International Financial Reporting Standards and Chic Paints Limited Essay

Submitted By misail
Words: 1125
Pages: 5


4.1. Chic Paints Ltd is a large, shareholder run company which manufactures specialist paints - such as those used on boats, cars and industrial machinery. Chic Paints is a limited company, formerly part of Ashstead Plc, but was the subject of a management buyout from its previous owners six years ago by five of its directors. All the current directors have shareholdings in the company.

4.2. The current board composition of CPL, their line management responsibilities, and their shareholdings in the company are:
Greg Pearce - Managing Director 25% shareholding, Dave Whistler - Finance Director 25% shareholding, Ruth Jones - Sales Director 20% shareholding, Ahmed Khan - Production Director 15% shareholding and Susan Mather - HRM Director 15% shareholding. Last year both Ruth Jones and Ahmed Khan had indicated that they would like to sell their shareholdings in the company and retire. In July, after extensive searching and discrete advertising, they finally found two possible replacements- Colin Addison and Zhang Wei.

4.3. CPL aims to manufacture paints and allied products that are expertly formulated to meet the highest international standards, using the best available technology for end user consumers. CPL employs a team of highly experienced, dedicated and customer-oriented employees to ensure process and product excellence. Six years on, the company has reduced its turnover from £200 million to £120 million but has improved its gross profit margin from around 12% at the time of the management buyout to around 30% today. Net assets over the same period have, however, increased from £20 million to over £25 million; and the workforce has been reduced from around 500 to around 350 employees.

4.4. The organisation adopts a hierarchal or ‘tall’ structure as shown by the Organisation Chart which is included as Appendix 1 to this report. This type of organisational structure is typical for a large company, where accounting systems are the responsibility of the Finance Director.

4.5 External regulations affecting the organization:

4.5.1. The Company’s Act 2006 – This sets out the way in which financial statements should be prepared and gives companies a detailed format of how the profit and loss account and balance sheet should be drawn up, the precise wording that should be used and a great deal of detail about the information that must be shown in the financial statements. Chic Paints Limited will abide by this act when preparing their financial statements.

4.5.2. UK Accounting Standards – These further define the policies and approaches to the preparation of accounting statements that the organization must take. They are either known as Statements of Standard Accounting Practices (SSAPs) or Financial Reporting Standards (FRSs) depending on when they were issued. Similarly to The Company’s Act 2006, Chic Paints Limited will also need to abide by this act when preparing their financial statements.

4.5.3. International regulations such as International Accounting Standards (IASs) and International Financial Reporting Standards (IFRSs), issued by the International Accounting Standards Board (IASB).

4.5.4. The Data Protection Act 1998 – This regulates how the organization processes and stores sensitive information on customers, suppliers and employees. Chic Paints Limited will need to ensure its systems are compliant with the Act or risk heavy penalties if data is found to be misused and/or stolen. Currently to protect data, as stated in the IT policy, all computers at Chic Paints Limited must be individually password protected and only the employee and their line manager can know this password.

4.5.5. Late payment law – As set out in the Late Payment of Commercial Debt (Interest) Act 1998. Allows suppliers to charge interest on late payment of invoices. Chic Paints Limited will need to ensure that suppliers are paid within the agreed time and that it does not delay payments to