Financial Reporting Issues in an Organisation
Essay by vinay198 • February 24, 2016 • Coursework • 1,825 Words (8 Pages) • 1,187 Views
Introduction
Samsung is a very diverse public company. It is a South Korean multinational conglomerate company and is the largest in the South Korean chaebol. Samsung town in Seoul is where the headquarter of Samsung is situated. It is listed in the London Stock Exchange.
Financial reporting help in disclosing the organization’s financial status to management, investors and the government by producing various kinds of statements. It also helps in assessing future financial condition and results for the company.
In this report, we summarize the financial reporting issues of Samsung. These include issues related to financial instruments. Tradable assets of any kind are termed as financial instruments. Also, we hope to discuss the predictive value of the financial statements, analysis of the financial report, pitfalls of using financial data and quality of reporting information.
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Financial Reporting Issues
- Property, Plant and Equipment and Related Depreciation-IAS 16
The revaluation presents offices and other buildings at their depreciated replacement cost, and land at the prevailing market price, as of the effective date of revaluation.
2- Inventory Valuation-IAS 2
Inventories are expressed at the lower of cost and net realizable value. Cost is resolved using the normal average cost method, omitting materials in transit. The losses on inventory obsolescence are written as a part of cost of sales.
3-Litigation-IAS 37
Apple Inc. Prosecuted against Samsung Inc. in patent infringement suits.
“Patent infringement is the commission of a prohibited act with respect to a patented invention without permission from the patent holder.” (Dictionary.lawyerment.com, 2015)
The decision was a striking win for Apple.
4-Decline in Operating Margins
Samsung’s operating margins declined. The organization citied its slowdown in demand for its smartphones and tablets as the primary explanation behind its lower-than-anticipated results.
5- Material Issue:
Because heightened rivalry amongst organizations, the significance of Research and development has expanded.
In such circumstances, depending singularly on existing advances and items may amplify short-term revenue and cash flow, but in the long-term, may lead to loss of opportunities to develop new markets and secure future growth engines.
6- Environmental Issue
Samsung Electronics uses tin in its items that is pulverizing tropical timberlands, slaughtering coral and destroying the lives of groups in Indonesian, Friends of the Earth (FOE) revealed.
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Analysis Of Financial Report
Samsung's CEO, Oh-Hyun Kwon, shared the performance and key achievements for 2014.
Firstly, they achieved record-high earnings in the Memory business, but overall earnings declined compared to 2013 due to lower smartphone sales.
In 2014, the income was KRW 206 trillion, 10% lesser than in 2013, and the working benefit and net benefit was KRW 25 trillion and KRW 23 trillion, individually.
For the Memory business, enhanced cost competitiveness and increased sales of high value-added product led to improved earnings.
Secondly, they continued strengthening core competencies in their technology and brand loyalty and launched innovative products.
To grow worldwide Research and development focuses and secure remarkable ability pool, KRW 15 trillion in 2014 was contributed.
Thirdly, they implemented a proactive shareholder return policy to increase shareholder value.
Since their stock expense stayed level all through 2014, they concentrated on enhancing so as to enhance shareholder esteem shareholder returns. They drove a gigantic scale buyback of over KRW 2 trillion. They likewise expanded profit per offer to KRW 20,000 for each basic offer and KRW 20,050 for every favored offer, 40% higher than the earlier year. They showed their commitment to shareholders by expanding profit by 79% for the third successive year.
The chairman’s report is in direct synchronization with the financial report. The chairman has provided a true and fair representation of events in 2014.
Samsung's money related proclamations were as per the International Financial Reporting Standards as embraced by the Republic of Korea ("Korean IFRS").
The graphs used by Samsung to describe their financial statements are self-explanatory and facilitates easy comparison between two years.
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Predictive Value
Samsung’s loss in 2014 brought about strategic decision making in the company. The aim was to beat the analyst forecasts.
Historic data:
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Yet, there is evidence that the world's top mobile phone brand is recuperating.
1) Better expected sales for Galaxy S6 phone:
Analysts said that, S6, which includes a screen that bends over the side of the phone, gives quite required expressive freshness. The way that the S6 now emerges from the group will offer the organization some assistance with improving deals.
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