International Financial Reporting

International Financial Reporting

Introduction - International Financial Reporting

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The concept of financial reporting deals with evaluating the different financial performance and financial results of an organization. The evaluation of financial information is necessary to understand the financial stability of an organization which would help the investors. The financial reporting of the Tesla plc company will be highlighted in this report to get an overview regarding the regulation of the company. Tesla plc is a leading pioneer in the automobile industry of the U.K and holds a market share of 18%. In this report, the critical evaluation of the regulatory framework of Tesla plc will be investigated. The analysis of the financial information of Tesla plc will be determined in this report. The significant impact of financial information in the pathway of organizational growth and development will be identified in this report. An explanation regarding the varying degrees of compliance in the organization will be determined in this report to gather informative data.

Context and purpose of financial reporting

The notion of financial reporting plays a crucial role in providing informative data to the investors and the different stakeholders of the company. The purpose of financial reporting is to provide detailed insight regarding the financial integrity of the company to various stakeholders. The informative data from the financial reporting help the stakeholders of the company to conduct rational decisions (Niedermeyer, 2019). The different aspects of financial reporting would help the creditors, investors and key stakeholders to measure the financial performance of the organisation. The different factors of the financial reporting would help the key stakeholders to facilitate effective management decisions regarding the investments of the company. The financial reporting contains informative and reliable information which would help to measure the growth of the organization in terms of its performance.

The financial reporting of Tesla plc indicates that the company holds a stable position in terms of its financial stability. Tesla plc uses the financial strategy of leveraging debt which has helped it to maintain its position in the market. Over the years Tesla plc has improved its financial position in the global market (Techcrunch.com, 2022). The financial strategy of the company focuses on repaying its debt aspect which would help in raising its debt at a lower rate for further improvement. The company increases its share of equity in terms of long term debt. The implementation of such financial strategies would help the company to dilute its earnings which helps the company to grow further financially. Tesla plc uses the aspect of financial reporting to maximize the worth of the shareholders. Financial reporting would help the company to maximize the profitability aspect which would help it to expand its territory further in the overseas market. The operating income of Tesla plc has increased over the years by 54% which has helped the company to become financially stable (Tesla.com, 2022). The company must utilize its leveraging strategy to develop its financial position in the market. The preparation of financial reporting would help the organization to increase its productivity by expanding its territory in the global market.

Key principles of conceptual and regulatory frameworks

The key principles of the conceptual framework focus on fundamental concepts, disclosure concepts, measurement and recognition. The conceptual framework of an organization provides a basic insight regarding the reasoning abilities of an organization. The conceptual framework of Tesla plc revolves around its decision-making aspect, utility aspect, value creation aspect and innovation aspect. These aspects would help the organization to emphasize the decision-making ability of the organization regarding its financial investment (Peterson and Arun, 2018). On the other hand, the regulatory framework of an organization focuses on serving clarity regarding the policies of the organization, justifying the aspects of costs, efficiency, proportionality, transparency etc. The regulatory framework of Tesla plc follows the principle of sustainability in managing its operational activities. The company is focussing on the aspect of reducing its carbon footprints in the global market. The primary purpose of the regulatory framework of Tesla plc focuses on developing its products to maximize its market share in the overseas market.

The conceptual framework of Tesla plc tends to integrate the aspect of charging stations which would help the organization to maximize its market share in terms of manufacturing electric vehicles. The introduction of electric vehicles has helped the company to establish a strong competitive advantage in the market (Techcrunch.com, 2022). The conceptual framework of the company aims at aligning the aspect of electric vehicles with the charging stations to enhance the aspect of customer satisfaction. The aspect of disclosure in the conceptual framework has helped the company to gain global success. The disclosure analysis of the company has contributed to the success of the company while attaining the organisational goals and objectives in an effective manner. On the other hand, the regulatory framework of Tesla plc focuses on the resilience of the company (Tesla.com, 2022). Tesla plc has improved its position with the help of its regulatory credits. The introduction of electric vehicles has helped the company to establish a sturdy position in the aspect of regulatory credits. The implementation of regulatory credits would help the organisation to reduce its position in terms of carbon emissions.

