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This report includes some of the basic principles and conventions that must be adhered to while preparing the financial state
Financial Accounting
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Table of Contents_______________________________________________________Page
1. Executive Summary…………………………………………………………………….2
2.1 Accrual Accounting……………………………………………………………………2
2.2 Going Concern…………………………………………………………………………3
3. Key Accounting Concepts and Conventions…………………………………………..4
4. Marks & Spencer’s treatment of PPE, Intangible assets and provisions……………5
5. Impact of Impairment on Marks & Spencer’s Finance Performance………………6
6. References………………………………………………………………………………..7
1. Executive Summary
This report includes some of the basic principles and conventions that must be adhered to while preparing the financial statements. It includes analysis and evaluation of some of the accounting practices and conventions. This report also analyses and evaluates some of the accounting practices in Marks & Spencer Plc.
2.1 Accrual Accounting
Accrual concept includes recognition of revenue when earned while expenses are only acknowledged when they are suffered or incurred. This accounting concept needs creation of an extra account that records the variance obtained from the difference between revenue and expenses recognized as well as reception or payments of cash. Accounts receivable is normally used in recording accrued incomes while deferred revenue account is used to record revenue not earned (Banerjee 2005, p. 4-5).
On the other hand, accrued expense account is used in recording expenses before payment of cash while deferred expense account is used in recording expenses after paying cash. This type of accounting concept is very expensive and that it is possible for the account to owe taxes on their income even before the cash is received. In marks & Spencer income is recognized when the products are sent to the customers and important risks and title incentives are shifted to the client. The deferred tax is accounted for after calculating it based on anticipated way of realization. The company also has trade receivables account and trade payables (Banerjee 2005, p. 4-5).
2.2 Going Concern
Going concern is regarded as one of the most important assumptions in accounting used in preparation of final accounts with an assumption that the business will continue to operate in the next foreseeable future. The company is expected to successfully settle their liabilities after realizing their assets. It is always upon the management of the company to check on the ability of the organization to continue doing business in the coming future. The accounts of Marks & Spencer are prepared in the basis of going concern and the directors are convinced that the company will be able to operate in the next future. The directors are very much concerned that there are no uncertainties that may interfere with the company’s operations in their future (Gibson 2012, p.11-12).
The company managed to make a profit of $458 as at March 2013 and positive cash and cash equivalents. The company’s current assets also exceed the current liabilities thus showing an element of going concern. The company is also in a position of paying out her dividends and financing The company will not likely to fail in its operations in the near future considering her statement of financial position and the consolidated income statement (Marks & Spencer 2013, p. 1-3). There are a number of indications of a going concern business which are not reflected in the financial statement of Marks & Spencer. Some of the dangerous signs indicating challenges of going concern are poor liquidity positions, high financial risk and delay in payments as well as serious litigations affecting the company. Marks & Spencer do not also have any indication of defaulting by one of their chief customers that may eventually affect her operations (Gibson 2012, p.11-12).
3. Key Accounting Concepts and Conventions
There are universal ways of presenting accounting information to the relevant parties. These conventions are very useful in doing away with inconsistency that may be experienced while recording accounting data. Relevance is one of the conventions that insist on disclosing only the information that is relevant as far as achievement of the business objective is concerned. Relevancy deals mostly with items whose nature and amount are significant in a way that they can influence the decision making process of the financial statement’s users. The convention may also be referred to as the materiality concept and is very important as it may greatly affect the accounting record and the nature of business (Weil, Schipper & Francis 2013, p. 24-25).
This accounting concept is very vital as it is based on anticipation of loss but not profit. It provides that income must not be overstated while preparing the books of accounts although any loss anticipated must be accounted for. It is important to include some anticipated losses such as discount on debtors, depreciation and creation for doubtful debt. The other convention is full disclosure concept which posits that all important substantial and pertinent facts regarding financial statements must be entirely revealed. Accounting information must be thorough, logical and appropriate. Financial statement should include detailed presentation of accounting information such as investors, accounts receivables, accounts payables and shareholders (Needles, Powers & Crosson 2011, p. 185-190).
