This section is based on the “Application Guide for Internal Control of accounting and financial information published by issuers”, from the Reference Framework published by the French Financial Markets Authority (AMF) on 22 July 2010. It is part of an overall process aimed at making continual progress and improving the Internal Control system that is already in place.
Internal Control for accounting and finance covers the processes that provide accounting data, i.e. the processes for producing financial information, closing the accounts process and communication campaigns.
The accounting and financial Internal Control process is designed to ensure:
The scope of application of the Internal Control procedures relating to the preparation and processing of financial and accounting information encompasses the parent company L’Oréal and all subsidiaries included in the consolidated financial statements.
Under the supervision of General Management, dedicated teams of specialists are responsible for accounting and financial monitoring in the following areas: accounting, consolidation, tax matters, management, financial services and treasury.
Within the Administration and Finance Division, the Operational Finance Department is responsible for preparing the Group’s consolidated financial results. As a result, it also coordinates the Business Service Centre and a global network of management controllers who are responsible for ensuring compliance with the accounting and management standards to ensure appropriate management of the Group’s results.In addition, an expert team is responsible for worldwide accounting management, ensuring that IFRS standards are applied, and that the Group’s accounting processes are implemented and harmonised worldwide and in the accounting Business Service Centre.
Finally, the Operational Finance Department runs the Group’s Tax Department. Comprising a network of tax lawyers at corporate level, in the Zones and in the Group’s most vulnerable countries, the Tax Department monitors changes in regulations, ensures compliance with local rules, and oversees the implementation of the Group’s tax policy, and in particular the transfer pricing policy and customs rules.
Within the Administration and Finance Division, the Corporate Finance Department protects the Group’s financial assets. The Treasury and Financing Department centralises cash flows and the hedging of currency and interest rate risks. The department leads a network of treasurers in the Zones and countries, and applies the Group’s financing policy.
The Financial Structure Department undertakes external growth transactions and monitors the financial structures of L’Oréal S.A. and its subsidiaries. The Business Opportunities for L’Oréal Development (BOLD) corporate venture fund, which makes minority investments in innovative products and companies, is also managed by the Corporate Finance Department.
The Group has put in place accounting policies and standards that are consistent with IFRS, the consolidated accounting standards. All consolidated subsidiaries must apply these standards in order to provide uniform and reliable financial information.
The Operational Finance Department oversees the regular update of these Group standards, taking into account the changes in regulations and accounting principles.
These regulations define the principles required for harmonised accounting treatment of transactions, including the methods used to record balance sheet items and to identify and value off-balance sheet commitments. The Group’s Accounting Department conducts the ongoing monitoring of any new accounting standards currently under preparation, in order to alert the General Management and anticipate their effects on the Group’s financial statements.
Common to all subsidiaries, the chart of accounts, along with all the key accounting processes, provide the definitions and methodology for preparing the reporting required to draw up the financial statements.
The management standards describe the operational application of these rules. They give the valuation rules for some of the key balance sheet and income statement accounts and also stipulate the controls and checks applicable to the key processes.
The management standards are regularly supplemented and are thus part of the continuous improvement process. This aims to respond to the findings of the Internal Audit Department and to cover the accounting and financial risks of the subsidiaries. This work has made it possible to bring our approach more closely in line with the recommendations set out in the “Application Guide for Internal Control of accounting and financial information” of the French Financial Markets Authority (AMF) Reference Framework.
