Financial Reporting Problem
Marks and Spencer plc (M&S)
The financial statements of M&S (GBR) are presented in Appendix A. The companys
complete annual report, including the notes to the financial statements, is available online.
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&Ss primary revenue sources?
c. Compute M&Ss gross profit for each of the years 2018 and 2019. Explain why gross
profit increased in 2019.
d. Why does M&S make a distinction between operating and non-operating profit?
e. Does M&S report any non-IFRS measures? Explain.
86 MARKS AND SPENCER GROUP PLC FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT 53 weeks ended 2 April 2016 Underlying Non-underlying Em Em 10,555.4 Notes 52 weeks ended 28 March 2015 Underlying Non-underlying Em Em Total Em Total Em Revenue 2.3 10,555.4 10,311.4 10,311.4 ...................................................................................................................................................................................................................................................................................... . ************************ Operating profit . ************************* 784.9 584.1 ............................................................................................................................................................................................................ 2,3,5 (200.8) 762.5 (61.2) 701.3 ................................................................................................................. 6 21.1 Finance income Finance costs 21.1 (116.4) 15.5 (116.8) ****************************************************************** 15.5 (116.8) 6 (116.4) ************* 600.0 Profit before tax Income tax expense Profit for the year 4,5 7 689.6 (118.8) ( 570.8 (200.8) 34.4 (166.4) 488.8 (84.4) 404.4 661.2 (124.8) 536.4 (61.2) 6.5 (54.7) (1183) 481.7 ******************* ******* Attributable to: Owners of the parent Non-controlling interests 573.3 (166.4) (54.7) (2.5) 570.8 406.9 (2.5) 404.4 541.2 (4.8) 536.4 486.5 (4.8) 481.7 (166.4) (54.7) ........................................................... 8 Basic earnings per share Diluted earnings per share 35.0p 34.9p 24.9p 24.8p 33.1p 32.9p 29.7p 29.5p 8 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 53 weeks ended 2 April 2016 m 404.4 52 weeks ended 28 March 2015 Em Notes 481.7 ********************************************************************* Profit for the year Other comprehensive Income: Items that will not be reclassified to profit or loss Remeasurements of retirement benefit schemes Tax charge on items that will not be reclassified 11 346.2 (45.6) 300.6 193.7 (40.2) 153.5 ************************************************************************ 7.3 (75) ************************************************************************************************************** **** 111111 Items that will be reclassified subsequently to profit or loss Foreign currency translation differences Cash flow hedges and net investment hedges -fair value movements recognised in other comprehensive income -reclassified and reported in profit or loss -amount recognised in inventories Tax credit/(charge) on cash flow hedges and net investment hedges ******** ****************************************************************************************************** (30.1) (22.1) 5.9 6.5 (32.5) 268.1 221.2 (60.0) (21.6) (212) 1109 2644 746.1 Other comprehensive income for the year, net oftax Total comprehensive Income for the year 672.5 **************************************************************************************************************************************************************************************************************************************************************************************** Attributable to: Owners of the parent Non-controlling interests 675.0 (2.5) 672.5 750.9 (4.8) 746.1 87 ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Notes ************************************************************************************************************************************************************************************************************************************************************* ***************************************************************************************************************************************************************************** ............................ ******************************************************************************************************************************************************************************************************************* . *********************************************** 122 ************************************************************************************************************************************************************************* *************************************************************************************************************************************************************************************************************** 11 ............................................................................. 