Identification of stakeholders

The stakeholders of the organisation are defined as the individuals who contribute directly or indirectly to the growth and development of the company. The key stakeholders of the company contribute to the success of the company in attaining the goals and objectives of the organisation effectively and efficiently (Almenhali et al. 2021). The interest of the key stakeholders could get affected by the performance of the organisation. The key stakeholders of Tesla plc include its investors, creditors, suppliers, shareholders, directors, government, financial institute etc. The aspect of communication with the key stakeholders could be possible with the help of financial reporting. The preparation of a financial report helps the key stakeholders of the company to get an insight regarding the financial performance and the financial health of the organisation. The capitalization of the company depends majorly on the influence of the key stakeholders of the company. The investors of the company could be described as the financial strength of the company. The area of interest of the investors of Tesla plc would help the organisation to improve its profitability prospects which would be advantageous for the overall growth of the organisation. Communicating with the stakeholders regarding the risks associated with the business is an important part. The different aspects of the organisation would help the stakeholders to get an overview regarding the capitalization of the organisation (Peterson and Arun, 2018). The interest of the investors revolves around the business growth and profitability of the organisation. The operational activities of Tesla plc depend on vertical integration which would help the business to expand its territory in the international market.

Customers are the key stakeholders of the company. Tesla plc focuses on providing better customer satisfaction by implementing the strategy of product development. Tesla plc focuses on providing quality products to its customers with the help of the product development strategy. Suppliers of the company are the alliance of the company who helps to complete the production process of the organisation in an effective manner (Tesla.com, 2022). Suppliers help to establish collaboration between the aspect of production and customer service. Investors of the company would help to increase the quality of the products which would help to expand its line of products in an effective manner. As Tesla plc operates in the global market so the regulatory bodies of different countries affect the operational activities of the business.

Analysis of the value of financial reporting

The value of financial reporting would contribute to the establishment of the financial stability of the organisation in the target market. Measuring and monitoring the value of financial reporting would help to evaluate the debt management capacity of the organisation in an effective manner. The preparation of financial reporting would help to add value to the organisational growth by allocating the financial budgets of the organisation effectively and efficiently. The different aspects of financial reporting would help to monitor the income aspect and the expense aspect of the organisation. The debts of the organisation could be monitored with the help of financial reporting (Apriliana and Agustina, 2017). The value of the financial reporting could be used to allocate the budgets of the company in an effective manner. The investigation of the income and the expenses of the company would help the company to remain transparent in the competitive markets.

The value of financial reporting would help to analyse the current assets and current liabilities of the organisation. The evaluation of the inventory and the liabilities of the organisation could be determined with the help of the value of financial reporting. The significant impact of important metrics would help to analyse the financial stability of the organisation in an effective manner. The essence and value of financial reporting would help the organisation further ensure and facilitate the aspect of financial compliance.

The analysis of the financial performance of the last five years of Tesla indicates an upward trend in the sales growth of the company by 14%. The net income of the company has grown over the last 5 years by 28.31%. The annual income of the company has increased by 70.67% in the last five years (Al-Dmour et al. 2018). The informative data regarding the financial performance of the company indicates that Tesla plc holds a stable financial position in the global market in terms of its financial performance. The sales revenue of the company has increased by 71% in the last five years with the help of its strategic marketing mix. The effective marketing strategy and effective supply chain management have helped the organisation to increase its sales growth in the last five years.

 Explanation of the difference between IAS and IFRS

The concept of an International Accounting System deals with evaluating the aspect of international accounting by balancing the books of accounts. The primary feature of the International Accounting System is to make the comparison of the performance of business organisations less complex (Framework, 2018). The other features of IAS involve providing transparency to the business organisation, identifying the business opportunities, promoting efficiency, improving the allocation of capital etc. The primary objectives of IAS are developing the interest of the stakeholders in the business organization, setting the quality of business organization, enforcing the reporting standards within the organization. The primary purpose of IAS is to establish the accounting standards within the operational activities of the organization.

The notion of International Financial Reporting Standard deals with setting the accounting rules for providing clarity in the financial statement of the organization. The features of IFRS involves the establishment of relevance and comparability within the structural growth of the organisation. The objective of IFRS is to establish clarity in the aspect of financial reporting which would help the organization to grow and develop effectively and efficiently. The other objectives of the organization involve improving the standardization of the accounting standards of the organisation.

The basic difference between IAS and IFRS are IAS is a traditional approach whereas IFRS is the latest approach with the set of financial accounting rules which would help to strengthen the accounting position of an organization in an effective manner (Rodríguez, 2021). The aspect of IAS deals with a traditional set of rules whereas IFRS deals with the current set of accounting policies which would help to analyse the diverse accounting aspects of an organisation in an effective manner. The current factors of IFRS would help to formulate the financial reporting in the international standards. The principles of IAS was used previously with the previous accounting standards whereas the principles of IFRS is used currently to evaluate the different aspects of financial reporting.

