The Rules and Regulations of a Talktalk Telecom Group - Coursework Example

TalkTalk Telecom Group PLC The following report is regarding the rules and regulations required to be followed by TalkTalk Telecom Group PLC in order to prepare its annual report. Each country has certain accounting and auditing requirements that are to be followed by the companies operating in that country. However, recently a number of countries have adopted standardized accounting standards developed by International Accounting Standards Board (IASB). The acceptance of a common framework helps the companies in consolidating their accounting information with other branches of the company operating in other countries. TALKTALK TELECOM GROUP PLC OVERVIEW TalkTalk is a company that provides telecommunications, internet, and pay-television services and the headquarters of the company are established in London, United Kingdom (TalkTalkGroup.com). Initially the company was only a fixed landline provider but now the company also provides mobile phone, home phone and broadband services. The company is listed on the London Stock Exchange (TalkTalkGroup.com). Since the company is incorporated in the United Kingdom therefore the company is bound to fulfill the requirements of the regulations of the UK for the preparation of its annual report (TalkTalkGroup.com). PREPARATION OF THE FINANCIAL STATEMENTS Every company in the UK is required to follow the International Accounting Standards (IASs) and International Financial Reporting Standards (IFRSs) developed by the International Accounting Standards Board (IASB). Therefore, TalkTalk is also required to prepare its financial statements in accordance with the standards mentioned above. For each head in the financial statements, a specific accounting treatment has been prescribed in the IASs and IFRSs. There are a number of standards that deal with different heads in the financial statements. The financial statements of a company include; statement of comprehensive income, statement of financial position, statement of cash flows, statement of changes in equity and the notes to the financial statements. These five documents constitute the financial statements of a company. The statement of comprehensive income provides an extensive view of the revenue earned by the company, the cost incurred by the company throughout the financial year, the profits or loss made by the company. The accounting standards provide certain accounting treatments that are required to be followed for the preparation of the statement of comprehensive income. One of the most important requirements is the treatment regarding recognition of revenue. IAS 18 – Revenue provides the required accounting treatment for recognizing the revenue (IFRS.org). Similarly, IAS 17 – Leases provides the accounting treatment for expenses related to finance cost. IAS 12 – Income Tax provides the accounting treatment for taxes and more importantly, deferred tax assets and deferred tax liabilities (IFRS.org). IAS 23 – Borrowing Costs is also important because it provides the complex accounting treatments for the borrowing costs. Thus, there are a number of IASs that need to be followed by the company in order to prepare the statement of comprehensive income in accordance with the required rules and regulations. The statement of financial position provides extensive information regarding authorized and subscribed capital of the company, the short term liabilities of the company, the long term liabilities of the company, non-current assets of the company, and current assets of the company. There are a number of IASs that include requirements to be met while preparation of the statement of financial position of the company. IAS 16 – Property, Plant and Equipment is one of the most important IASs because it provides the accounting treatment for one of the biggest heads in the statement of financial position (IFRS.org). This IAS provides the treatment regarding recognition, depreciation and impairment of property, plant and equipment owned by the company. Similarly IAS 39 – Financial Instruments: Recognition and Measurement and IAS 40 – Investment Property are also important for the preparation of the statement of financial position. Similarly, statement of cash flows provides extensive information regarding the movement of cash in the company. The statement of cash flows includes information regarding the cash flows due to operating activities, investing activities and financing activities. This gives the users of the financial statements a comprehensive view regarding the flow of funds of the company and whether the net cash flows are positive. IAS 7 – Statement of Cash Flows provides all the requirements that are to be met by the companies in the preparation of statement of cash flows (IFRS.org). This IAS provides the format of the statement and the format of the underlying notes as well. The statement of changes in equity provides the users of the financial statements with information regarding the revenue reserves and capital reserves maintained by the company and the allocation of the reserves towards the dividends and other payments to the shareholders. Ultimately, the notes to the financial statements provide the background information of the figures appearing in the financial statements. The notes to the financial statements include certain disclosures that are required by the IASs such as the disclosure of related party relationships and related party transactions, the disclosure of the property, plant and equipment of the company and the disclosure regarding the solvency of the company. DIRECTOR’S REPORT Apart from the financial statements, there are a number of other requirements for information to be included in the annual report of the company. The director’s report is required by the UK company law and it is produced by the board of directors of a company (Companies Act 2006). There is certain information that is required to be communicated through the director’s report. The director’s report should include a business review and the prospects of the business (Companies Act 2006). They should also explain how their leadership has helped them promote the success of the company (Companies Act 2006). The company law also specifies the requirement for the review of risks and uncertainties that are faced by the company. There is another requirement for the comparative analysis of the development in the business of company (Companies Act 2006). The regulations also require the directors to disclose their