Financial Report on Crimson PLC - Essay Example

Financial Report - Crimson Plc The objectives of the financial ments is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. The financial position of an enterprise is affected by the economic resources it controls, its financial structure, its liquidity and solvency, and its capacity to adapt to changes in the environment in which it operates. The balance sheet presents this kind of information. The financial statements and other information presented in the annual report fairly represent the state of affairs and results of the operations of Crimson Plc group. The annual financial statements have been prepared in accordance with the legal and regulatory framework, Generally Accepted Accounting Principles and the Accounting Standards. They are based on appropriate accounting policies and are supported by reasonable and prudent judgements and estimates. The financial statements are in lieu with the following Accounting principles. (A) Statement of Compliance: The Balance Sheet and Income Statement have been prepared in accordance with International Accounting Standards/International Financial Reporting Standards (IAS/IFRS),issued by the International Accounting Standard Board, except as noted below. The form of presentation of the financial statements reflects the reporting format applicable under IAS 1 "Presentation of Financial Statements". According to IAS 1 and IFRS 7 a full set of financial statements should include the following: -> A balance sheet; -> An income statement; -> A cash flow statement and -> Notes to the financial statements. The cash flow statement is omitted from the financial statements due to the lack of classification data. The Income Statement does not present comparative information because of the lack of prior period data. (B) Basis of preparation: Crimson Plc did not prepare a balance sheet, or accumulate its accounting records in a general ledger due to the turbulence of the period. The opening balances for the 22 Balance Sheet accounts were compiled from a pro forma Balance Sheet drawn up as of the last day of the financial year 31 December 2005. It is possible that amendments to the Balance Sheet may be called for if and when new information emerges. The 22 financial transactions presented in the Balance Sheet and Income Statement were processed using double entry accounting but without a general ledger system. The following accounting principles have been applied consistently during the period with respect to items that are considered material in relation to Crimson's financial statements. The financial statements have been prepared under the going concern concept. The going concern concept has been defined as follows: "the enterprise will continue in operational existence for the foreseeable future. This means in particular that the income statement and balance sheet assume no intention or necessity to liquidate or curtail significantly the scale of the operation." The financial statements are presented on a fair value basis for financial assets and liabilities falling within the scope of IAS 39, except those for which a reliable measure of fair value is not available. For those assets not falling within the scope of IAS 39, the principal of historical cost is adopted on initial recognition. Adopting IAS 18 clause revenues are recognised when earned and expenses when incurred. Expenses are recognized in the Income statement on the basis of a direct association between the costs incurred and the earnings of specific items of income(matching).However, here the application of the matching concept does not allow the recognition of items in the balance sheet which do not meet the definition of assets or liabilities. (C) Materiality and Aggregation: As per SSAP 16, each material item is presented separately in the financial statements. Immaterial items are aggregated with amounts of a similar nature or function and are not presented separately. Financial statements are results from processing large quantities of transactions which are structured by being aggregated into groups according to their nature of function. The final stage in the process of aggregation and classification is the presentation of condensed and classified data which form line items on the face of the financial statements. If a line item is not individually material, it is aggregated with other items on the face of the financial statements. In this context, information is material if its non-disclosure could influence the economic - decisions of users taken on the basis of the financial statement. (D) Current / Non - Current Distinction: The current and non-current assets and the current and non-current liabilities were presented on the balance sheet based on the nature of their operations. In lieu with the accounting standards SSAP 2, disclosure about each asset and liability item which combines amounts expected to be recovered or settled both before and after specific time periods is clearly mentioned in the Balance Sheet. Information about the maturity dates of assets and liabilities is fully disclosed and thus was very helpful in assessing the liquidity and solvency of Crimson Plc. Information on the expected date of recovery and settlement of non - monetary assets and liabilities such as inventories and provisions is also disclosed and this proved to be useful in deciding whether or not assets or liabilities are to be classified as current or non-current. INCOME STATEMENT : IAS 1 considers the issue of the presentation of the income statement, which in other national published accounting standards is referred to as the profit and loss account. In lieu with this standard, the expenses were being classified by function i.e., additional information was provided on the nature of expenses which included depreciation and amortization expenses. This will proved to be useful in determining the value added and other ratios from the financial statements. CONCLUSION: It is important that all transactions are properly recorded, classified and summarized in our financial statements, books and records in accordance with our policies, controls and procedures, as well as all generally accepted accounting principles, standards, laws, rules and regulations for accounting and financial reporting. Crimson Plc maintains internal controls and systems designed to provide assurance as to the integrity and reliability of the financial statements and to adequately safeguard, verify and maintain accountability for its assets. Such controls are based on established policies and procedures and are implemented with an appropriate segregation of duties. REFERENCES : -> Barone, Elisabetta, Jan 2006: Financial Accounting - An International approach. -> Black, Geoff, April 2005: Introduction to Accounting and Finance. -> Cairns, David, Oct 2004: International Financial Reporting Standards: A Practical Guide. -> Gitman, Lawrence, May 2005: Principles of Managerial Finance + Finance Works. Read More