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 enables 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 facilitates verification of data accuracy.
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 are presentation 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 on22 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, inventory and fixed asset management, or payroll and cash management.
The closing of accounts is governed by 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 the 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.
The insurance policy aims to provide the best protection for the Group’s assets and people against the occurrence of major risks that could adversely affect it. The Group has implemented group insurance programmes (in particular for Property Damage & Business Interruption, Third-Party Liability, Cyber, Transport, Credit Insurance and Construction) that harmonise coverage and optimise insurance cover for all its subsidiaries throughout the world, except in countries where regulations prohibits this type of arrangement (see “Restrictions” below). Local programmes have been setup in the countries in which group programmes cannot be deployed. This policy is applied as follows:
The financial solvency of insurers is an important selection criterion for the Group. Furthermore, the insurance programmes subscribed by the Group mainly involve coinsurance between the various major players in the international insurance market.
General civil liability: this group programme subscribed for all Group subsidiaries (except where local Restrictions apply)includes, in particular, civil operational liability, product liability and damage to the environment that is sudden and accidental. It covers the financial consequences of the civil liability of Group entities, if they are liable.
Property damage and Business Interruption: this programme provides cover for fire, lightning, explosion, theft and natural events within the limits of the products available on the insurance market. The Group has set up a global programme to cover all its property, chiefly fixed assets and inventories(except where Restrictions apply). This cover also includes a portion on business interruption directly resulting from covered property loss or damage. As the capacity of the insurance market is limited for certain risks, this programme includes sub‑limits, particularly for natural events. Through its reinsurance subsidiary, the Group carries risk retention levels that are not material at consolidated level, and these are applicable over and above local deductible amounts. The offering includes site prevention inspections by specialist departments of the leading insurer.
Cyber: a cyber insurance policy provides financial cover for the consequences of IT-related risks, subject to exclusions and warranties available on the market. As it is a “multi-risk” policy, cyber risk insurance comprises several components.
Transport: the Group has set up an insurance programme to cover the transportation of all its products. Therefore, all subsidiaries benefit from appropriate and uniform cover for risks related to the Group’s logistical operations (except where Restrictions apply).
Customer credit risk: Group subsidiaries must set up credit insurance, assisted by the Group and under the terms and conditions negotiated, in addition to their own credit management policy, provided that insurance cover compatible with their level of sales activity is available under financially acceptable conditions.
Buildings: the primary aim of the group Buildings insurance programme is to standardise the conditions of cover for all projects, in all countries. It also makes it possible to disseminate a general Buildings insurance policy, centralised Corporate management and, lastly, warranty optimisation.