remuneration and the steps taken by the company to comply with governance regulations and corporate social responsibility (FRC.org). The company law also places strict rules regarding the fairness of the information provided in the report. In case of any misleading information, the directors will be held responsible for compensating the individuals who acted as a response to the information in the director’s report (Companies Act 2006). In the director’s report in the annual report of TalkTalk, the information provided is divided into performance review and governance. As per the statutory requirements, in performance review the directors provide the information regarding business review, finance review, principal risks and uncertainties, and corporate and social responsibility review. In governance part, the directors provide information regarding board and advisors, corporate governance, director’s remuneration report, and other statutory information. Thus, it can be said that the director’s report of TalkTalk meets all the requirements of the UK company law. AUDITOR’S REPORT In the region where TalkTalk operates, every listed company and every other company meeting specified criteria is required to appoint an independent auditor that would give his opinion whether the financial statements of the company are prepared in accordance with the applicable financial reporting framework. Every company is required to annex the auditor’s report with the financial statements of the company therefore auditor’s report makes an essential part of the annual report of the company. The rules and regulations require the audit of a company to be conducted in accordance with the International Standards on Auditing (ISAs) developed by International Auditing and Assurance Standards Board (IAASB). As IASs provide accounting treatment for different heads of the financial statements, similarly ISAs provide procedures to be conducted during the audit of the financial statements. Audit is conducted to the levels of materiality and the opinion presented by the auditor is not conclusive because there are inherent limitations to an audit which prevent the auditor from performing audit procedures on whole of the population. Audit procedures are performed on sampling basis. The auditor’s report is formed in accordance with ISA 700 – Forming an Opinion and Reporting on Financial Statements (IFAC.org). The auditor is required to give a clean opinion if in accordance with the audit procedures performed the auditor is of the view that the financial statements have been prepared in accordance with the applicable financial reporting framework. If the auditor is of the view that the financial statements are not prepared in accordance with the applicable financial reporting framework or a material misstatement is there in the financial statements, the auditor is required to modify the report in accordance with ISA 705 – Modifications to the Opinion in the Independent Auditor’s Report (IFAC.org). The auditor’s report in the annual report of TalkTalk includes the statement by the auditors that they have audited the financial statements of TalkTalk Telecom Group PLC and the reference to the applicable financial reporting framework. It also includes the respective responsibilities of the directors and auditors, scope of the audit of the financial statements, opinion on the financial statements, opinion on other matters prescribed by the Companies Act 2006, and other matters. Ultimately, the auditor’s report includes the name of the auditor and the firm to which he belongs. CONCLUSION Thus it can be concluded that the presentation of annual report of TalkTalk is executed in accordance with IASs, IFRSs, Company Law in UK and ISAs. From the analysis of the annual report, it can be said that all the requirements have been complied with. REFERENCES Companies Act 2006. (2006) Companies Act 2006: Section 415. [Internet]. Available from http://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf [October 16, 2011] Companies Act 2006. (2006) Companies Act 2006: Section 416. [Internet]. Available from http://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf [October 16, 2011] Companies Act 2006. (2006) Companies Act 2006: Section 417. [Internet]. Available from http://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf [October 16, 2011] Companies Act 2006. (2006) Companies Act 2006: Section 463. [Internet]. Available from http://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf [October 16, 2011] Companies Act 2006. (2006) Companies Act 2006: Section 496. [Internet]. Available from http://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf [October 16, 2011] FRC.org.uk. (2011) The UK Corporate Governance Code and Associated Guidance. [Internet]. Available from < http://www.frc.org.uk/corporate/ukcgcode.cfm> [October 16, 2011] IFAC.org. (2011) ISA 700 – Forming an Opinion and Reporting on Financial Statements. [Internet]. Available from < http://www.ifac.org/sites/default/files/downloads/a036-2010-iaasb-handbook-isa-700.pdf> [October 16, 2011] IFAC.org. (2011) ISA 705 – Modifications to the Opinion in the Independent Auditor’s Report. [Internet]. Available from < http://www.ifac.org/auditing-assurance/clarity-center/clarified-standards> [October 16, 2011] IFRS.org. (2011) IAS 7 – Statement of Cash Flows: Summary. [Internet]. Available from http://www.ifrs.org/NR/rdonlyres/E373B892-383F-44D4-8264-AF6FA315651A/0/IAS7.pdf [October 16, 2011] IFRS.org. (2011) IAS 12 – Income Taxes: Summary. [Internet]. Available from http://www.ifrs.org/NR/rdonlyres/C7CA75BF-DDE9-4E3A-967E-FFD00B01D4B5/0/IAS12.pdf [October 16, 2011] IFRS.org. (2011) IAS 16 – Property, Plant and Equipment: Summary. [Internet]. Available from < http://www.ifrs.org/NR/rdonlyres/E3C85202-87B9-405F-BE25-057C6FF0CEFA/0/IAS16.pdf> [October 16, 2011] IFRS.org. (2011) IAS 18 – Revenue: Summary. [Internet]. Available from < http://www.ifrs.org/NR/rdonlyres/0C747416-3A8C-4F5E-924E-606198CD526F/0/IAS18.pdf> [October 16, 2011] TalkTalkGroup.com. (2011) Corporate Information. [Internet]. Available from < http://www.talktalkgroup.com/corporate-information/> [October 16, 2011] TalkTalkGroup.com. (2011) Annual Report 2011. [Internet]. Available from < http://m2.ttxm.co.uk/sites/www.talktalkgroup.com/pdf/corporate/TalkTalk_AR11_Web-Ready.pdf> [October 16, 2011] TalkTalkGroup.com. (2011) Corporate Social Responsibility. [Internet]. Available from < http://www.talktalkgroup.com/corporate-information/corporate-social-responsibility.html> [October 16, 2011] Read More