Introduction
In the current competitive supermarket industry one of the biggest company is Tesco plc. Tesco operates 2318 stores in 12 countries and employs 380,000 people around the world. As for other companies in the market, the main purpose of the business is maximizing profit for its owners. What's more Tesco trying to expand in international market, thus it is possible to find some Tesco supermarkets in continental Europe, in some parts of Asia and in some cities of the United States. As other public companies do, Tesco have to provide annual reports to the public that include the financial statements of the company, such as Statement of financial position, Income Statement, Statement of Cash flow and Statement of Equity changes. The IASB (International Accounting Standards Board) Framework developed set of characteristics that should be taken into account when evaluating the usefulness of these financial statements.
Qualitative characteristics
To begin with, the financial reports are not perfect, because the information within the statements made mainly for investors, and there is not much direct information for other stakeholders of the business. However, other users can use assumptions and find useful information through looking at financial information given in annual reports.
The Tesco’s financial statements are classified upon four qualitative characteristics of IASB Framework. They are: understandability, relevance, reliability and comparability.
The Tesco reports provide notes to group financial statements for deeper understanding of financial accounts. To make information understandable is the least achievable aim, because the financial information within the statements includes calculations, terms,...
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Corporations keep various types of financial records and it is the responsibility of managers to make sure that the records are maintained and resolved at the end of the fiscal year. Most company has shareholders that want a year-end account on how the company has done and with a projection of what the company is capable of doing in the future. The shareholders have a vested interest and want to be kept informed on how the company is doing financially. Financial records for major corporations are public knowledge and this paper is comparing Target and Wal-Mart and their financial standings.
The Securities and Exchange Commission requires that publicly owned businesses provide annual reports, which are available to the public. Many different people use annual reports, to make informed business decisions. Management from the company uses the information to determine a number of items. Some of these items are the profitability of the company, the inventory turnover rate, and the accounts receivables rate. Creditors use the annual report to determine how well a company can satisfy its current liabilities, as well as, how the company is doing in the aspect of long tem survival. Another group of people who use the annual reports furnished by companies are the investors, who can purchase shares of stock from the publicly company. Annual reports are very important to these people, because they are an over all picture to help them determine the over all stability and reliability of the company’s financial outlook. These annual reports are important because they do not only contain the financial statements of the company, but there is a management ‘s note to discuss reasons for any unexpected numbers, and an auditor’s report, from an independent accounting firm, who either agrees or disagrees with the financial numbers. Market reporter Matt Krant said, “Ignoring these reports is akin to driving down the freeway blindfolded.”
Financial statement users around the globe use financial statements to evaluate the performance of companies (Fundamentals of Financial Accounting, 2006). In order to locate a company’s reported assets, liabilities, expenses and revenues, statement users rely on four types of financial statements. The four financial statements include: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows (Fundamentals of Financial Accounting, 2006, p. 6). Each of these reports provides different information to the financial statement user. The Balance Sheet reports at a point in time: a company’s assets (what it owns), liabilities (what it owes) and stockholder’s equity (what is left over for the owners) (Fundamentals of Financial Accounting, 2006, p.7). The Income Statement shows whether a business made a profit (net income) during a specific period of time (Fundamentals of Financial Accounting, 2006, p. 10). The Statement of Retained Earnings illustrates what portions of the company’s earnings was paid to stockholders and retained by the company for future operations (Fundamentals of Financial Accounting, 2006, p.12). Finally, the Statement of Cash Flows reports summarizes how a business’ “operating, investing, and financial activities caused its cash balance to change over a particular range of time” (Fundamentals of Financial Accounting, 2006, p.13).
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