Main Information about Narratives - Essay Example

INTRODUCTION Some quarters say that narratives are an important part of the financial statements. Some quarters also say that narratives are not a compulsory part of the financial statements. The following data will finally help these quarters be more knowledgeable of narratives and financial statement presentation regulations. BODY A brief description of each narrative section included within your chosen company’s annual report, explaining the purpose of the statement and the main contents. The London Stock Exchange market share price of one Sage stock is only ₤ 231. This August 18, 2006 (www.sage.com) Sage is one of the leaders in the field of supplying companies with software that will lessen the time needed to record, group, tabulate, analyse and communicate all business and MONEY transactions. Its major product is a business software that is fitted to every need of Sage clients. Sage helps its clients make business operations run smoothly and harmoniously by giving them software technology with lasting benefits by automating monetary transactions. Sage also offers after sales maintenance services to clients that have purchased their products. The Sage organizational set up concentrates on encouraging entrepreneurship, innovation, spirit of working as a team and using local software United Kingdom experts to make state of the art business programs. Present Marketing Strategy. Small and medium scale enterprises have shown strong needs to purchase business (specifically accounting ) software in order hasten and make more accurate current manual accounting business transactions. Such companies have back offices where accounting and bookkeeping (Larson, 1995) services are being processed. The medium and larger companies do need software that can make their tasks easier. When the accounting system is accurate and is updated constantly by the computer, then the customers and suppliers will know, as soon as possible (ASAP), what the daily business problems are so that remedies that will lessen the damage done will be put in place earlier. This is where Sage comes to the rescue. Sage will help, in a big way, the small and medium rate industries with their bookkeeping needs and accounting functions. The software, however, are being purchased by some the small companies. Based on the above, the company has been very successful with the present marketing strategy (Thompson, 1999). The income statement clearly shows that there is its present income has been on the rise. Because the present strategy is on the right track, then we will now be implementing a new strategy will be discussed below. This strategy is called Resource based marketing (Kinnear, 1996) strategy. OUTLOOK. According to Sage Chairman Michael Jackson, Individuals in Sage are being treated very highly and respected as a person. Sage company is constantly invented new products and new processes for its large customers’ activities. Revenue has grown for Sage company because Sage manages to offer new products to its biggest resource(Samuelson, 1973) which is the CUSTOMER(Irwin,2000). Sage produces for its four million clients software solutions that takes good care its network. Sage has a network of over 22,000 reselling business partners. Based on the above Chairman Michael Jackson statement, invention is the name of the game. Many companies have put up a research( Dilworth, 1993) and development department in order to find new products to sell. These new discoveries will spell the difference between success and failure. By continually inventing new products where the competitors have no similar goods or services, the Sage company will have the edge in terms of market share. Another type of research and development strategy is to improve the quality or quantity output of something that has no competition because it is new discovery. For example, if the accounting software created by Sage can work harmoniously with adobe pdf files, and word files and excel files, as well as other competing accounting software, then there will a deluge of buyers of the sunshine product. The harmonious relationship and exchange of important information between the different softwares above will definitely give Sage the big advantage it needs to prop itself so it could reach the FTSE 100 index mark. Sage plans to grow by continuing it investments in locally engineered business software solution that will meet head on the continually changing information needs of small and medium scale enterprises. It also plans to expand its business by entering into new markets. One good acquisition by Sage is the hiring of Tamara Ingram who was formerly the Senior executive of WPP ( which belongs to the top 4 largest companies in the field of advertising and media services. Financial highlights. For the year 2005, turnover had increased by fourteen percent or ₤ 776.6 million as compared with only ₤682.6 million in the year 2004. Another highlight is that organic revenue had increased by six percent and earnings per share had also increased by thirteen percent to ₤11.18 for the year 2005 from the former ₤9.90 for the year 2004. Based on the balance sheet, the profit and loss account had increased from the prior 2004 amount of ₤211,975 to the current year 2005 ₤332,721. The profit for the financial year 2005 was ₤143,504 which is higher than the ₤126,736 for the prior year 2004. Based on the performance graph on table 4 below, The performance chart shows that Sage average sales is lower than the FTSE 100 index average sales. Dividend had increased by twenty three percent when it posted a ₤2.875 per share for the year 2005 as compared to only ₤2.330 for the prior year 2004. The customer base has also increased to a BIG 4,700,000 companies in the year 2005 which is higher than the 4,400,000 companies it had done business with in the prior year 2004. Revenue had also increased from the prior year. Sage company has also acquired some businesses including ACCPAC, SP, Softline and many more. Sage company has also invested in ₤100 million in new and existing companies. Sage has also acquired another big company called Adonix. The Operating profit has remained at twenty seven percent. Marketing Strategy PRODUCT. The product is accounting software The accounting software has been selling like hotcakes because the prices offered by Sage is very reasonable and affordable as evidence by the income statement and the