Bank of America

The group offers employees short term benefits such as paid and sick leave, profit sharing, etc., as well as long-term benefits and post-employment services. We reviewed that the defined contribution schemes were accounted for in the provisions, as required in the IAS 19 rule.

Regarding share-based compensation, as the recognition of this engagement towards employees was an off-balance sheet item under French GAAP, all stock-options granted but not exercised after November 7, 2002 were provisioned for in the shareholder’s equity.

We however surprisingly discovered that the stock options granted in 2005 have not been recognized in the shareholder’s equity on the grounds that the achievements required to exercise the options were « unlikely » to happen, and thus not recognized in the P&L neither. As we believe these represent an economic engagement, we suggest Carrefour to include the fair value of these options the amount in Shareholder’s equity as well as expensing it over their vesting period.

In the P&L section, IFRS standards impacted on the presentation of the statements. Indeed, revenues from Carrefour additional activities (financial services, Carrefour voyage, etc.  are now included in a line entitled “Other revenues”. However, some expenses such as costs of payments made by customers in instalments, loyalty scheme, fees received by Carrefour’s finance company are included net of sales. As we understand it, they therefore do not appear in cost of sales but as a reduction in Revenues. The impact is reflected in Revenues that are underestimated, but also in Cost of sales that are underestimated as well. As a potential adjustment, and for a clearer understanding of the impact of these costs, we believe Carrefour should include these costs in Costs of sales. The impact will ultimately be reflected in the Gross margin ratios that should decrease a little bit , as gross margin remains the same for a higher level of revenues.