Professional Documents
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Re-submission date November 19, 2021 Date received (2nd Submission) November 19, 2021
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Contents
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I. Introduction...........................................................................................................................4
1. Main contents......................................................................................................................4
2. L’Oreal.................................................................................................................................4
a. Income statement........................................................................................................5
b. Balance sheet................................................................................................................5
c. Cash flow statement........................................................................................................6
II. The main objectives of internal accounting activities in general......................................7
1. Definitions...........................................................................................................................7
a. Accounting...................................................................................................................7
b. Financial accounting...................................................................................................7
c. Management accounting................................................................................................8
2. Distinctions between management accounting and financial accounting.....................8
2. Financial problem.............................................................................................................16
3. L’Oreal scandals...............................................................................................................17
IV. Conclusion.........................................................................................................................17
V. References.............................................................................................................................17
I. Introduction
1. Main contents
Management accounting will provide all the necessary information that is the main and
important factor to help managers make the most accurate plans and decisions so that the
business can achieve effective performance best move. The application of accounting
information to change and improve strategies and processes is very much appreciated by
L'Oreal because it will help businesses overcome and predict possible risks. . Therefore,
my report below will help people see an overview of the activities of management
accounting and the importance as well as the characteristics and skills required of
management accounting and accounting. management accounting.
2. L’Oreal
The world cosmetics market is a market that brings high revenue for businesses operating
in this field. The river level of people all over the world, in developed countries,
emerging economies, and not except Vietnam is gradually improving. They care more
about the beauty of the outside image and are willing to pay more money to satisfy it.
After more than 100 years of establishment and development, L'Oréal is currently
holding the No. 1 position in the world cosmetics market. The group has a presence in
more than 130 countries and has more than 65,000 enthusiastic employees worldwide.
Group net income is 3.6 billion euros in 2020. Every second 135 L'oreal products are
sold worldwide. Each year L'oréal registers nearly 500 copyrights and spends more than
3% of its revenue on investment and R & D. This group owns 25 leading brands in the
world. The objective of this report is to clarify the function and role of management
accounting, evaluate the difference and application of various management accounting
systems in the organization, the importance of financial management for general business
activities.
a. Income statement
Revenue for 2020 is EUR 27,992.1 million, EUR 1,881.5 million lower than 2019's
EUR 29,873.6 million, but EUR 1,054.7 million higher than 2018's EUR 26,937.4
million.
Profit for 2020 is 20,459.8 million EUR compared to 2019 which is 1349.1 million
EUR lower and 854.0 million EUR higher than in 2018.
2020 operating profit of EUR 5,209.0 million, EUR 338.5 million lower than in 2019
but EUR 287 million higher than 2018.
b. Balance sheet
Based on L'Oreal's 2020 annual report, the company's total assets in 2020 are EUR
43,606.9 million, EUR 202.9 million lower than in 2019 of EUR 43,809.8 million.
But 5,149.4 million euros higher than in 2018 was 38,457.5 million euros.
L'Oreal's liabilities in 2020 are EUR 11,130.1 million, the highest in the last three
years, specifically EUR 261.6 million higher than 2019 and EUR 1,018.5 million
higher than in 2018.
L'Oreal's equity in 2020 is EUR 28,998.8 million, EUR 427.2 million lower than in
2019, and EUR 2,065.2 million higher than in 2018.
c. Cash flow statement
According to L'Oreal's 2020 regular report, the net cash provided by operating
activities in 2020 is EUR 6,453.3 million, the highest in all three recent years.
Specifically, higher than 2019 is 191.0 million EUR, and higher than 2018 is 1,161.4
million EUR.
Cash and cash equivalents at the end of the period (A + B + C + D + E + F) in 2020
were EUR 6,406.9 million, the highest in three years. 1,117.9 million euros were
higher than in 2019 and 2,414.9 million euros higher than in 2018.
