Marks and Spencer Financial Accounting - Essay Example

The directors, according to the Companies Act that came into effect on October 2007, have the central duty to act in good faith and in such a way that it should promote the company in its success.

2. One ex-Chairman of M&S was influential in preparing these rules. Who was he and what contribution did he make?
Answer-
Executive Chairman Lord Burns was influential in preparing rules and he has been considered to be independent under The Combined Code. Lord Burns had met an independence criterion that was set out in The Combined Code upon his appointment on July 2006.
“The Code states that ‘if exceptionally a Board decides that a Chief Executive should become Chairman, the Board should consult major shareholders in advance and should set out its reasons to shareholders at the time of the appointment and in the next annual report”(M&S, 2008). On April 2008, Lord Burns wrote a letter to the shareholders stating the reasons behind the board’s decision to appoint a new chairman.
3. Did M&S comply with all the rules?
Answer
No, Marks and Spencer did not comply with all the provisions of the Code. The exceptions are given below:-
• “During 2008, the board did not fully consult major shareholders in advance of announcing on 10th March 2008 about the appointment of Chief Executive.
• From 1st June 2008, the role of Chairman and Chief Executive will be exercised by the same individual (A.2.1) and our Chief Executive will become Chairman (A.2.2).” (M&S, 2008).

4. Who are M&S’ auditors?
Answer
Marks and Spencer's auditors include four non-executive directors. They are:
1. Jeremy Darroch- (Chairman).
2. Martha Lane Fox.
3. Steven Holliday
4. Sir David Michels

5. The auditors state that the accounts give a “true and fair view”. What requires the accounts to be “true and fair”?
Answer
According to the M&S auditor’s report, the accounts give a true and fair view when:
• The financial statements and the part of the remuneration report that is to be audited have been properly prepared in compliance with the Companies Act 1985,
• These are prepared by the group financial statements article 4 of the IAS regulation and
• The information given in group directors’ reports is consistent with financial reports.

6. What two places in the accounts are you told the type of accounting standards that are used in the preparation of the accounts?
Answer
1. Revenue – Continuing operations
Revenue = goods to customers outside the M&S group –
Appropriate deduction for actual and expected returns
Discounts and loyalty scheme voucher schemes
Net of value-added tax and other sales taxes.
2. Dividend- Final dividends can be recorded in the financial statements

7. What are the names of these standards and what is the body that issues them?
Answer
1. International Financial Reporting Standards (IFRS)
2. International Financial Reporting Interpretations Committee (IFRIC)
Issued by Auditing Committee

8. Who is the chairman of this body and what is his nationality?
Answer
Lord Burns, British
9. What are the names of the four financial statements included in the annual accounts?
Answer
1. Consolidated and company income statement
2. the Consolidated and Company balance sheet
3. The consolidated and company cash flow statements
4. the consolidated statement of recognized income and expenses

10. What valuation method does M&S use to value men’s socks held in store at the end of the year? What accounting standard was followed in doing this?
Answer
Men’s socks at stores are considered to be inventories and are valued at a lower cost and net realizable value using the retail method. It is computed based on the selling price less the appropriate trading margin.
In this valuation, the IFRS accounting standard is followed

11. Note to the accounts deals with Earnings per Share. What accounting standard must be followed in preparing this?
Answer
Earning per share is calculated based on earnings after tax and the weighted average number of ordinary shares. The adjusted earnings per share are calculated based on earnings excluding the effects of property disposals and exceptional items.

12. If M&S did not comply with an accounting standard which body might reprimand them?
Answer
M&S board of directors
13. In one section of the annual accounts M&S reports uses different accounting standards to the ones used elsewhere in the accounts. Where are these amounts reported and why?
Answer
In ‘Investment Properties’, the properties are valued based on market value.
Because the investment properties were valued by qualified professionals working for CB Richard Ellis as they are Chartered Surveyors and members of the Royal Institution of Chartered Surveyors. Read More