Furthermore, there is objectivity concept that states accounting data ought to be measured and articulated by the principles that are globally suitable. Feasibility concept states that the period, labor and cost of investigating accounting data ought to be compared to the profit coming out of it. In addition, consistency convention is another form of accounting concept which implies that accounting standards should be applied while preparing financial statements yearly. This is very important when it comes to comparability of different accounting periods. Similar accounting processes and practices should always be applied constantly in every financial year to facilitate comparability process (Weil, Schipper & Francis 2013, p. 24-25).
4. Marks & Spencer’s treatment of PPE, Intangible assets and provisions
Property, plant and equipment in Marks & Spencer’s costs are recorded at a cost excluding depreciation as well as exclusion of impairment in accordance with conservatism theory. This concept is very important since it avoids overstatement of profit and also recognizes anticipated loss as required. The company does not revalue her property while doing their accounts although assets available as a result of construction are recorded at cost minus impairment cost. Marks & Spencer has a policy of depreciating her noncurrent assets after subtracting residual values Marks & Spencer 2013, p. 2-6). The organization do not depreciate her freehold land but the freehold and leasehold buildings whose remaining lease term is more than 50 years are depreciated by taking residual value and dividing by anticipated economic life of the property (Greuning 2009, p. 92-100).
However, the leasehold building with period below 50 years are normally depreciated as per the outstanding time of lease. Equipment, furniture and fitting with between 3 and 25 years. Marks & Spencer usually ensure that they review their policy of impairing property, plant and equipment if there are some instances that prove that the carrying amount cannot be recovered. This always prompts the management of the company comes up with an amount that ought to be recovered basing on conventions and estimations. The depreciation of the property, plant and equipment is normally done in this company in writing down the assets to the remaining value divided by the property plant and Equipment anticipated useful live (Oppermann 2008, p. 64-70).
5. Impact of Impairment on Marks & Spencer’s Finance Performance.
In the previous year Marks & Spencer impaired the carrying amount of Marinopolous B.V goodwill and other stores in Greek whose branches make do not make profit to show the value that can be recovered and the net book value. Impairment has several impacts on the financial position of various businesses and therefore should be taken seriously. Any loss for an asset due to impairment should be charged on the asset in question and further disclose the notes of impairment to the financial statements stating the assets and reasons for the action (Robinson 2012, p. 512-516).
Impairment loss and write offs of an asset is likely to reduce both the net income as well as the non-current asset’s value. The reduction of income statement through charging the impairment loss has an effect of reducing the shareholders’ equity and eventually lowering debt to equity as debt to asset goes high. It is also likely that Marks & Spencer’s expected net income may go high because the value of the asset must have been reduced through impairment loss. The total impairment for the year ended 31 March 2013 for the Marks & Spencer company was £m 44.9 (marks & Spencer 2013, p. 17-19). This means that the income was reduced by £m44.9 and the value of assets were also decreased by the same value. Eventually the effect of impairment would mean that income is not overstated but expenses are recognized as anticipated.
References
Banerjee, A 2005, Financial Accounting: A Mangerial Emphasis, [S.L.], Excel.
Gibson, Charles H 2012, Financial Reporting and Analysis + Thomsonone Printed Access Card South-Western Pub.
Greuning, V 2009, International Financial Reporting Standards: A Practical Guide, Washington (D.C.), World Bank.
Marks & Spencer, 2013, Notes to the financial statements, retrieved 27 August 2013, <http://annualreport.marksandspencer.com/docs/MS_AR2013_p82-109_NotestoFS.pdf>.Needles, Powers, & Crosson, V 2011, Principles of Accounting, Mason, Ohio, Cengage Learning.Oppermann, B 2008, Accounting Standards in Brief, Lansdowne [South Africa], Juta.Robinson, R 2012, International financial statement analysis, Hoboken, N.J, John Wiley & Sons.
Weil, L., Schipper, K., & Francis, J 2013, Financial accounting: an introduction to concepts, methods, and uses, Mason, Ohio, South-Western.
