Business Analysis: Benetton Group S.P.A.

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Recommended: Universal financial reporting standards

1 - INTRODUCTION

For the purpose of this paper, I selected Benetton Group S.p.A. (the company), an Italian company that manufactures and markets fashion apparel in wool, cotton and woven fabrics as well as leisurewear. The company prepares its consolidated financial statements (FS) according with the International Financial Reporting Standards (IFRS) adopted by the European Union. Since 1989 the company has been listed in the New York Stock Exchange (NYSE) and required to comply with the Security Exchange Commission (SEC) Act of 1933 and 1934. As the non-US issuer, the company was obligated to provide a full reconciliation of its annual reports from the IFRS to the Generally Accepted in the United Stated Accounting Principles (US GAAP). The filing had been completed with the SEC on a Form 20-F. But in 2007, the SEC released all non-US issuers from the Form 20-F filing obligation (SEC, 2007). As the consequence, the company’s last reconciliation was provided on the Form 20-F for 2006 annual filing. After 2007, the company has not referred to US GAAP reconciliation in its annual financial reports.

The reconciliation from the IFRS to the US GAAP shows that accounting for the same line item under two standards can create financial statement differences. Those differences have material impact on the measurement of the net income under both standards. But to decide if differences are significant or material, first one should understand the concept of materiality. Next, one should find a reconciling adjustment with a martial effect on net income. Then, one should analyze what has led to the creation of the adjustment, and to calculate the amount that affects the net income (Street et al., 2000).

2 - CONCEPT OF MATERIALITY

Materialit...

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...inal/2007/33-8879.pdf

Shima, K.M., and Gordon, K.M. (2011). IFRS and the regulatory environment: The case of U.S. investor allocation choice. Journal of Accounting and Public Policy, 30, 5, 481-500

Street, D.L., Nichols, N.B., and Gray, S.J. (2000). Assessing the Acceptability of International Accounting Standards in the US: An Empirical Study of the Materiality of US GAAP Reconciliations by Non-US Companies Complying with IASC Standards. The International Journal of Accounting, 35(1), 27 – 63

Tan, H., Wang, S., and Welker, M. (2011). Analyst Following and Forecast Accuracy After Mandated IFRS Adoptions. Journal of Accounting Research, 49(5), 1307-1357

Tyson, T. (2011). The Convergence of IFRS and U.S. GAAP. The CPA Journal, 81(6), 26-31

Vance, D.E. (2011). Meta-Analysis of Empirical Materiality Studies. Journal of Applied Business Research; Sep/Oct 2011; 27, 5

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