Analysing Financial Statements Of Marks And Spencer Group Accounting Essay

Marks and Spencer Group ( M & A ; S ) is the prime retail merchant in vesture, nutrients and place ware within the United Kingdom. The companys committedness to quality, value, service, invention and trust is a cardinal subscriber to their success as a high street retail merchant in the UK. Their current nucleus UK operations centre around three divisions, nutrient, general ware ( including vesture and place ware ) , and the fiscal services industry

1.2 Analysis of Financial Statements

M & A ; Ss fiscal statements represent stableness within the company. Gross addition was a high spot within the cardinal public presentations, which included a significant rise in its nutrient concern. However the section information besides shows that were less efficient in commanding their merchandise costs ( cost of gross revenues ) .In relation to the Balance Sheet, the Operating manager of M & A ; S referred to it as A strong Balance Sheet that underpins our hereafter programs to put and the figures seem to repeat this message ( M & A ; S one-year Report 2008, pg 9 ) . During the last twelvemonth M & A ; S has seen additions in its current and non-current Assetss, peculiarly in countries such as intangible assets, Property, Plant and Equipment.

1.3 Analysis of Accounting Ratios

Harmonizing to M & A ; Ss one-year study they have presently completed the first stage of a three point program that was foremost implemented back in 2004 ( M & A ; S one-year Report, pp 5 ) . Since the start of the twelvemonth Marks and Spencers has enjoyed important sale growing amounting to 5.1 % , despite the economic downswing during the last one-fourth of the twelvemonth. However compared to the 10.1 % addition achieved in 2007, it has since seen a considerable bead, due to the economic uncertainness encountered during the last one-fourth of the twelvemonth. Similarly This menace of the economic system addressed by both main executives who both steadfastly believe both companies are in a place to sit out the economic clime due to the substructure in place.. Unexpectedly the net income borders of both companies revealed a autumn in gross border. The same figures were besides posted by similar retail merchants in their industry, such as Burberry ( Burberry one-year study, 2008, pg 5 ) . Therefore most retail merchants in this sector are doing less net income on what it sells to that of the old twelvemonth ( Gene Siciliano, 2003, pg 106 ) . But the net net income border is where they differ. M & A ; S with their addition of 1.2 % , and gradual addition twelvemonth on twelvemonth, prove that they have a clasp on cost control. As a group M & A ; S have seen this liquidness ratio psychiatrist over the past twosome of years.From the position of an investor, M & A ; S have showed a consistent growing of net incomes per portion. Figures stated in the cardinal public presentation steps highlight the important growing of the EPS over the past five years.Another key ratio for stockholders is the dividends per portion. Since investors invest in companies to see a return on the investing, M & A ; S has provided an attractive proposition. All investors in M & A ; S have enjoyed a twelvemonth in twelvemonth addition in dividends per portion since 2004. Furthermore the Dividend screen is another of import facet of stockholder ratios. Potential investors can asses the hazard of puting in portions through he usage of this ratio. But relatively when the survey of 2009 has been done it has been more worst compared to that of the others old ages and this is chiefly due to the economic crisis and the recession all over particularly many European states did endure a batch due to this recession and the UK was one, where we have M & A ; S. Harmonizing to one of the beginnings on the cyberspace it was mentioned Marks and Spencer Group, the U.K.s biggest vesture retail merchant said full-year gross revenues rose 0.4 % to 9.06 billion from 9.02 billion a twelvemonth ago. Net net income in the twelvemonth fell 38 % to 508.0 million or 32.3 per diluted portion compared to net net income of 821.7 million or 48.7 per portion a twelvemonth ago which once more clearly shows the affect that the economic system has had on both the states and the biggest administrations.

The administration besides saw a lessening in its overall net income border when compared to that of the old twelvemonth 2008 where the net income border was 12.5 % where as in the twelvemonth 2009 this was 7.8 % which means there was a enormous lessening in the net income. It came to the intelligence that a few Mercantile establishments of Markss and Herbert spencers were besides closed due to the really hapless economic state of affairs of the state.