balance sheet, the Sage company has been doing good. SEGMENT. The sage market segments are classified as United Kingdom, Mainland Europe, North America and Real world. The Sage company has opened many branches or segments in the United Kingdom, Mainland, Europe, North America According to the notes to the accounts, The tangible assets like freehold buildings have been depreciated over a life of 50 years. Whereas the leasehold is depreciated over the life of the lease. The motor vehicles are depreciated at 25% per year. While the furniture and fixtures are depreciated by a flat rate of 15% per year on a straight line basis. The stocks are recorded on a lower of cost or market basis. All research and development costs are expensed outright and not amortized over the life of the product invented. Sage follows the Financial Reporting Standard 19 that requires full provision for accounting for deferred tax. Deferred tax is computed using the timing of differences method. Sage follows Financial Reporting Standard 19 when it adopted the policy of not discounting deferred tax assets and liabilities. The financial Reporting Standards are issued by the United Kingdom Accounting Standards Board. The assets and liabilities are translated to the sterling at the currency exchange rate at year end. The Sage group has entered into a pension scheme for some of its employees and the pension payments are recorded as expense item in the income statement. Some assets are acquired by finance leasing arrangement that give rights bearing on ownership. The Sage company is divided into four major market segments namely United Kingdom, Mainland Europe, North America and the Rest of the World. The biggest market share goes to North America with revenue of $314,931,000. A summary of the regulatory requirements governing the inclusion of narrative information within a quoted company’s annual report, and an assessment of whether your chosen company appears, prima facie, to have complied with those requirements. According to the article by ICF International entitled “Mandatory Reporting on Environmental, Social, & Community Issues in the United Kingdom” Issued last Summer of 2004 that all companies selling their stocks in the United Kingdom Stock exchanges shall COMPULSORITY implement The Operating and Financial Review requirement. The purpose of the Operating and financial review to give the members or shareholders of the companies listed in the United Kingdom with information that that is relevant to the shareholders. The information should also be given on time so that the shareholders can use the financial statements for decision making. The operating and financial review enumerates information such as issues of employment, matters relating to the environment, community related and social issues. The Operating and financial review shall also objectives and the strategies that the board of directors had done for the past year or years and the board of directors’ future plans such as expansion to uncharted territories or closing of a lose generating branch and the like. The Operating and financial review shall also how the assets of the corporation have been acquired or disposed of as well as the risks and uncertainties that the company faces. The company shall also include the analysis of why there was a gain or lost for the last year or years as well as the basis for future plans. This was a compulsory requirement as ordered by the Department of Trade & Industry head. The Accounting Standards Board of the United Kingdom has sided with the DTI ruling. However, Mr. Gordon Brown of the United Kingdom Parliament has kept this on hold because of the high cost of compulsory auditing the OFR. The companies are following the Accounting Standards issued by the United Kingdom International Accountings board in the presentation of financial statement An evaluation of the usefulness of the narrative information provided by your chosen company, including the identification of any additional information which they have not disclosed, but you feel would be beneficial to users. The narrative information provided by the company is VERY USEFUL to the financial statement users such as the shareholders, employees, customers, suppliers and creditors. The government regulatory agencies will use the financial statements (including the narratives) to estimate the future taxes that the government will collect. The financial statements, including the narratives, are used by the environmental agencies to determine if the company has not violated any environmental laws. The creditors will use the financial statements to determine if the company will be able to pay the bank loan term loan on time. The Management will use the financial statements to determine if they had been successful in bringing up the sales of the company. An assessment as to whether the current regulations governing the inclusion of narrative information within annual reports are adequate. The current United Kingdom regulations are MORE THAN adequate to govern the including of narrative information as part of the financial statements. CONCLUSION: The users of the financial statements comprised of the balance sheet, income statement, and statement of cash flows use the financial statements for DECISION MAKING PURPOSES. The narrative portion of the financial statements are used to explain or expound on the quantitative information presented. The government through the Department of trade and Industry has instructed that all companies listed in the United Kingdom Stock Exchange must prepare financial statements in accordance with accounting standards approved by the United Kingdom Accounting Standards Board. The Dept of Trade and Industry has instructed that all companies listed in the stock exchange inside the United Kingdom must present an OPERATING and FINANCIAL REVIEW which is the main function of the board of directors. Sage has been complying with all narrative and financial statement regulations as well as the Operating and Financial Review standard of the United Kingdom. The present narrative regulations and financial statement as well as operating and financial review regulations are more than adequate to serve as guide for the uniformity of their presentations in the financial statement users. REFERENCES: www.sage.com http://www.icfi.com/Publications/Perspectives-2004/uk-ofr.asp http://www.dti.gov.uk/cld/OFR_Guidance.pdf http://www.frc.org.uk/asb/ Read More