The world economy is influenced by both economic and no-economic factors (Schumpeter, 2017),
Finance
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The world economy is influenced by both economic and no-economic factors (Schumpeter, 2017), and therefore there is a need to keep a check on all the aspects that may affect the growth of the economy. Various non-economic factors are responsible for the increase or the fall of the economy of different countries around the globe. Some of these factors include; war, corruption, political instability, technology, government laws and regulations, education as well as innovations and training.
War is one of the factors that lead to the decline of peace within a nation or even the overall world peace and thus have a direct effect on the growth of the world economy (Duffield, 2014). Peace is deemed to be one of the major factors that encourage investments and as well favors trade between nations. With the disruption of peace, there will be tensions within the globe that will discourage investments and trade as well. Political stability, on the other hand, contributes to peace, and therefore political stability should be encouraged within nations to ensure their prosperity in business and the overall economy (Borner, Brunetti & Weder, 2016).
Corruption is directly related to the decline of the economic growth of a country because the money and resources that are deemed for development are pocketed by individuals, and therefore development is left to lag behind. The slow progress of the country discourages investment leading to low injections to the country’s economy. Technology, on the other hand, influences the mode of production, as well as the provision of services and therefore the more improved the technology, is the easier the production and service delivery.
Government laws and regulations play a significant role in the growth of an economy. Favorable laws and policies attract investments especially when there are subsidies for the provision of services. The development of regulations that favor business such as less taxation encourages investments contributing to higher production and the overall increase in the GDP of the country. Education and training equip the people with the necessary skills for the establishment of businesses. Innovations leads to the development of new technologies as well as the production of new types of goods and services that lead to the satisfaction of people’s needs and therefore for the fulfillment of human needs, creativity and innovation leads to the development of entrepreneurship to which increase the business ventures and the overall GDP of a country (Acs, Szerb, & Lloyd, 2017).
References
Acs, Z. J., Szerb, L., & Lloyd, A. (2017). The global entrepreneurship and development index. In Global Entrepreneurship and Development Index 2017 (pp. 29-53). Springer, Cham.
Borner, S., Brunetti, A., & Weder, B. (2016). Political credibility and economic development. Springer.
Duffield, M. (2014). Global governance and the new wars: the merging of development and security. Zed Books Ltd..
Schumpeter, J. A. (2017). Theory of economic development. Routledge.
The case-based learning solution
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Introduction
Knowledge of learning theories is fundamental to all leaders who want to be successful in their businesses. The following is a design of a case-based learning solution for non-learning leaders wanting to understand learning theory. Most people who own businesses have an urge to learn and understand how to effectively manage a business but lack the necessary learning materials and tools. On the other hand, technology has created a lot of impact on every aspect of modern life. Computers are currently used to control every daily operation. The excessive use of technology in all aspects of life has made many people miss some basic educational needs because they have low technology level (Tainio, Lilja & Santalainen, 2003). This case-based learning solution will take care of all people in the society irrespective of their understanding of technology to enable them complete the learning theory course effectively.
The case-based learning solution
Demonstration of theory and practice
A learning organization presents many and diverse methods of gathering and managing knowledge. Most organizations make an assumption on learning theories arguing that the context of what is contained in a learning lesson is connected to the fundamental of the theory (Lane 2001). The outcomes, objectives and goals of learning should be directed towards clear understanding of learning theories. When designing a learning solution for leaders, one should consider several factors. Firstly, the technology level of an individual is of great importance. Not all people are computer literate therefore; the lessons created should use other means of presenting ideas apart from the computer. In most circumstances, MS word and PowerPoint are used for designing most lessons but in cases where the leaders’ technology level is low, hand written charts could serve well. Cognitive learning theory and research gives a better solution on how to design instructions that enhances leader-learning skills. Based on the educational level of the learner, the cognitive learning theory provides a learner with an opportunity to learn something new and the new approaches towards attaining the learning objectives.
Secondly, the learning solution should demonstrate design theory and practice. The lessons should be designed in way that they not only cover the content on the learning theory and design but also focuses on its application. Learning theory in practice enables leaders to demonstrate high levels of understanding and make use of that knowledge in running organizations. The instructor’s goal will be to understand the demands of the topic sand the needs of a learner in order to offer a learning experience that gives the learner an opportunity to excel in life. Education forms the primary method of social progress and reform. The experience acquired in learning has a lot of impact in the social life of a leader and helps to bring about changes in a society. According to Constructivism theory, a learner’s personal understanding comes from the knowledge gained in a learning process facilitated by using appropriate learning activities and good environment (Kim, 2005).
