FA Assignment: 1 Analysis of annual reports from FMCG sector for ITC (India) Proctor and Gamble (USA) Reckitt

Benckiscer (UK) Goodman Fielder (AUS)

Rishiraj Sisodiya Varun Gogia Gaurav Kalelkar Raj Rishi Purohit Saurabh Aggarwal

We have taken Fast Moving Consumer Goods (FMCG) sector for analyzing differences between annual reports from following companies. 1. Indian Tobacco Corporation ,ITC(IND) 2. Proctor and Gamble ,P&G(USA) 3. Reckitt Benckiser ,RB(UK)
4. Goodman Fielder , GOODMAN FIELDER(AUS)

While comparing the annual reports from the above mentioned countries, we have taken ITC from India as a frame of reference. Henceforth, we have analyzed the annual reports in the following manner for learning about the differences.
1. Indian Tobacco Corporation ,ITC(IND) Vs Proctor and Gamble, P&G(USA)

2. Indian Tobacco Corporation ,ITC(IND) Vs Reckitt Benckiser ,RB(UK)

3. Indian Tobacco Corporation ,ITC(IND) Vs Goodman Fielder ,GOODMAN

FIELDER(AUS)

All the reports which have been studied are latest reports and are referred from companies official websites. The financial years with durations for companies are as follows.

1) Indian Tobacco Corporation (1 Apr, 2011 to 31 Mar, 2012) 2) Proctor and Gamble (1 July, 2010 to 30 June, 2011) 3) Reckitt Benckiser (1 Jan, 2010 to 31 Dec, 2011) 4) Goodman Fielder (1 July, 2010 to 30 Jun, 2011) Indian Tobacco Corporation (India) Vs Proctor and Gamble (USA)

Analysis of Cash flow statements:

1) For ITC, Cash flow details are shared for 2 years while in case of P & G it is given for 3

years.
2) For Indian Co, Cash flow from other investment activities has proper bifurcation for

income dividends from current investment and long-term investment. While US Co does not have dividend income details.
3) For operating expenses in cash flow, ITC has given detailed numbers for finance cost,

doubtful and bad exposures, etc while P & G has included it in other. 4) P & G has represented explicit numbers for changes in account receivables and inventories. However, the same figures are absent for ITC, India.
5) Investment for subsidiaries and joint ventures is explicitly mentioned for ITC while it

does not have presence in P & G.

Analysis of Balance Sheet:

1) Current investments are not included by P&G for assets. Those are mentioned explicitly for ITC India.
2) Trade receivables are used in ITC report while P & G has used Accounts receivable

though it represents the same aspect.

3) Short term loans and advances are a part of ITC report. However, they are absent from P

& G report.
4) Prepaid expenses are part of P & G under current assets while they are not represented for

ITC, India. 5) Property plant and Equipment are not included in ITC report. 6) Accrued liabilities are part of PG report but it has not been mentioned in the ITC report. 7) Shareholder equity is detailed in PG report- Convertible Class A Preferred stock, Nonvoting Class B Preferred stock, The common stock, reserve for ESOP debt retirement, Additional paid-in capital, Accumulated other comprehensive income/(loss), Treasury Stock, at cost, etc while it is not mentioned with these details in ITC report.

Analysis of Income statement:

1) USA Company has used the term consolidated statement of Earnings. For India, it

is called Profit and Loss statement. 2) ITC has explicitly mentioned excise duty and subtracted it from gross revenue. But, for P & G, nothing has been stated in the name of excise duty. It contains the figures for income taxes for continuing operations though.(This might be because of difference in tax structure) 3) Amortization and Depreciation is mentioned in expenses for ITC in Profit and Loss statement. While American P & G has adjusted it for assets in the name of accumulated depreciation.
4) Both sales and expenses have been stated with internal details for ITC, while P & G

has given macro level information which is effective and serves the purpose as well.

Indian Tobacco Corporation (India) Vs Goodman Fielder (Aus)

Analysis of Cash flow statements: (The differences) 1) Insurance Proceeds present in Goodman Fielder while absent for ITC.
2) Depreciation and amortisation Expense present in ITC but not in Goodman Fielder.

3) Dividends paid to outside equity interests present in Goodman Fielder and on the basis of long and short term in India.