Relatively the portion value of the company besides depreciated in this financial twelvemonth of 2009 where one instrument earned simply 32 P where as in the twelvemonth 2008 it was about 49 P, so relatively there are was a significance loss in the company and its portion value every bit good when it was compared with the last financial twelvemonth

1.4 Restrictions to Accounting Ratios

due to the usage of utilizing IRFS criterions instead than FRS many figures in the histories could be misdirecting. This alteration due to the demand by the UK jurisprudence, and the possibility of Window Dressing all limit the usage of ratios. Other grounds such as the usage of historical informations, different methods of usage, and the deficiency of non fiscal informations all contribute to the restrictions of fiscal Account.

Accounting Policies In M & A ; S

Marks and Herbert spencers are obliged to unwrap the Accounting Policies implemented during the twelvemonth in conformity with IFRS and the companies act 1985. They require M & A ; S to include a sum-up of all accounting policies used in order to Help users in construing the Financial Statements ( Hermanson et al, 2005, 195 ) .Therefore the revelation of any accounting policies must supply adequate transparence to enable users of the study to understand all informations provided.

For this ground the FRS 18 was established in June 2001 was chiefly established to cover with accounting policies. It governs how companies select, apply and unwrap the policies used.

The FRS requires accounting policies to be consistent with accounting criterions. Therefore the relevancy of an accounting policy should be assessed when it is selected. This requires M & A ; S to judge how appropriate an accounting policy is to the peculiar circumstance for the intent of supplying a true and just position.

Furthermore FRS 18 ensures the dependability of a policy is evaluated, and reviewed on a regular footing. If a alteration in methods takes topographic point, grounds for this will necessitate to be disclosed to the populace. These alterations should merely take topographic point If a new policy becomes more appropriate.

3.0Analysis of belongings, works and Equipment

Since the start of the fiscal twelvemonth, M & A ; S has been working towards their undertaking of bettering their UK belongings portfolio. To day of the month M & A ; S has amounted a sum of 622 shops in the UK, and a farther 278 abroad in this portfolio. Included in this is a 70 % modernization of shops, with a farther 10 % planned in the approaching twelvemonth. All this has had a significant consequence on the companys belongings, works and Equipment, of which is analysed below

Land and buildings- This involves any land owned by M & A ; S during the twelvemonth. As mentioned above for easy understanding Buildings relate to all belongings that the company owns which is complete.

Thingss such as office infinite, shops and warehouses all autumn under class. Due to the demand to beef up their portfolio this class represents the highest value of touchable assets that the concern owns. Furthermore with farther add-ons to come Land and edifices could go a valuable plus in the companies Balance Sheet.

Fixtures adjustments and equipment- Fixtures and adjustments owned by the company have mostly increased due to its spread outing belongings portfolio. Together with new equipment and the committedness to modernize its shops, this class is identified as a cardinal factor in contending the recession the UK Economy finds itself in.

Assetss in Construction- Due to the addition of M & A ; Ss UK portfolio, and the modernization of its shops many assets remain incomplete. Therefore the cost of these assets is listed as its value until it is complete.

3.2 Depreciation

The deprecation constabularies adapted to account for the Land and edifices depend on a figure of factors. Freehold Land is deemed non depreciable under the M & A ; S accounting policies, whereas freehold and leasehold edifices are. Depending upon the staying clip the lease term has left, they will either be depreciated by their residuary value over their estimated staying economic lives if over 50 old ages, otherwise over the staying period of the rental

In relation to Fixtures, adjustments and equipment the rule remains the same. But the assets are depreciated between 3-25 old ages harmonizing to the estimated life of the plus, utilizing the consecutive line method. This shows a alteration in their accounting policy compared to the old twelvemonth, which stated 3-15 old ages. Therefore it can be implied that M & A ; S can pay less depreciation on any add-ons as there is an option to deprecate an plus over a longer period of clip.

Finally the Assets in Construction, as the name suggests refers to the assets that are non yet complete. Therefore any plus of this type is non capable to depreciation until after it has been completed and reclassified to either one of the other classs.

The one-year study further shows no damage took topographic point during the twelvemonth. Nevertheless, if damage was to take topographic point, than harmonizing to the accounting policies of M & A ; S it would be reviewed yearly, and any damage found would be charged to the income statement as the NBV value is more than its recoverable sum

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