1. Analyze Carrefours competitive and corporate strategy.
the key risks of the company's strategy?
What are
2. Provide an overall assessment of Carrefour's accounting quality and
highlight any potential adjustments you deem necessary to Carrefour's financial statements. Financial reporting quality refer to the characteristics of a firms financial statements. High quality financial reporting adheres to generally accepted accounting principles and is decision useful in terms of relevance and faithful representations. Employee benefits: Schemes with defined benefits and long term advantages: The group use the corridor method which is in line with IAS 19: Employee benefits. But the group has chosen to record all its actual losses and gains that have not yet been recognized in the French financial statements at the end of 2013 directly to shareholders equity at the beginning of 2014, this adjustment adhere to IAS 19 but could lead to poor comparability due to the fact that the differences afterward are spread over the expected average working life in income statement.
Share based compensation:
The groups choice of application of IFRS 2: Share-based payment is according to the option offered by IFRS 1 and reflect the economic truth here by using fair value and Black Scholes formula to spread the expenses over the vesting period. But we believe that the plans granted in 2004 and 2005 are based on nonmarket objectives, although it is thought to be unlikely to be achieved, it should be taken into consideration into calculation at the grant date and the expenses should be spread over the period. Thus the expense should be recognized in 2005. Note 14: Net sales The application here is in line with IAS 21: the effects of changes in foreign exchange rate. It is good that the group disclosure the impact of exchange rate here, but for better decision making and comparability purpose, it would be better to see the impact for previous years at least in 2004 to see the real trend of net sales. Note 12: Net income from discontinued operations The disclosure made here obey the rule according to IFRS 5: non-current assets held-for-sale and discontinued operations. The application to present the number separately from continued operations could reflect the economic truth of the group and be decision
useful when the outside analysts are doing ratio analysis.
Note 20: Commercial receivables The groups application and disclosure are in accordance with IFRS, and it would be more useful if the group could make further disclosure about the categories by due dates.
Note 26: Borrowings
The group use the accounting principle under IFRS and made sufficient disclosure as we have checked the annual report of Carrefour at 2005 to see they disclosed more information there by interest rate type, by currency, by maturity date and the breakdown of bonds. This application we believe is faithfully represented, relevant and decision useful. Conclusion In allwe believe that Carrefour maintain a good quality of accounting by: Adopting generally acceptable accounting principle (IFRS), introducing the concept of fair value, making relevant and faithful representation of financial statements to all stakeholders.
3. Analyze Carrefour's operating management, financial management, and
investment management during the years 2001 to 2005. What are the drivers of the company's poor share price performance? 4. Summarize the key findings of the financial analysis and provide recommendations for improvement to Carrefour's management. What actions could management take to regain the confidence of Chrystelle Moreau and her fellow investors?