16 ............................................................................................................................................................................................................ ........................................................................................................................................................................................................ ........................................................................................................................................................................................................................................................................................................ ************************************ ************************************************************************************************************************************************************************************************** 19 20 .................................................................................................................................................................................................................. As at As at 2 April 2016 28 March 2015 Em Em Assets Non-current assets Intangible assets 14 802.8 858.2 Property, plant and equipment 15 5,0271 5,031.1 Investment property 15.5 15.6 Investment in joint ventures 6.9 Other financial assets 16 3.0 3.0 Retirement benefit asset 851.0 460.7 Trade and other receivables 17 234.7 283.3 Derivative financial instruments 21 74.0 75.8 Deferred tax assets 23 1.2 7,015.0 6,741.1 Current assets Inventories 799.9 797.8 Other financial assets 19.1 11.6 Trade and other receivables 17 321.1 321.8 Derivative financial instruments 21 72.1 1179 Current tax assets 1.6 Cash and cash equivalents 18 247.6 205.9 1,461.4 1,455.0 Total assets 8,476.4 8,196,1 Liabilities Current liabilities Trade and other payables 1,617.7 1,6424 Partnership liability to the Marks & Spencer UK Pension Scheme 12 71.9 71.9 Borrowings and other financial liabilities 297.5 279.4 Derivative financial instruments 21 28.5 7.7 Provisions 22 14.0 46.2 Current tax liabilities 75.2 64.0 2,104.8 2,111.6 Non-current liabilities Retirement benefit deficit 11 26.9 11.7 Trade and other payables 19 353.0 319.7 Partnership liability to the Marks & Spencer UK Pension Scheme 12 383.8 441.0 Borrowings and other financial liabilities 20 1,774.7 1,745.9 Derivative financial instruments 21 0.2 20.0 Provisions 22 52.0 32.1 Deferred tax liabilities 23 337.6 315.3 2,928.2 2,885.7 Total liabilities 5,033.0 4,997.3 Net assets 3,443.4 3,198.8 Equity Issued share capital 24 405.8 412.0 Share premium account 411.3 392.4 Capital redemption reserve 2,210.5 2,202.6 Hedging reserve 32.3 64.3 Other reserve (6,542.2) (6,5422) Retained earnings 6,927.5 6,670.5 Total shareholders' equity 3,445.2 3,199.6 Non-controlling interests in equity (1.8) (0.8) Total equity 3,443.4 3,198.8 The financial statements were approved by the Board and authorised for issue on 24 May 2016. The financial statements also comprise the notes on pages 90 to 125. Steve Rowe Chief Executive Officer Helen Weir Chief Finance Officer *********************************************************************************************** ********************************************************************************************************************************** ********************************* . ************************************************************************************************************************************************************************************************ ********************************************************************** FINANCIAL STATEMENTS 88 MARKS AND SPENCER GROUP PLC FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 2,2026 ********** 11111111111 ................................................................................................................................................................................................................................................. ******************************************************************************************************************************************************************* ***************************************************** ********************************************************************************************************************************************************************** ********************************************************************************************************************** Ordinary Share Capital Non- share premium redemption Hedging Other Retained controlling capital account reserve reserve reserve eamings Total interest Total Em Em Em Em Em Em Em Em Em As at 30 March 2014 408.1 355.5 (41.8) (6,542.2) 6,325.1 2,707.3 (0.6) 2,706.7 Profit/(Loss) for the year 486.5 486.5 (4.8) 481.7 Other comprehensive expense)/income: Foreign currency translation (20) (5.5) (75) (7.5) Remeasurements of retirement benefit schemes 193.7 193.7 193.7 Tax charge on items that will not be reclassified (40.2) (40.2) (40.2) Cash flow hedges and net investment hedges - fair value movements recognised in other comprehensive income 210.9 103 221.2 221.2 reclassified and reported in profit or loss (60.0) (60.0) (60.0) amount recognised in inventories (21.6) (21.6) (21.6) Tax on cash flow hedges and net investment hedges (21.2) (21.2) (212) Other comprehensive income 106.1 158.3 2644 264.4 Total comprehensive income/expense) 106.1 644.8 7509 (4.8) 746.1 Transactions with owners: (280.7) (280.7) (280.7) Transactions with non-controlling shareholders 4.6 Shares issued on exercise of employee share options 3.9 36.9 40.8 40.8 Purchase of own shares held by employee trusts (24.2) (242) (24.2) Release of share-based payments ents.................................................. (1.1). (1.1) Deferred tax on share schemes 6.6 6.6 6.6 As at 28 March 2015 412.0 392.4 2,202.6 643 (6,542.2) 6,670.5 3,199.6 (0.8) 3,198.8 ************************************************* Dividends .................................................................................................................................................................................................................................. 4.6 ...................... SER *********************************************************************** ........................ ........................................................................................................................................................................................................... ********************************************************* ************************************************************ ****************************** .......................................................................................................................................................... ****************** .......................................... ***************************** As at 29 March 2015 412.0 392.4 2,202.6 64.3 (6,542.2) 6,670.5 3,199.6 (0.8) 3,198.8 Profit/loss) for the year 406.9 Other comprehensive expense)/income: Foreign currency translation (0.5) 7.8 7.3 7.3 Remeasurements of retirement benefit schemes 346.2 346.2 346.2 Tax charge on items that will not be reclassified (45.6) (45.6) (45.6) Cash flow hedges and net investment hedges fair value movements recognised in other comprehensive income (21.8) (8.3) (30.1) (30.1) reclassified and reported in profit or loss (22.1) (22.1) (22.1) amount recognised in inventories 5.9 5.9 5.9 Taxon cash flow hedges and net investment hedges 6.5 6.5 6.5 Other comprehensive income/expense) (32.0) 300.1 268.1 268.1 Total comprehensive income/expense) (32.0) 707.0 675.0 (2.5) 672.5 Transactions with owners: Dividends (301.7) (301.7) (301.7) Transactions with non-controlling shareholders 1.5 1.5 Shares issued on exercise of employee share options 1.7 18.9 20.6 20.6 Purchase of own shares held by employee trusts (10.9) (10.9) (10.9) Shares purchased in buyback (7.9) 7.9 (150.7) (150.7) (150.7) Credit for share-based payments 17.2 17.2 17.2 Deferred tax on share schemes (3.9) (3.9) (3.9) As at 2 April 2016 405.8 411.3 2,210.5 32.3 (6,542.2) 6,927.5 3,445.2 (1.8) 3,443.4 1. The Other reserve was originally created as part of the capital restructuring that took place in 2002. It represents the difference between the nominal value of the shares issued prior to the capital reduction by the Company (being the carrying value of the investment in Marks and Spencer plc) and the share capital, share premium and capital redemption reserve of Marks and Spencer plc at the date of the transaction 2. The Retained eamingsreserve includes a cumulative E4.8m loss (Last year E12.6m loss) in the currency reserve 3. Amounts 'redassified and reported in profit or loss' are presented within finance costs offsetting the revaluation of the hedged bonds (last year E4.4m was presented in cost of sales and 55.6min finance costs). Amount recognised in inventories includes f(93.7)mincluded cost of salesforthe year and E87am (last year 21.6m) that remains in inventory at the balance sheet date. ********* .................................................................................................................................................................... ******** ********* ***** ................................... ****************************************** . ...................................................... BeaT. ************ 11111111 ************************************************************************************* 89 ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................................................................................................................................................................................................................................................................................................................. 53 weeks ended 52 weeks ended 2 April 2016 28 March 2015 Notes Em Em ******** 27 Cash flows from operating activities Cash generated from operations Income tax paid Net cash Inflow from operating activities .................................................................................................................................................................................................................... 1,311.3 (99.3) 1,212.0 1,349.1 (71.1) 1,278.0 ..................................................................................................................................................................... . ***************** *********************************************************************************************************************************************************************************************** Cash flows from Investing activities Proceeds on property disposals Purchase of property.plant and equipment Purchase of intangible assets (Purchase/reduction of current financial assets Interest received Acquisition of subsidiary Net cash used in Investing activities 30.6 (363.3) (186.8) (7.2) 6.8 (56.2) (576.1) 35.4 (521.8) (178.0) 6.0 9.3 .......................................................................................................................................................................................................................................... 25 (649.1) ********************************************************************************************************************************************************** ************************************************ Cash flows from financing activities Interest paid' Cash inflow/outflow) from borrowings Repayment of syndicated loan notes Decrease in obligations under finance leases Payment of liability to the Marks & Spencer UK Pension Scheme Equity dividends paid Shares issued on exercise of employee share options Purchase of own shares held by employee trust Share buyback Net cash used in financing activities (113.5) 3.1 (19.9) (2.4) (56.0) (301.7) 20.6 (10.9) (150.7) (631.4) (1153) (165.7) (10.2) (4.8) (544) (280.7) 40.8 (24.2) ......................................................................................................................................................................................................................................................................... ..................................................................................................................................................................................................................... (6145) ******************************************************************************************** ....................................................................................................................................................................................................................... Net cash Inflow from activities Effects of exchange rate changes Opening net cash Closing net cash 1. Includes interest on the partnership liability to the Marks & Spencer UK Pension Scheme 4.5 3.7 187.8 196.0 14.4 (23) 175.7 187.8 28 53 weeks ended 2 April 2016 Em 52 weeks ended 28 March 2015 Em Notes *********************************************************************************************************************************************************** (2,223.2) 4.5 7.2 Reconciliation of net cash flow to movement in net debt Opening net debt Net cash inflow from activities Increase/(decrease) in current financial assets Decrease in debt financing Exchange and other non-cash movements Movement In net debt Closing net debt ******************************************************************************************************* ******************************************************************************* (2,463.6) 14.4 (6.0) 235.1 (3.1) 240.4 (2,223.2) 75.2 (2.0) 84.9 (2,138.3) ................................................... ********************************************************************************************************************************************************************* 28 FINANCIAL STATEMENTS 122 MARKS AND SPENCER GROUP PLC FINANCIAL STATEMENTS COMPANY STATEMENT OF FINANCIAL POSITION Asat 28 March 2015 Em .................................................................... ***************************** ******************************************************* ******************************************************************************************************************************************************************************************************************************************************************************************** . ******************************** As at 2 April 2016 Notes Em Assets Non-current assets Investments in subsidiary undertakings C6 9,235.8 9,226.4 Total assets 9,235.8 9,226.4 Llabilities Current liabilities Amounts owed to subsidiary undertakings 2,559.2 2,429.5 Total liabilities 2,559.2 2,429.5 Net assets 6,676.6 6,796.9 Equity Ordinary share capital 405.8 412.0 Share premium account 411.3 392.4 Capital redemption reserve 2,210.5 2,202.6 Merger reserve 1,397.3 1,3973 Retained earnings 2,251.7 2,392.6 Total equity 6,676.6 6,796.9 The financial statements were approved by the Board andauthorised for issue on 24 May 2016. The financial statements also comprise the notes on pages 123 to 125. Steve Rowe Chief Executive Officer Helen Weir Chief Finance Officer ****************************************************************************************************************************************************************************************************************** ********************** COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Ordinary share capital Em 408.1 Share premium account Em Capital redemption reserve Em 2,202.6 Merger reserve Em 1,3973 355.5 Retained earnings Em 2,382.1 282.2 (280.7) Total Em 6,745.6 282.2 (280.7) *********************************************************************************************************************************** ******************************************************************************************************************************************************** 9.0 9.0 ************************************* 39 36.9 3924 At 30 March 2014 Profit for the year Dividends Capital contribution for share-based payments Shares issued on exercise of employee share options At 28 March 2015 At 29 March 2015 Profit for the year Dividends Capital contribution for share-based payments Shares purchased in buyback Shares issued on exercise of employee share options At 2 April 2016 412.0 412.0 2,2026 2,202.6 1,397.3 1,397.3 392.4 2,392.6 2,392.6 302.1 (301.7) 40.8 6,796.9 6,796.9 302.1 (301.7) ........................................................................................................... . .......................................................................................................................................................................................................................................................... 9.4 (150.7) 9.4 (150.7) (7.9) 7.9 ************* 1111111111111111 1.7 405.8 18.9 411.3 20.6 6,676.6 2,210.5 1,397.3 2,251.7 COMPANY STATEMENT OF CASH FLOWS ..................................... ************************ 53 weeks ended 2 April 2016 m 52 weeks ended 28 March 2015 Em ********************************************************************************************************************************* 302.1 302.1 282.2 282.2 ********************************************************************************************************************************************************************************* 40.8 . *************************************************** Cash flow from Investing activities Dividends received Net cash generated from Investing activities Cash flows from financing activities Shares issued on exercise of employee share options Shares purchased in buyback Drawdown/repayment) of intercompany loan Equity dividends paid Net cash used in financing activities Net cash Inflow from activities Cash and cash equivalents at beginning and end of year 20.6 (150.7) 129.7 (301.7) (302.1) (423) (280.7) (282.2)
