case study, intermediate financial accounting
BREAF CASE STUDY (15 MARKS) The financial statements of M&S (GBR) are presented below. The company's complete annual report, including the notes to the financial statements. INSTRUCTIONS (a) What type of income statement format does M&S use? Indicate why this format might be used to present income statement information (b) What are M&S's primary revenue sources? (c) Compute M&S's gross profit for each of the years 2012 and 2013. Explain why gross profit increased in 2013. (d) Why does M&S make a distinction between operating and non-operating profit? (e) Does M&S report any non-IFRS measures? Explain. Financial statements Consolidated income statement Notes 2,3 52 weeks ended 30 March 2013 m 10,026.8 52 weeks ended 31 March 2012 En 9,934.3 2,3 756.0 746.5 6 6 26.5 (218.2) 48.3 (136.8 Revenue Operating profit Finance income Finance costs Profit before tax Income tax expense Profit for the year Attributable to: Equity shareholders of the Company Non-controlling interests NA 4 7 564.3 (106.3) 458.0 668.0 (168.4) 489.6 466.7 (8.7) 458.0 513.1 23.5 489.6 8 8 29.2p 29.0p 32.5p 32.20 5643 668.0 18.4 6.6 9.3 Basic earnings per share Diluted earnings per share Non-GAAP measures: Underlying profit before tax Profit before tax Adjusted for Strategic programme costs Restructuring costs IAS 36 Impairment of assets TAS 39 Fair value movement of put option over non-controling interest in Czech business TAS 39 Fair value movement of embedded derivative Fair value movement on buy back of the Puttable Callable Reset medium-term notes Reduction in M&S Bank income for the impact of the financial product mis-selling provision Underlying profit before tax Underlying basic earnings per share Underlying diluted earnings per share 5 5 5 5 5 5 5 1 449 (15.6) (5.8) 0.2 oli 75.3 15.5 665.2 705.9 8 8 32.7p 32.50 34.9 34.6p Consolidated statement of comprehensive income 52 weeks ended 52 weeks ended 30 March 2013 31 March 2012 Notes Em Em Profit for the year 458.0 489.6 Other comprehensive income: Foreign currency translation differences 7.9 (15.1) Actuarial gains (losses) on retirement benefit schemes 11 90.7 (189.9 Tax on retirement benefit schemes (19.9) 50.4 Cash flow and net investment hedges - fair value movements in other comprehensive income 33.6 53.0 - reclassified and reported in net profit (26.0) (23.0) - amount recognised in inventories (13.6) 13.7 Tax on cash flow hedges and net investment hedges 10.4 (73) Other comprehensive income'loss) for the year, net of tax 72.3 (118.2 Total comprehensive income for the year 530.3 371.4 Attributable to: Equity shareholders of the Company 539.0 394.9 Non-controlling interests (8.7 23.5) 530.3 371.4 The accompanying notes, which are an integral part of these consolidated financial statements, are included in Marks and Spencer's 2013 annual report, available in the Corporate Site section of the company's website, http://www.marksandspencer.com Consolidated statement of financial position Notes Em 5 Em 14 15 16 11 17 21 695.0 5,033.7 15.8 15.5 3.0 206.1 265.4 65.3 6,299.8 5843 4.789.9 15.9 14.4 3.0 913 2702 442 5.8132 16 17 21 767.3 16.9 245.0 42.5 3.1 193.1 1 267.9 7,567.7 6819 260.5 2530 670 1.6 196.1 1.460.1 72733 18 Assets Non-current assets Intang ble assets Property, plant and equipment Investment property Investment in joint ventures Other fnancial assets Retirement benefit asset Trade and other receivables Derivative fnancial instruments Current assets Inventories Other fnancial assets Trade and other recevables Derivative fnancial nstruments Current tax assets Cash and cash equivalents Total assets Liabilities Current liabilities Trade and other payables Partnership liability to the Marks & Spencer UK Pension Scheme Borrowings and other francia abilities Derivative fnancial instruments Provisions Current tax labilities Non-current liabilities Retrement benedt deficit Trade and other payables Partnership lability to the Marks & Spencer UK Pension Scheme Borrowings and other francia labilities Derivative fnancial instruments Provisions Deferred tax isbilities Total liabilities Net assets Equity issued share capital Share premium account Capital redemption reserve Hedging reserve Other reserve Retained earnings Total shareholders' equity Non-controlling interests neguity Total equity mesaas 19 12 20 21 22 1,503.8 71.9 558.7 13.7 19.2 71.0 2.238.3 1.449.1 71.9 327.7 60.5 8.4 878 2.005.4 133 280.8 11 19 12 20 21 22 23 13.1 2921 550.7 1,727.3 13.1 16.0 230.7 2,843.0 5,081.3 2,486.4 1.948.1 272 240 196.7 2.489.1 4.4945 2778.8 24 403.5 315.1 2,202.6 9.2 (6,542.2) 6,1172 2.505.4 (19.0) 2.486.4 401.4 2943 2,2026 14.8 16.1143 5,9914 2.790.2 (11.4 2.778.8 Consolidated cash flow information 52 weeks ended 30 March 2013 Em 52 wooks ended 31 March 2012 Em Notes 26 1,246.2 (106.0 1,140 2 1352.1 149.1) 1203.0 15843 (642.6) (187.1) 243.4 5.9 (580.4 (156.4 (44.8 7.7 757.8 Cash flows from operating activities Cash generated from operations Income tax paid Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets Sale (purchase of current financial assets Interest received Net cash used in investing activities Cash flows from financing activities Interest paid Cash infow(outflow) from borrowings Drawdown of syndicated loan notes Issue of medium-term notes Redemption of medium-term notes Decrease in obigations under finance leases Payment of lability to the Marks & Spencer UK Pension Scheme Equity dividends paid Shares issued on exercise of employee share options Purchase of own shares by employee trus! Net cash used in financing activities Net cash outflow from activities Effects of exchange rate changes Opening net cash Closing net cash (135.9 41.4 (135.2 0.5 81.0 395.6 (606.4 (11.0 171.9) (271.3 22.9 296.5 (307.6 (13.0 171.9 (267.8 44.3 (13.21 1511.0 165.8 (1.9 263.5 195.8 (595.8) (38.0 0.9 195.8 160.7 27 52 weeks ended 30 March 2013 Com 52 weeks ended 31 March 2012 som Notes Reconciliation of net cash flow to movement in net debt Opening net debt Net cash outfow from activities Decrease increase in current financial assets Decrease in debt financing Partnership lability to the Marks & Spencer UK Persion Scheme (non-cash Exchange and other non-cash movements Movement in net debt Closing net debt (1.857.1) 136.0) (243.4 132.7 1606.0 (4.5 757.2 2.614.31 11.900.9 186.8 448 138.4 (71.9 27 43.8 (1.857.1)