Analysis of Balance Sheet: (The differences) 1) Assets are coming first in GOODMAN FIELDER followed by liabilities but in ITC, the reverse is true. 2) Current Assets are coming first in GOODMAN FIELDER followed by fixed assets (in Assets) but in ITC, the reverse is true. 3) Items present in Current Assets in ITC but not in GOODMAN FIELDER : 3.1) Short-term loans and advances

3.2) Items present in Current Assets in GOODMAN FIELDER but not in ITC : 3.3) Derivative financial instruments 3.4) Current tax receivable

4) Items present in Non- Current Assets in ITC but not in GOODMAN FIELDER : 4.1) Fixed assets 4.2) Long-term loans and advances 4.3) Capital work-in-progress - Tangible assets 4.4) Tangible assets 4.5) Items present in Non- Current Assets in GOODMAN FIELDER but not in ITC : 4.6) Receivables 4.7) Investments in jointly controlled entities 4.8) Property, plant and equipment 4.9) Deferred tax assets

5) Non- current liabilities are above the current liabilities in ITC but not in GOODMAN FIELDER. 6) Items present in Liabilities part of ITC but not in GOODMAN FIELDER : 7) Shareholders funds (Share capital, Reserves and surplus) 8) Items present in non-current Liabilities part of GOODMAN FIELDER but not in ITC : 8.1) Derivative financial instruments 8.2) ITC shows EQUITY AND LIABILITIES together but GOODMAN FIELDER has only the LIABILITIES part.

9) Equities are given in GOODMAN FIELDER after the list of the liabilities (Equities are not there in ITC) :

9.1) Contributed equity 9.2) Reserves 9.3) Accumulated losses)/retained earnings 9.4) Capital and reserves attributable to the owners 9.5) Non-controlling interest

Analysis of Income Statement: (The differences)

Items present in Goodman fielder but not ITC : 1) Revenue 2) Sale of goods 3) Other income 4) Cost of sales 5) Warehousing and distribution expenses 6) Selling and marketing expenses 7) General and administration expenses 8) Other 9) Expenses, excluding fi nance costs 10) Net fi nancing costs 11) (Loss)/profi t before income tax 12) Income tax expense 13) (Loss)/profi t for the year 14) Attributable to: 15) Owners of Goodman Fielder Limited 16) Non-controlling interest 17) (Loss)/profi t for the year 18) Earnings per share for (loss)/profi t attributable to the owners of Goodman Fielder Limited: Cents Cents 19) Basic earnings per share 20) Diluted earnings per share 21) Gross Income 22) Gross Revenue from sale of products and services 23) Less: Excise Duty 24) Net Revenue from sale of products and services 25) Other operating revenue 26) Revenue from operations 27) Other income

28) Total Revenue 29) Expenses 30) Cost of materials consumed 31) Purchases of Stock-in-Trade 32) Changes in inventories of finished goods, 33) work-in-progress, Stock-in-Trade and Intermediates 34) Employee benefits expense 35) Finance costs 36) Depreciation and amortisation expense 37) Other expenses 38) Total Expenses 39) Profit before tax 40) Tax expense: 41) Current tax 42) Deferred tax 43) Profit for the year 44) Earnings per share (Face Value ` 1.00 each) 28 (iv) 45) Basic 46) Diluted Reckitt Benckiser vs. ITC
1. The financial year for Reckitt Benckiser starts from 1 January of every year and ends on

31 December of the same year. Whereas for ITC it starts on 1st April and ends on 31st March of next year. 2. Each company shows the figures for the financial year being evaluated as well as for the financial year before it.

Comparison of Balance sheet:

1. Assets: Both the companies classify assets as current and non-current assets. NON-Current Assets ITC has grouped assets under non-current assets as fixed assets and all other non-current assets whereas Reckitt Benckiser has made no such attempts. ITC classifies goodwill as separate from intangible assets whereas Reckitt Benckiser combines intangible goods with goodwill. RBs noncurrent assets also include the financial instruments available for sale after a period of more than a year. ITC lists a type of assets as tangible assets under fixed assets whereas no such

classification is done by RB. Further looking at the asset side we find certain difference in list of assets summarised in the table below: ITC Tangible assets Intangible assets under development Less: Provision for assets given on lease Non-current investments Long-term loans and advances Reckitt Benckiser Available for sale financial assets Retirement benefit surplus Other receivables

Current Assets

ITC Short-term loans and advances Other current assets Current tax receivables Current liabilities ITC

Reckitt Benckiser Derivative financial instruments

Reckitt Benckiser Derivative financial instruments Current Tax liabilities

All other entries were common in the two balance sheets.

Non-Current liabilities

ITC

Reckitt Benckiser Retirement benefit obligations Non-current tax liabilities

Equity ITC Reckitt Benckiser Share premium Merger reserve Hedging reserve Foreign currency translation reserve Profit/Loss account ITC Purchases of stocks in trade Changes in inventories of finished goods Work in progress/Stock in trade and intermediates Employee benefit expense Depreciation and amortization expense Reckitt Benckiser Profit on ordinary activities before taxation Attributable to non-controlling assets Attributable to owner of parent