II. The main objectives of internal accounting activities in general
1. Definitions
a. Accounting
According to the American Accounting Association, accounting is defined as
the comparison and control of information and numbers, and the process of
identifying and measuring financial and non-financial information, thereby
providing accurate information to help decision-makers make the right
business decisions. Besides, each person related to a business will use
different accounting information (Colin, 2017).
b. Financial accounting
Financial accounting is concerned with providing information to objects
outside the business organization such as banks, regulatory agencies,... (Colin,
2017). Financial accounting is the collection, processing, examination,
analysis, and provision of economic and financial information by means of
financial statements to the subjects that need to use the information of the
accounting unit.
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processes that are likely to best achieve the stated goal. The search for
activities will be based on the development of new products in existing
markets; developing new markets for existing products; develop new
products in new markets. The process of finding directions for action will
involve the collection of future information, opportunities, and the right
environment. Finding the right activities and strategies will help keep the
company from being surprised by potential threats that appear in the
future. The third stage is to select suitable alternative courses of action.
After gathering information and data based on projected metrics such as
the potential growth rate of those activities; The market share and profit
that the company will gain for those alternative activities, managers will
rely on this information to make the most informed, accurate choices that
bring many benefits to the company. Stage four is the implementation of
decisions. Once the course of action has been selected it will be
implemented as part of the long-term planning and budgeting process. A
budget is a financial plan for implementing decisions made by
management. Budgets for all of a company's various decisions are
expressed in terms of cash inflows and outflows, sales, and the cost of
goods sold. These budgets are initially prepared at the
department/responsibility center level ,and consolidated together into a
single unified statement for the entire organization that outlines the
organization's expectations over the year's future segment. This report is
called the master budget and includes a budgeted profit statement and a
cash flow statement. The budgeting process informs everyone in the
organization about the part they are expected to play in implementing
management decisions (Colin, 2017).
3.2. Control Process:
Stages 5 and 6 are about comparing actual and planned results and
reacting to deviations from the plan. Management's control function
includes measuring, reporting and subsequently correcting performance to
ensure that the company's goals and plans are achieved. To track
performance, accountants prepare performance reports and submit them to
managers responsible for making various decisions. These reports
compare actual results (actual costs and revenues) with planned results
(budgeted costs and revenues) and should be released periodically.
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period and keeps up with the trends and online shopping needs of customers
(L’Oreal Annual Report, 2020).
4. Definitions of management accounting systems and evaluating the differences and
applications of diverse management accounting systems
4.1. Cost-accounting systems
a. Cost accounting is a form of management accounting that deals with the
cost of inventory valuation that aims to capture a company's total cost of
production by assessing the variable cost of each production step as well
as fixed costs to meet the requirements of external reporting and internal
profit measurement (Colin, 2017). Cost accounting is used by a company's
internal management team to determine all the variable and fixed costs
associated with the production process. There are many types of costs
involved in cost accounting, listed as follows:
b. Fixed costs: are costs that do not change with the level of production.
These are typically expenses like a mortgage or rent payment on a
building or piece of equipment that is depreciated at a fixed monthly rate.
An increase or decrease in the level of production will not cause a change
in these costs.
c. Variable costs are costs associated with a company's level of production.
For example, the monthly utility bill a company uses in production will
vary according to their usage.
d. Operating expenses: are expenses related to the day-to-day operations of
a business. These costs can be fixed or variable depending on the situation.
e. Direct costs are costs specifically related to the production of a product. If
a person grows flowers to sell to suppliers then the direct cost of the
finished product would include the person's labor hours growing the
flower and the cost of the flowers.
f. Indirect costs are costs that are not directly related to the product. In the
chestnut roaster example, the energy cost to heat up the roaster would be
indirect because it is imprecise and difficult to track.
