For the preparation of this section, L’Oréal based its work 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. This approach 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: the process of producing financial information, the accounts closing process and financial communication actions.
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 and all subsidiaries included in the consolidated financial statements.
Dedicated teams of specialists ensure the implementation of accounting and financial monitoring, under the supervision of General Management, in the following areas: accounting, consolidation, tax matters, management, financial services and treasury.
In the Administration and Finance Department, the Operational Finance Department prepares the Group’s consolidated financial results: the latter coordinates the Business Service Centre and a global network of management controllers who are responsible for ensuring compliance with the Group’s accounting and management standards to ensure appropriate management of the result. Worldwide accounting management is executed by a team of specialists that ensure the application of IFRS and the implementation and harmonisation of the Group’s accounting processes in the accounting Business Service Centre and in the countries. Finally, the Operational Finance Department runs the Group’s Tax Department which comprises a network of tax lawyers at corporate level, in the regions and in the Group’s most vulnerable countries, monitors changes in regulations, ensures compliance with local rules, and oversees the implementation of the Group’s tax policy, and in particular the strict application of the transfer pricing policy and customs rules.
In the Administration and Finance Department, the Corporate Finance Department ensures the protection of 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 implements 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 a set of accounting policies and standards consistent with IFRS, the consolidated accounting standards.
The application of these standards is compulsory for all consolidated subsidiaries 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:
The management standards describe how the rules should be applied operationally. They give the valuation rules for some of the key balance sheet and in come 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. The purpose of this work is both to take action in response to the findings of the Internal Audit Department and to cover the areas corresponding to the accounting and financial risks of 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.
