1- Explain briefly why each of the following groups might be interested in the financial statements of M&S Group Plc:
a- Marc Bolland as Chief Executive Officer (CEO).
b- Trade creditors.
c- PricewaterhouseCoopers LLP (PwC).
2- As you learned in Unit 1, Session 3, the major environmental factors impacting on an organization can be grouped under four headings: Political/Legal, Economic, Social/Demographic and Technological (PEST analysis). Giving examples from the annual report, discuss the impact of each of the elements in the PEST analysis on M&S Group Plc.
3- Explain why the M&S Group prepares consolidated financial statements.
4- Explain why the going-concern assumption is important in understanding M&S's financial statements. Support your answer with evidence from M&S's annual report
5- As you learned in Unit 1, Session 4, the concept of materiality is one of the most basic generally accepted accounting practices (GAAP).
Required:
a- Explain the role that the concept of materiality has in making M&S' financial statements useful to most decision makers. Give an example.
b- Explain why £30,000 is a material or immaterial amount for the Group.
6- M&S Group mentioned in its annual report about "Property, plant and equipment", p. 83 that:
The Group's policy is to state property, plant and equipment at cost less accumulated depreciation and any recognized impairment loss. Property is not revalued for accounting purposes. Assets in the course of construction are held at cost less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs.
Depreciation is provided to write off the cost of tangible noncurrent assets (including investment properties), less estimated residual values, by equal annual instalments as follows:
- freehold land - not depreciated;
- freehold and leasehold buildings with a remaining lease term over 50 years -depreciated to their residual value over their estimated remaining economic lives;
- leasehold buildings with a remaining lease term of less than 50 years - depreciated over the remaining period of the lease; and
- fixtures, fittings and equipment - 3 to 25 years according to the estimated life of the asset.
Required
a- State where in M&S might the responsible for estimating the useful lives of property, plant and equipment lie. Support your answer with evidence from M&S' annual report.
b- State the estimated depreciation rates of property, plant and equipment.
c- Explain why M&S uses the straight-line method for depreciating assets.
7- The financial condition and operating results require M&S's management to make judgments, assumptions and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes.
Required:
a- Discuss how judgments and estimates play a major role in preparing M&S' consolidated financial statements. Give examples from the accompanying notes.
b- From M&S's annual report, identify four situations in which accountants rely on their professional judgment rather than on written rules.
8- Assume that Marc Bolland, Chief Executive Officer (CEO), has mentioned:
"We own freehold land that cost us £12.5m but today is worth at least £30m. Let's show it at £30m in our statement of financial position, and that will increase our total asset and our shareholders' equity by £17.5m."
Required:
Critically discuss this quotation. Your evaluation should consider ethical and legal issues as well as accounting issues.
9- From the income statement, p. 78, M&S has earned £458.0m net profit. Explain how this net profit effects the amount of dividend distributed to M&S' shareholders. Support your answer by suitable figures from M&S' 2013 annual report.