The Operational Finance Department and the Global IT Department make joint decisions about the software suitable for the Group’s financial and accounting requirements. At the level of information systems, the teams are strengthening the procedures for the separation of tasks and improved control of access rights. They have been offered tools to ensure that access rights comply with the Group’s rules.
The system for monthly reporting on economic indicators provides the foundation for continuous, uniform monitoring of the performance of each subsidiary and ensures they are in line with the objectives set.
Used by all entities, this reporting and consolidation system ensures the consistency and reliability of figures at the level of each subsidiary through blocking controls that operate before the financial data is uploaded to Group level. In this regard, the operating profit and loss account by destination, which is common to both management and general accounting, contributes to strengthening the control of accounts in the financial statements, as a single reference framework is used.
The Group’s organisation is based on reporting from each subsidiary that is provided directly by the countries to the parent company, L’Oréal, without any intermediate aggregates for the vast majority of the subsidiaries. This system optimises data transfer and the completeness of information and makes it easier to check that data is accurate.
The Chief Executive Officer and Chief Financial Officer of each subsidiary make a joint commitment with regard to the quality, reliability and completeness of the accounting and financial information they have prepared and sent to the Group’s Operational Finance Department, through a representation letter that they jointly sign.
The role and tasks of the Audit Committee, as previously described, comply with European regulations and, in particular, Directive 2014/56/EU and EU regulation 537/2014 on statutory audits, and are based on the report by the working group on Audit Committees published by the AMF on 22 July 2010.
Specific procedures for monitoring and for validation, authorisation and accounting rules apply to the processes that populate the financial statements, such as sales, purchases, management of inventories and non-current assets, and payroll and cash management.
The closing of accounts is subject to precise instructions and a detailed time schedule. These are circulated to all subsidiaries to make sure that deadlines are met and financial statements are prepared in a consistent manner. The Group has introduced two hard closings (anticipating the work involved in the closure of financial statements) in May and November to prepare in advance and speed up closing times.
For the preparation of consolidated financial statements, validation procedures apply at each stage of the process of reporting and processing information. In particular, they verify that inter-company transactions have been correctly adjusted and eliminated (these are reported on a monthly basis), consolidation transactions have been checked, accounting standards have been correctly applied, the consolidated published accounting and financial data have been harmonised and properly determined and the general accounting data and management data used in the preparation of the financial information are consistent.
Managers in charge of Financial Communication prepare a precise timetable for publication of up-to-date information on the Group to the financial markets. This timetable complies with the requirements of market authorities. These managers check with the Legal Department that communications comply with the required deadlines, laws and regulations.
They also have a role in ensuring that the publication of information provided by the Operational Finance Department is precise and accurate. All material information provided to the financial community reflects with truth and transparency the situation and business activities of the Group. Furthermore, all communications are made in accordance with the principle of equal provision of information to all shareholders.
All accounting and financial information prepared by consolidated subsidiaries is subject to a limited review at the time of the half-year closing process and to a full audit at year-end by the external auditors. Twice a year, the Chief Executive Officer and the Chief Financial Officer of each consolidated subsidiary make a joint commitment as to the fair presentation, reliability and completeness of the financial information by jointly signing a representation letter.
Audit assignments in the countries are almost all entrusted to members of the networks of the two Statutory Auditors who, after having jointly performed the review of all the Group’s accounts and the manner in which they were prepared, are responsible for issuing an opinion on the Group’s consolidated financial statements. The Statutory Auditors issue an opinion as to whether the consolidated financial statements and the parent company financial statements give a true and fair view. They are kept informed from the early stages of preparation of the financial statements and present an overview of their work to the Group’s accounting and finance managers and to the Audit Committee at the time of the half-year and annual closings.
