Accounting Standard followed by the company:
i) General Mills Inc:
General Mills Inc, for the purpose of its financial reporting, follows Generally Accepted Accounting Principle(GAAP).
ii) Meiji Holdings:
The company, for the purpose of the financial reporting and also for its subsidiaries, follows Generally Accepted Accounting Principle(GAAP). The company declares that the accounting standards are different from International Financial Reporting Standard(IFRS).
Accounting Standard followed by the auditors:
i)General Mills Inc:
The financial statements of the company are audited by KPMG LLP, which are the external auditors of the company. The external auditors have used standards of Public Company Accounting Oversight Board(United States). The standards obligates the auditors to ensure that all the financial statements of the company are free from any material misstatement and whether the internal control was maintained in all the material aspects.
ii)Meiji Holdings:
The financial statements of the company are audited by Ernst and Young Inc and the auditors declare that they have carried out the audit by following auditing standards prevailing and accepted in Japan.
Comparing financial statements of both the companies:
i)Income Statement:
Referring to the income statement of both the companies, we have found few differences in the content included. Although, the format followed by both the companies is similar, but while General Mills Inc. report three year comparative income statement in US Dollars only, Meiji Holdings has reported only two year comparative income statement in Japanese Yen, although US Dollar translation for the year 2013 is provided.
- General Mills Inc Income Statement:
-Meiji Holdings Income Statement:
ii)Balance Sheet:
Balance Sheet presentation of both the companies differs in their format and content. General Mills Inc. has presented its balance sheet, reporting the accounting data for the year 2012 and 2013 in US Dollars. Contrary to it, although, Meiji Holdings has also provided the data relating to 2012 and 2013, but only the accounting data relating to 2013 was presented in US Dollars.
Another difference in the balance sheet of both the companies is the format. Although, both the companies have followed horizontal balance sheet, but while General Mills has only explained the current assets in detail, Meiji Holdings has explained its current assets, fixed assets and investment in detail in its balance sheet.
Furthermore, Meiji Holdings has also reported the contingent liabilities along with its balance sheet rather than in the notes to the financial statements.
- General Mills Inc Balance Sheet:
- Meiji Holdings Balance Sheet:
iii) Statement of Cash Flow:
Although, both the companies has followed indirect method preparing the cash flow statement, but just as the previous financial statements, while General Mills Inc has presented its cash flow statement for the year 2011, 2012 and 2013 in US Dollars, Meiji Holdings has also presented the results for the year 2012 and 2013, with only the cash flow transactions for the year 2013 released in US Dollars.
- General Mills Inc Cash Flow Statement:
- Meiji Holdings Cash Flow Statement:
Defining various filings by a public company:
i) Annual Report:
Annual Report are the obligated annual publications which the company must send to its stockholders and other interested parties. The report gives complete information about financial and operational activities of the company, held during the year. Nowadays, the company also includes comparison with the previous years so as to facilitate quick and easy interpretation for the shareholders.
At its most basic, an annual report includes:
- A description of the industry in which the company operates.
- A brief introduction to the board of directors and the key management.
- Information relating to various business segments of the company.
- Audited Financial Statements of the company along with the letter from the independent external auditors, expressing their view over financial reporting of the company.
- It also includes a section relating to Management Discussion and Analysis(MD&A) of the business's financial condition and the results that the company has posted over the previous two years.
ii) Form 10K:
These are the required annual filings that includes information about the business and its management, audited financial statements and disclosures about the legal matters of the firm Information required in 10K is similar to that which a firm typically provides in its annual report but 10 K is no substitute to the annual report of the company.
iii) Corporate Social Responsibility Reporting:
As defined by Lord Holme and Richard Watts, Corporate Social Responsibility is the ‘’Continued commitment of the business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large’’.
Every public limited company, along with the financial reporting, also issues it CSR Report indicating as how the business activities of the company follows ethical standards, spirit of law and work as per international norms. In other words, such report discloses as how the company has been successful in maintain a relation with the society through its business activities.
Comparing above three reports:
Since, the annual report of the company contains almost similar information as in Form 10K, comparison of both of these reports is possible. Both of these reports contains extensive information about the financial statements and performance of the company during a year.
On the other hand, corporate social responsibility report includes information only relating to the information as how the company has taken care of the society while operating its business activities. Such report contains information only relating to the societal aspect of the company and how its management is related to the people.
Comparing General Mills Inc and Meigi Holdings:
** Al the figures are in USD Millions
i)Which company is more profitable?
Referring to the net profit figures of both the companies, we can easily conclude that General Mills Inc has higher net profit of $1855 in comparison to $177(approx) for Meigi Holdings. While the former company have net profit margin of 10.4%, the latter has net profit margin of 1.48%.
ii) How can you explain the difference in profitability between the two companies?
The reason for difference in net profit margins between both the companies can be explained. Primarily by the cost of revenue. While for General Mills Inc, cost of revenue accounts for 63.8% of the total revenue, for Meigi Holdings it accounted for 66%.
Secondly, operating expenses, in the form of Selling, Administrative and General Expenses, accounted for 20% of the total sales for General Mills. On the other hand, operating expenses accounted for 31.6% of total sales for Meigi Holdings.
iii) Compare growth of revenues versus income over time and between the two companies.
While for General Mills Inc, since 2012, revenue of the company has increased by 6.70% and the net income has increased by 18.3%, Meigi Holdings were able to improve its revenue only by 1.55%. However, the net income of the company increased by and net income by 144% during 2013.
Works Cited
Baker, M. (2004, June 8). Corporate social responsibility - What does it mean? Retrieved from Mallenbaker.net: http://www.mallenbaker.net/csr/definition.php
General Mills Inc. (2013). Annual Report 2013. General Mills Inc.
Meiji Holdings Co., Ltd. (2014, April 15). Retrieved from Morningstar: http://financials.morningstar.com/ratios/r.html?t=2269®ion=jpn&culture=en-US&ownerCountry=USA