4.2. Inventory management
Is a planning method for determining when to order and how much to
order so that ordering costs and optimization of inventory costs do not
disrupt production. Inventory management helps to ensure adequate
supply of products to customers, avoid shortages, ensure costs for storage,
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this is presented in the income statement business action. They are usually
prepared annually, however, they can also be prepared monthly or quarterly.
d. Job Expense Reporting - Job Expense Reporting involves determining the cost,
cost, and profit of each specific job. It is possible to carry out a review of the
earnings side of projects and so that the company can showcase its efforts to the
stakeholders while reducing their efforts to less profitable businesses. These
reports also assess the costs while the project is in progress that the waste areas
can be treated and the project can be profitable and viable (Colin, 2017).
5.1. Example for accounting system
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pandemic. Even so, there are countries and L'Oreal product lines that tend to increase
consumption more than before the pandemic.
For example, mainland China was the only market that achieved positive growth of 17.5%,
L'Oréal Luxe market with many high-end brands such as Lancôme, Yves Saint Laurent and
Helena Rubinstein, recorded received a significant increase in sales, more than 30%,...
(L’Oreal Annual Report, 2020).
This increase is due to the fact that L'Oreal has increased sales methods, reached customers
online and at the same time when the epidemic has been somewhat controlled and countries
have a period of social distancing, people have needs buy more skin care products. L'Oreal's
financial problems have been greatly affected by the Covid-19 pandemic, but L'Oreal has
come up with appropriate strategies and plans to maximize financial losses.
3. L’Oreal scandals
L'Oreal is a famous global company and brand, so L'Oreal also has many scandals
that cost businesses millions of dollars in damage due to those scandals.
Typically, the scandal about the "promoting gene" product line has been proven. In
2014, L'Oreal had to admit that their Lancome Genifique and L'Oreall Paris Youth
Code skin care products were not "clinically proven" to "promote genes" and "give
visibly younger skin" after only 7 days” as their advertisement to consumers.
Following the incident, L'Oreal USA was banned from making anti-aging claims
without "authoritative, credible scientific evidence to support such claims". Although
L'Oréal escaped punishment at that time, each future false advertising violation of the
company would cost them up to 16,000 USD (Brands Vietnam, 2016).
Or there are still many other L'Oreal scandals such as racism against Munroe
Bergdorf, discrimination, animal testing,...
IV. Conclusion
The report shows the definitions, types, functions and systems of management accounting
while highlighting the responsibilities and importance of financial accounting for a
business. In addition, it also shows some financial and operating information of the
leading cosmetics company, L'Oreal.
V. References
L'Oréal. n.d. L'Oréal Group Vietnam Pages Group. [Online] Available at:
https://www.loreal.com/vi-vn/vietnam/pages/group/strategy-and-model-vn/ (Accessed:
November 17th, 2021).
L'Oréal. n.d. Welcome to L'Oréal. [Online] Available at: https://www.loreal.com/en/
(Accessed: November 17th, 2021).
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Colin, D. (2017). Management and cost accounting. 10th edn. United kingdom: Annabel
Ainscow.
Edmonds, T., Tsay, B. and Olds, P. R. (2011). Fundamental Managerial Accounting
Concepts. 6th edn. The McGraw-Hill Companies, Inc,: Tim Vertovec.
Loreal-finance.com. n.d. [Online] Available at: https://www.loreal-
finance.com/system/files/2021-
03/LOREAL_2020_Universal_Registration_Document_en_0_0.pdf (Accessed:
November 17th, 2021).
L’Oreal. (2020). L’Oreal Annual Report. [Online] Available at: https://www.loreal-
finance.com/system/files/2021-
03/LOREAL_2020_Universal_Registration_Document_en_0_0.pdf (Accessed:
November 17th, 2021).
Vietnam, B., 2016. 10 bê bối quảng cáo khiến các thương hiệu lớn mất triệu đô. [Online]
Brands Vietnam. Available at: https://www.brandsvietnam.com/9421-10-be-boi-quang-
cao-khien-cac-thuong-hieu-lon-mat-trieu-do (Accessed: November 18th, 2021).
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