◎周文娟

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Quality and Usefulness of Financial Statements of Sainsbury

◎周文娟

This report analysed and commented upon the quality and usefulness of financial statements of Sainsbury plc by reference to the Qualitative Characteristics of Financial Information. By comparing with the financial statements of Tesco plc， it is can draw a conclusion that both companies did well in adopting the four qualitative characteristics.

There are various users of accounting information. They have to rely on the financial statements the businesses provided. However， how to measure whether or not a financial statement is reliable？The IASB refers four attributes called Qualitative Characteristics to make the information provided in financial statements useful to users.

This report is going to analyse and comment on the quality and usefulness of the financial statements of J Sainsbury plc， which is the third large supermarket in the UK. In addition，Tesco plc， which is the first large supermarket in the UK， will be chosen to compare.

1-Qualitative Characteristics of Financial Information

The IASB Framework states that there are four qualitative characteristics which make the information of financial statements is useful and quality： understandability， relevance，reliability， and comparability.

2-Financial Statements of Sainsbury and Tesco

Both J Sainsbury plc and Tesco's principal activities are grocery and related retailing. Both companies' financial statements have been prepared in accordance with International Financial Reporting Standards （IFRSs）. In addition， there are some interpretations and amendments related to International Accounting Standards （IAS）.

The following comparisons will comment on the four elements between both companies' financial statements.

2.1-Consolidated Statement of Comprehensive Income

The consolidated statement of comprehensive income shows all items of income and expense， and items went to the statement of recognised income and expense in a period.

Understandability： Sainsbury prints its income statement with colour lines and bold words， which shows the relationship among each elements and figures more clearly than Tesco's. It is easier to understand by users who have no professional accounting background. But Tesco presents these two statements merely by same size of words and same size of black lines. This may leads problems to the users.

Relevance： Both companies represent the elements and figures required by IFRS. Besides， the unit of figures is million pounds， so the omission of figures may leads different decision for users. Therefore，they are material.

Reliability： The financial statements are presumed to be reliable after the auditing.

Comparability： Both companies' f i n a n c i a l s t a t e m e n t s i n c l u d e corresponding information for the preceding periods. Besides， both of them informed the accounting policies they adopted. Therefore， this statement is comparable.

2.2-Consolidated Statement of Financial Position

Consolidated statement of financial position gives a snapshot of an organisation at a point in time.

Understandability： The same problem appeared again that Sainsbury still has a clearer presentation of statement of financial position than Tesco's.

Relevance： Information can be used as a basis for evaluation of future position and performance， and the information of past events helps predict the future transactions.

Reliability： The notes to the accounts intensify the reliability of all information provided in the statement of financial position.

Comparability： Both companies' statements are comparable through time to identify trends， and evaluate their performance because the information is consistent.

2.3-Consolidated Statement of Cash Flows

IFAS concludes that the statement of cash flows shows the changes in cash during the accounting period. It also represents all of a company's cash receipts and cash payments.

Understandability： Same problem for Tesco's presentation affected negatively for the understandability.

Relevance： The addition notes of statements of cash flows of Tesco give more information to users.

Reliability： The financial statements are presumed to be reliable after the auditing.

Comparability： It is able to compare Sainsbury's and Tesco's financial statement through time and compare with each other to evaluate the relevant performance and changes.

3-Conclusion

In view of the comparison and analysis above， it can be concluded that the three financial statements in both Sainsbury and Tesco have the qualitative characteristics. This leads to an inference that the three financial statements in both companies have high quality and usefulness.

（遵義師范學(xué)院）