ACCT2105 - Assignemnt 3 - Part A - Tran Tung Linh - s3750075

Understanding Financial
Reports and Notes to the

Financial Statements
Tran Tung Linh – s3750075

Lecturer: Clara Nkhoma
ACCT2105
Group: 2
Word: 655
SEPTEMBER 5
RMIT UNIVERSITY
1
Table of Contents
Task I: Understanding financial statements’ items...................................................3
Task II: Understanding financial statements in detail..............................................4
Question 1...............................................................................................................4
Question 2...............................................................................................................4
Question 3...............................................................................................................4
Question 4...............................................................................................................4
Question 5...............................................................................................................4
Reference List............................................................................................................5
2
Task I: Understanding financial statements’ items
Differences and Explanations:
 Income Statement:
 M&S’s had Adjusting items while BAT’s report only had transactions.
 Due to the share of post-tax results of associates and joint ventures, in 2017, BAT gained
£24,209 million. Therefore, its Profit for the year was £37,656 million, which was higher than
that in 2018, although The Revenue in 2018 was higher than that in 2017. Meanwhile, M&S
didn’t have share of post-tax results and associates and joint ventures.
 Balance Sheet (Financial Position):
Total liabilities 4596
 M&S’s debt to assets ratio = ×100= × 100≈ 60.87 %
Total Assets 7550.2
Total liabilities 16329
 BAT’s debt to assets ratio = ×100= × 100≈ 11.16 %
Total Assets 146342
 This indicates that 60.85% of M&S assets were being financed by the creditors while BAT’s assets were
only being financed at 11.16%.
 Changes in Equity:
 The order of M&S’s Financial Statement: Income Statement, Financial Position, Changes in
Equity, and Cash Flow.
 The order of BAT’s Financial Statement: Income Statement, Changes in Equity, Balance Sheet,
and Cash Flow.
 Explain: The reason why M&S’s report put Changes in Equity after Financial Position is because it
wanted to explain thoroughly the changes in equity in the Financial Position’s part. They added up all
the variables which affected total equity. In the end, they calculated the total equity was £2,954.2
million (2018). Whereas, in BAT’s report, changes in equity was put behind Income Statement and
Comprehensive Income to see how they affected total equity.
 Cash Flow:
 In 2017, BAT acquired Reynolds American Inc. by the cash outflow associated with
acquisition at £17,657 million. While, in 2018, the company didn’t acquire so it leaded to the
decrease in cash outflow in investing activities. While the M&S’s net cash used in investing
activities didn’t change much.
 M&S’s net cash inflow from operating activities decreased compared to the previous year
because its inventories increased. Meanwhile, BAT’s net cash inflow from operating activities
increased but its inventories also increased.
3
Explanations:
 Overall, the annual reports are different because:
 M&S’s report is a consolidated report. This means M&S is a group company; hence, it
will subtract Adjusting items to see the Profit for the year while BAT doesn’t need to do
that.
 BAT’s report is a stand-alone report. M&S’s report included all the activities of its
parent company and subsidiaries while BAT’s report covered these finding as a separate
entity. It will have transactions to help readers know their main activities that affect
their business.
Task II: Understanding financial statements in detail

Question 1
According to M&S, its main principal activities are trying to make its own brand food and Clothing and home
products special and high-quality in stores and worldwide.
Question 2
Based on M&S’s term of reference (2018), The Remuneration Committee has the authority and it is reported by
M&S Group regularly about remuneration market trends and practices, gender comparative remuneration and
general remuneration trends and practices. The Committee duties are also to, pay policy, gender pay, increase its
remit to cover senior leadership reward, and employee engagement.
Question 3
M&S group measures its inventories by a weighted average cost basis and net realisable value.
In the Accounting Policies in note 1 to the Financial Statements, pg. 84.
Question 4
Archie Norman has been the Chairman of Marks and Spencer Group since September 2017.
As described in the annual report (2018), the Board of Directors in charge of supervising strategies and manners
to help the company develop sustainably and profitably for its stakeholders.
4
Question 5
According to the annual report in 2018, Deloitte is the Company’s Auditor which is responsible for performing
the audit of M&S.
Auditors must declare their independence to prove that the financial statements they audit is fair, true and
impartial. The auditors must audit the financial statements following the ethical standards in business.
The financial statements must be audited by an external party because if the internal staff of the company do
accounts, they might try to cheat for their self-interest or falsify the accounts to make the company’s
performance better. Thus, the external auditors will be the one who have an objective perspective and no bias to
audit and judge the financial performance of a company .
Reference List
British American Tobacco (Brands) Ltd 2018, Transforming Tobacco 20-F 2018, company report, British
American Tobacco.
Mark and Spencer Group PLC 2018, Transformation Underway 2018, company report, Mark and Spencer
Group.

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Understanding Financial

Reports and Notes to the

Tran Tung Linh – s3750075

Task II: Understanding financial statements in detail

In the Accounting Policies in note 1 to the Financial Statements, pg. 84.

audit and judge the financial performance of a company .

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