Learning tools
As discussed above, this is the development of a learning program for non-learning leaders wanting to understand learning theories. Various tools aid in the learning process although, the tools used on this context should consider the technology level of learners. Technology forms an important part of the day to day live because it has revolutionized communication and learning patterns. Most learning lessons today are planned and written using high-tech materials introduced in the learning institutions. In addition, the business environment is extremely challenging today and leaders are using the upcoming innovations in making their boosting businesses. This creates a challenge to people who have low education level and are unable to utilize the modern technology. The following learning process will create a solution for such people since appropriate tools will be used in teaching them. To ensure learners get home the taught lessons, various tools such as charts, demonstrations, and video presentations will be used. In cases where MS word and PowerPoint presentation is used, an instructor will be available to guide learners on how to use the computers (Lawrence, 2003).
Outcome
On the other hand, the outcome of the learning process should be substantial and effective to leaders. Learning theories play a great role in shaping the life of leaders in terms of making them realize various opportunities found in the business world. The outcome of the teaching process should give learners enough competence to be able to develop their businesses and people. After learning, leaders should be able to accomplish the following. Firstly, the leader should be in a position to make an observation and learn from it. This process makes use of the skills and knowledge acquired in class to understand various aspects of an organization through observation. Secondly, the learner’s social behavior should change whereby; the environment plays a significant role in the change. Behavior change is measured by performances of individuals through display of learned tasks (Means, 2009).
Length of learning
The length of the learning process depends on the capacity of a leader to understand the theories being taught. Most leaders today whose technology levels are low can attend a learning theory class until they gain whatever they need irrespective of the time taken. The class time for each theory class will be commanded by the understanding level of a leader. In most cases involving non-learning leaders, lessons are determined by the level of understanding. In order to ensure learners achieve the objectives and goals of learning, the following steps are necessary. In addition, learners will be evaluated to determine how well they cope with the learning and highlight learning theories that require more time to teach. Moreover, the instructors will make use of several deliverables that describe how the learning process will be carried out. The participants manual and instructors manual will be designed to assist leaders in learning and save the instructor’s time for explanations. Where slides are used, several examples will be demonstrated to enable learners get every content of the learning theory.
First, only learning theories that are easier to implement will be applied first. Eventually, other theories will be introduced as time goes on. This step encourages and promotes learner’s outcome as they develop more learning skills. Secondly, secondly, the learners’ evaluation will be carried out when the mind is fresh. This should take place probably in the morning hours. The evaluation will assist the instructor in determining theories that worked, those that did not work, and areas needing additional teaching.
Conclusion
Design of a case-based learning solution for non-learning leaders wanting to understand learning theories is a hard task requiring a lot of input and resources. Non-learning leaders possess low levels of education and take long to absorb a point making it difficult to plan their lessons. From the above plan, several factors have been considered in designing the case-based learning solution. These are the intended audience, the level of technology, demonstration of design theory and practice, tools, outcomes, and length of learning.
References
Kim. (2005). “The Effects of a Constructivist Teaching Approach on Student Academic Achievement, Self-Concept, and Learning Strategies”. Asia Pacific Education Review 6 (1): 7–19.
Lawrence, T. A. (2003). Challenges of Teaching with Technology Across the Curriculum: Issues
and Solutions. London: Information Science.
Leonard, D. C. (2002). Learning theories, A to Z. Westport, Conn.: Oryx Press.
Mearns, J. (2009). Social learning theory. In H. Reis & S. Sprecher (Eds.), Encyclopedia of
human relationships (vol. 3). Thousand Oaks, CA: Sage. pp. 1537-1540.
Tainio, R, Lilja, K., & Santalainen, T. J. (2003). In M. Dierkes, A. Berthoin Antal, J. Child & I.
Nonaka (Eds.), Handbook of organizational leadership and knowledge. New York: Oxford University Press, Inc. pp. 428-445.