Identification of degrees of compliance

The identification of the varying compliance with IFRS is necessary to evaluate the different aspects of the capital market which would help to make the business organisation globally successful (Peterson and Arun, 2018). The aspects of globalisation and harmonisation play an important role in the identification of degrees of compliance. The adoption of IFRS helps to enhance the value of the financial statements of an organisation in an effective manner. The implementation of the IFRS would help to analyse the critical aspects of the financial statement in an effective manner (Almenhali et al. 2021). The identification of the analytical factors would help to develop the value of financial statements in compliance with IFRS. The major influencing factor which helps to shape the purpose of implementing IFRS is that it would help to improve the level of transparency in the financial statements. The implementation of IFRS would further help to compare the financial statement of different years which would help to analyse and identify the loopholes in the operational activities of the organisation. The effective interest rate of the organisation could be calculated with the help of IFRS. The cash flow of the IBOR rates could of an organisation be determined with the help of IFRS. The degree of compliance of the organisation such as the cost-effectiveness of an organisation could be evaluated with the help of IFRS. The implementation of the accounting principles of IFRS would help to increase the target market of an organisation by allowing the participation of more investors (Weygandt et al. 2018). The alignment of the theories of IFRS would help to enhance the interest level of the investors which would help the organisation for further growth and development. The different aspects of IFRS provide step by step guidance regarding the income and expenses of an organisation. The implementation of the IFRS policies would provide guidance regarding the decrease in the depreciation of the assets of the organisation. The application of the IFRS theories would help to understate the cost of an organisation which would help the organisation to grow its profitability aspect in an effective manner.

Conclusion

This report could be concluded by stating that the different aspects of the organisation have been evaluated in alignment with IFRS and IAS. The determination of the diverse aspects of the financial reporting have been determined in this report. This report identified the various aspects of financial reporting which would help in allocating the resources of the organisation in an effective manner. The determination of the financial performance of Tesla plc has been generated in this report. The identification of the stakeholders and the impact of the stakeholders in the growth and development of an organisation have been discussed. The financial performance of the company in the last five years have been determined in this report. The difference between IFRS and IAS has been stated in this report. The key essentials of the financial factors helps to shape the financial performance of the organisation. The importance of financial reporting helps to increase the interest of the stakeholders. The evaluation of the conceptual framework helps to determine the stability of an organisation. The implementation of IFRS helps to enhance the value of financial reporting of an organisation effectively and efficiently. The identification of the key principles of the regulatory framework would help the organisation to establish a competitive advantage in the global market. This would further help the organisation to increase its market share.

References

Books

Niedermeyer, E., 2019. Ludicrous: The Unvarnished Story of Tesla Motors. BenBella Books. Available at: javascript:void(0) [Accessed on 25/3/22]

Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2018. Financial Accounting with International Financial Reporting Standards. John Wiley & Sons. Available at:https://www.uoguelph.ca/lang/sites/uoguelph.ca.business/files/BUS%206180%20Financial%20Managerial%20Accounting,%20Summer%202014,%20Jeffrey%20O%E2%80%99Leary.pdf [Accessed on 25/3/22]

Journals

Al-Dmour, A.H., Abbod, M. and Al-Balqa, N.S., 2018. The impact of the quality of financial reporting on non-financial business performance and the role of organizations demographic'attributes (type, size and experience).

Almenhali, A., Alhajeri, H., Almansoori, H., Aljneibi, N., Almansoori, N., Alsulaity, N., Mohammed, Y. and Nobanee, H., 2021. Financial Analysis of Tesla. Available at SSRN 3896901.

Apriliana, S. and Agustina, L., 2017. The analysis of fraudulent financial reporting determinant through fraud pentagon approach. Jurnal Dinamika Akuntansi, 9(2), pp.154-165.

Apriliana, S. and Agustina, L., 2017. The analysis of fraudulent financial reporting determinant through fraud pentagon approach. Jurnal Dinamika Akuntansi, 9(2), pp.154-165.

Framework, C., 2018. Conceptual framework for financial reporting. IFRS Foundation.

Peterson, O.K. and Arun, T.G., 2018. Income smoothing among European systemic and non-systemic banks. The British Accounting Review, 50(5), pp.539-558.

Rodríguez, P.P., 2021. Accounting and auditing of credit loss estimates: The hard and the soft. Latin American Journal of Central Banking, 2(2), p.100027.