• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  6. 6
  7. 7
  8. 8
  9. 9
  10. 10
  11. 11
  12. 12
  13. 13
  14. 14

The different accounting regulatory environments in the U.S. and France.

Extracts from this document...


Introduction of the two companies Carrefour is the world's second largest food retailer, and operates over 9,000 stores in 30 countries. Hypermarkets, supermarkets and hard discount stores are three major forms of business in Carrefour. In 2001, consolidated sales of Carrefour were � 69.5 billion (51% from international business), and net income from recurring operation was � 1.2 billion. Till the end of 2001, Carrefour had a total employee of 383,000 worldwide. Safeway Inc. is one of the largest food and drug retailers in North America. Till the end of 2001, this company operated 1,773 stores in the United States and western Canada. The total sales of 2001 were $34.3 billion. Safeway has extensive network of distribution, manufacturing and food processing facilities in order to support its stores. Although Carrefour's turnover is approximate double of Safeway's, they both engage in food retail industry. Therefore Carrefour and Safeway Inc. is a matched pair of large quoted companies. The different accounting regulatory environments in the U.S. and France Legal systems U.S. The federal law of the United States generally is modeled on English common law. "A common law rule seeks to provide an answer to specific case rather than to formulate a general rule for the future". (Nobes C and Parker R, 2002) This naturally influences commercial law, which traditionally does not regulate the behaviour of companies and how they should prepare their financial statements. To a large extent, accounting within such a context does not depend upon law. Instead, accountants themselves establish rules for accounting practice, which may be written down as recommendations or standards. France France has a codified law system, in which rules relate with justice and morality. They become doctrine. The accounting laws and decrees of the French state apply to all business enterprises, not just to companies. The keeping of accounting records and taxation report to owners and creditors as well. ...read more.


The states or families always control French companies. Carrefour is also not an exception. Halley Family Group, the biggest shareholder of Carrefour, owns 11.51% shares. Daniel Bernard is the Chairman-Chief Executive Officer of Carrefour. The Board of Directors of Carrefour is 'made up of 11 numbers, including 3 independent directors who do not hold a position and have never held a position within the company or any of its subsidiaries. Each director must own at least 600 shares during his six-year term of office. The Board of Directors met six times in 2001 with a 91% attendance rate for all directors.' The Board of Directors has 3 specialized committees. The members are all from Board members. Their duties are to study certain specific issues and to report to the Board of Directors. These three committees are strategic orientation committee, audit committee and compensation committee. The Strategic Orientation Committee is responsible for making the decisions that are most important for the future of the Group. It met twice in 2001. The Audit Committee is mainly charge of reviewing the parent company and consolidated financial statements. It met three times in 2001. The Compensation Committee proposes the compensation of corporate officers. It met once in 2001. In Carrefour's annual report of 2001, there is detailed information about the work of the Board of Directors and compensation of officers etc. The disclosure of information of Carrefour is plenteous under French law. Comparison between these two companies, corporate governance does not have obvious differences. Carrefour uses the similar system with Anglo-American Boards structure. However in the Board of Directors minor members are independent outside directors. Assessment of the foreign currency translation and segmental reporting disclosures In the US, foreign currency translation follows the requirements of SFAS 52. The new standard is based on the concept of "functional currency", which means " the currency of the primary economic environment in which the company operates." ...read more.


Huge size might be the main problem for Carrefour. It has to face more complicated and variable global economic and market environment. The target market for Safeway Inc. is only the North America, which means the problems might be comparatively simple. Conclusion After comparison of general regulation environments, classifications, accounting measurement techniques, corporate governance, the foreign translation and segmental reporting disclosures and ratios between Carrefour and Safeway Inc., there are several obvious differences. The outside reasons mainly are different regulation environments and different corporate governance systems. The inside reasons are that the two companies adopt different degree of conservatism and the different degree of disclosure for different types of information. In general, it would be better that Safeway Inc. put more detailed information about corporate governance, not just the list of the Board of Directors. It also will be helpful that Carrefour can give more details about its segmental report. Whether they are in which systems, there are advantages and disadvantages. Exploit its favourable conditions and avoid unfavurable ones is the key principle to success. Appendix Return on capital employed (ROCE)= Net profit before interest and taxation Share capital +Reserves +Long-term loans *100 Net profit margin= Net profit before interest and taxation Sales *100 Gross profit margin= Gross profit Sales *100 Average stock turnover period= Average stock held Cost of sales *365days Current ratio= Current assets Current liabilities Acid test ratio= Current assets (excluding stock) Current liabilities Interest cover ratio= Profit before interest and taxation Interest payable Earnings per share (EPS) = Earnings available to ordinary shareholders No. of ordinary shares in issue Reference Choi F, Frost C and Meek G, 1999, International Accounting, 3rd Edition, Prentice-Hall Inc. Choi F and Muller G, 1992, International Accounting, 2nd Edition, Prentice-Hall Inc. Lawrence S, 1996, International Accounting, 1st Edition, International Thomson Business Press McLaney E and Atrill P, 1999, Accounting: An Introduction, Pearson Education Limited Monks, Robert A G and Minow N, 2001, Corporate Governance, 2nd Edition, Blackwell Publishers Inc Nobes C and Parker R, 2002, Comparative International Accounting, 7th Edition, Pearson Education Limited ?? ?? ?? ?? FN 408 INTERNATIONAL FINANCIAL ANALYSIS 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Accounting & Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Accounting & Finance essays

  1. Harmonisation of accounting standards in Europe

    member states were required to produce a profit and loss account and balance sheet with attention to a clearly defined and highly structured common format and content. The fourth Directive's first draft was published in 1971, before the UK, Ireland and Denmark had entered the EU in 1973.

  2. Task1: different types of business ownership

    > To become better known through selling shares. > To gain limited liability. > To grow and expand. > To raise capital through selling shares to family or friends. > The partners may not always agree and some may work harder than others which can cause problems > The

  1. Discuss the need for regulation in financial reporting.

    This would be standardization based on uniform accounting practice, and could be achieved with little more than the random selection of one accounting treatment from the range available. Financial reporting regulators in the UK responded to the diversity in reporting of barter of advertising transactions with official rulings, EITF 99-17[1] and UITF 26, respectively.

  2. Enron Case Analysis

    Also, through the misguided accounting practices of recording future numbers instead of actual numbers their balance sheet was inflated greatly. The CFO, Jeffrey Skilling, should have never instituted the "mark to market" accounting system. Instead, they should have used real numbers like every honest company.

  1. Business systems Babatunde Onaola - Identify and use planning, control methods in conjunction with ...

    Using the differential method, the cost to make the part was determined to be: a. Variable production costs, plus b. Avoidable fixed costs, plus c. Opportunity costs An example will help to understand the differential method: Part X had been manufactured by Conservative, Inc.

  2. Management Accounting Report.

    Number two will show the breakeven and the margin of safety when the variable cost change. The maximum profit that the company can make when the variable costs have raised by �15 per product is �40,000 per annum. Summary (Break-even)

  1. Financial Analysis of Matalan PLC

    Disclosure of accounting policies is essential to the fair presentation of financial accounts. Validity of the Information: * The information is backward looking. Most users are concerned with the future. * There is a tendency in financial accounting for increased complexity.

  2. Costs, Profits and Break-even Analysis.

    Market Segmentation There are various ways to segment your market. These may include: * Demographically - according to the age structure of the population * Geographically - by country or region or area * Behaviouristically - according to the nature of the purchase, the use the product is put to,

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work