TITLE

Choosing Financial statement

of public limited company
and identify the elements of
financial reporting framework
with examples

Abdul Basit
FINANCIAL STATEMENT 0903-BH-BAF-19
ANALYSIS
Assignment No.1
 Analysis of financial reporting of
“Fauji Cement Company LTD (FCCL)”
As far as financial reporting is concerned, it is paramount for every company to make sure
compliance with the conceptual framework established by FASB and GAAP. In this context,
FCCL has been diligent in reporting financial statements and the position of the company.

FCCL’s financial statements have been analyzed on three levels: the objective of reporting,
elements and characteristics, and assumption and measurement procedure during reporting. All
reference are shown in next paragraphs along with some hand written information in financial
statements for the purpose of analysis.

Firstly, financial reporting aims to convey financial information so that stakeholders can make a
prudent decision involving buying and selling stocks as well as lending money. In this regard,
FCCL has reported their summary of financial reports in two, English and Urdu, languages;
eliminating the language barrier in conceptualizing the statements (see page 5, 6, and 7 of
financial statements). Moreover, it has also shown the particulars of the audit committee, board
of directors, investment committee, human resource committee, and bankers along with
information regarding company performance relative to the industry as well short glance at the
financial position (see page 3 of financial statements). In this way, FCCL makes its stakeholder
receives information holistically and decide whether this information is reliable or not by looking
at the particulars of different committees.

Secondly, FCCL financial statements contain overall qualitative characteristics: relevance,

faithful representation, and enhancement; and elements of financial statements: assets, liabilities,
equity revenue, expenses, etc.

FCCL’s statements are relevant in such that person can predict future position and confirm its
past prediction by comparingly looking at two periods, June 2021 and march, 2022. During
analysis materiality is not quantifiable because it is dependent on organization size and nature;
but insinuated that it can be higher than Rs. 1000 ( see page 9 financial statements). Faithful
representation of financial reports can be questioned as an unaudited balance sheet is presented,
the compelling reader to conceive a sense of biases and error in statements (see page 8 of
financial statements). In enhancing qualities, FCCL has scored the highest. Comparability and
verifiability are not compromised by the company; as its financial position during two distinct
periods has been reported in the same place, and financial statements show that the fundamental
equation of accounting is contented (see page 8, 9, 10, etc.). FCCL tries to give timely
information to stakeholders, even though it is known that timeliness has a trade-off with the
prospect of error; that’s why, the financial statements of march, 2022 are unaudited (see page 11
of financial statements). For the understandability of statements have attached notes to financial
statements and some supplementary information regarding each entry in statements (see page 14-
23 of financial statements); for example, for the cost of goods sold entry it has shown
supplementary information containing particular about material, labor and FOH cost along with
calculation of CGS (see page 19 of financial statements). This stance makes financial statements
comply with the characteristic of completeness.

Lastly, FCCL has followed the overall assumption of reporting financial reporting. It has kept the
ownership separate from the business as well industry so that stakeholders scrutinize the position
of the company in comparison with other companies and industries. FCCL has shown the heads
of long-term and short-term assets as well as liabilities, additionally, depreciation of assets is also
presented; proving the compliance with going on concern assumption. The assumption of
periodicity and the monetary unit can be traced in financial statements as financial statements
contain all heads that are quantifiable and they are reported quarterly for timely decision making
( see page 11 of financial statements). Along with assumption, measurement principles such as
revenue and expense recognition, full disclosure, and measurement are kept under consideration.
In the case of the measurement principle, FCCL has shown assets and liabilities using the
historical cost principle, but long-term deposits, financial derivative instruments, short-term
investments, and trade deposits are measured at fair value using a fair value hierarchy of three
levels (see page 20 of financial statements ). It is obvious, by looking at statements, that
company is using accrual basis accounting, indicating revenue and expense recognition
principles (see page 8 and 9 of financial statements). FCCL has complied with full disclosure
principles as it has supplementary information by using notes of financial statements such as
cost-sheet for CGS (page 19), net sales (see page 19), plant and equipment valuation (page 18),
long-term loans (page 16), and many more (page 14-23).