Module Title: Financial Reporting – An International Approach
Module code: MODOO3472 Level: 7
Academic Year: 2013/14 Teaching period: TRI 3
Module Leader: Feroz Kassam-Kanji
Word Limit: 3,500 words
Written assignments must not exceed the specified maximum numbers of words. All
assignments which do so will be penalised. The penalty will be the deduction of
marks at the Markers discretion. Assignments will not be accepted without a word
count on the cover sheet.
This assignment must be received no later than 15:00hrs on 19/05/14
Work submitted after this date will receive a mark of zero unless an extension has been
approved by the Student Advisor in advance of this deadline.
Request for short-term extensions will only be considered in the case of illness or other
cause considered valid by the Student Advisor. These must normally be received and
agreed in writing at least twenty four (24) hours prior to the deadline.
PLEASE REFER TO THE Academic Regulations of your Student handbook for full details.
This assignment must be completed individually
If you share your work or part of your work with another student this is an academic offence
(collusion) and will result in a fail grade.
This assignment must be attached to a completed University Assignment Cover Sheet and
accompanied by a completed University Assignment Receipt before submission.
Any attachment (such as computer discs) must be marked with your SID number(s) and securely
attached to your assignment before submission.
You must use the Harvard Referencing (Citations) to acknowledge your sources of information
and provide a reference list (and bibliography where appropriate). Failure to do so is an
academic and will result in a fail grade.
Any bibliography provided must be included as an appendix.
Marks will be awarded for the professionalism of the report.
Assignment submissions must be type-written and stapled.
Do not submit your work in a plastic sleeve.
Answer the questions below, based on Next PLC’s Annual Report & Financial Statement
to the year ended 28
January 2013, discussing the role of international financial reporting
standards in meeting a range of international stakeholder’s financial and non-financial
information needs to enable them to make optimal economic decisions. This assignment
project is intended to promote original thinking.
ASSIGNMENT - BACKGROUND
Entities, whether operating in a domestic or international environment, must ensure their
financial statements fairly reflect the corporate position so that external observers can draw
reasonable conclusions from their critical review of the entity’s results. The information used
by external observers is not restricted to the annual financial statements; in many countries
large entities must publish interim financial reports and entities regularly publish strategic
and operating data to inform a wide range of corporate stakeholders. Also, the globalisation
of International Accounting Standards provides the foundation for effective cross boundary
financial comparisons in terms of profitability, liquidity and efficiency, and investor return.
Who is Next PLC?
NEXT is a UK based retailer offering exciting, beautifully designed, excellent quality
fashion and accessories for men, women and children together with a full range of
NEXT distributes through three main channels:
NEXT Retail, a chain of more than 500 stores in the UK and Eire;
NEXT Directory, a home shopping catalogue and website with over 3 million active
customers and international websites serving around 60 countries; and
NEXT International, with almost 200 mainly franchised stores around the world.
You are required to:
1) State the objective of financial statements according to the IASB’s “conceptual
framework”, and explain how this objective can be achieved by having certain
qualitative characteristics? Your discussion must include two examples from Next.
2) Annual Accounts have become filled with "obfuscation" and a "lack of insight" by
trying to serve too many stakeholders, a leading investor has claimed (Audit Quality
Forum debate – 01/11/13) i.e. clutter in financial statements. Give your critical
explanation on whether you agree or disagree, and whether Next’s Annual Accounts
has got the right balance. (10 marks)
3) Potential and existing investors are one of the main external users of Next’s financial
statements. Give a critical explanation of their information needs and what
information will influence their investment decisions. (10 marks)
4) Critically evaluate Next’s EPS; your explanation must make reference to its
importance and its significance as a driver of share prices (10 marks)
5) Critically evaluate the following non-current elements of Next’s Balance Sheet (or
Statement of Financial Position): property, plant and equipment, leases, and financial
instruments. Evaluation should refer to the accounting policies followed and impact
on users’ interpretation. (15 marks)
6) After a critical examination of Next’s Statement of Cash Flows, give a detailed
explanation of changes in its cash position, and how quickly Next converted its profit
into cash. Your critique must explain the importance of publishing a cash flow
statement. (10 marks)
7) Calculate return on capital employed, gross profit margin, inventory turnover in days,
debt equity ratio and dividend cover. Give a critical commentary on ratios calculated,
and Next’s prospects for 2014 (15 marks)
8) Critically examine any two additional reports given, and evaluate their usefulness.
(E.g. CEO’s Report, financial review CSR and any other reports given). (10 marks)
Marks for professionalism: Appropriate use of referencing, extent and evidence of
research, structure of essay, coverage of issues, presentation and use of appropriate
language (10 marks)
Total Marks (100 marks)