounting standards while recording the financial information (Cayanan, 2016).
The main fundamental qualitative enhancing characteristics of financial reporting used by JB Hi-Fi Company are related to disclose all the imperative financial information with its stakeholders and investors. It is considered that if qualitative enhancing characteristics of financial reporting of company are related to timely disclosure of company’s information and increasing the transparency of business. AS per the IFRS rules and regulations, JB HI Fi company has maintain standards reporting policies and frameworks which helps all the stakeholders and investors to understand the financial performance of business in easy and determined approach. After evaluating the annual report of both companies, it is evaluated that proper notes to accounts and narration to its business reports will also increase the faithfulness of its books of accounts to the investors (Abeysekera, 2013).
It is evaluated that JB Hi-Fi has maintained effective financial reporting in which all the rules and regulations have been followed in effective manner.
Relevancy- It is evaluated that relevant financial information is capable of making effective investment decisions. It is considered that the annual return prepared by company is accompanied by all the required amount of information which could be used by investors to make investment decision.
It is considered that annual report prepared by company is based on the accounting concept perpetual entity in which certain period of reporting is given. Investors by using these information could easily make effective investment decision in determined approach.
It is considered that a complete depiction of information disclosed would include groups of assets, nature of assets, financial performance of business and other factors which could be used by investors to make effective investment decision in determined approach. It is evaluated that JB Hi-Fi Company has disclosed all these information in its annual report by following IFRS and GAAP rules in its accounting standards.
It is considered that if company could use proper level of comparable values which not only consider international factors but also the concepts and rules in the reporting frameworks then it will increase the relevancy and compatibility of the annual report of company. It is considered that company has used this information by following proper. JB Hi-Fi Company has followed IFRS and GAAP rules in its reporting frameworks which increases its compatibility with the financial reporting of other companies (Garrett, Hoitash and Prawitt, 2014).
After evaluating the annual report of JB HI-FI Company and Morrison plc, it is evaluated that these both companies have followed proper level of accounting standard. In the verifiable rules, both companies have followed different impairment test which shows that JB Hi-Fi Company has charged all of its assets by using proper impairment test in which impairment loss has been charged from the cash generating units. On the other hand, Morrison plc has charged all of its impairment loss from its goodwill and rest amount is charged from cash generating units of company (Zeff, van der WelandCamfferman, 2016).
Conclusion
It is evaluated that all of assets, liabilities, revenue and expenses of company is properly recorded by following proper level of harmonization in its GAAP rules and international financial reporting standards. This level of accounting standard not only increases the overall transparency of business.
References
Abeysekera, I., 2013. A template for integrated reporting. Journal of Intellectual Capital, 14(2), pp.227-245.
Cayanan, A.S., 2016. An assessment of the financial reporting practices of listed Philippine banks in 2003. Philippine Management Review, 11(1).
Chand, P., Patel, A. and White, M., 2015.Adopting international financial reporting standards for small and medium?sized enterprises. Australian Accounting Review, 25(2), pp.139-154.
Dinnie, K., 2015. Nation branding: Concepts, issues, practice. Routledge.
Draft, I.E., 2015.Conceptual Framework for Financial Reporting. 2015-05-01)[2015-07-20]. https://kjs. mof. gov.cn/zhengwuxinxi/gongzuotongzhi/201506 P.
Elad, C., 2016. International Classification of Financial Reporting, Christopher W. Nobes.Routledge, Abington, UK (2014),(160 pages,£ 95), ISBN: 0415736935.
Garrett, J., Hoitash, R. and Prawitt, D.F., 2014. Trust and financial reporting quality. Journal of Accounting Research, 52(5), pp.1087-1125.
Zeff, S.A., van der Wel, F. and Camfferman, C., 2016. Company financial reporting: A historical and comparative study of the Dutch regulatory process. Routledge.
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