Accounting and Finance Practices - Diageo

Boniface M.

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Accounting and Finance Practices - Diageo

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Themes

Efficiency, accounting, profitability ratios, liquidity ratios, efficiency ratios, investor ratios, group structure, net profit margin, ceceivable days, customer payments, stock of goods, financial statements, Financial Reporting Standard 101 Reduced Disclosure Framework, Financial Instruments Disclosures

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Abstract

Diageo Plc started in 1886 and now operates internationally, with its headquarters in London, UK. Diageo manufactures, markets, and sells alcoholic drinks (Diageo, 2024). The company sells a wide variety of alcoholic beverages, including scotch, gin, vodka, rum, raki, liqueur, wine, tequila, cider, flavored malt drinks, and Chinese white spirits (Tsalavoutas et al., 2020). In addition to ready-to-drink and non-alcoholic beverages, the firm offers whiskies made in India, Ireland, the United States, and Canada. Its leading brands include Johnnie Walker, Casamigos, J&B, Guinness, Tanqueray, Baileys, Smirnoff, Captain Morgan, Crown Royal, Don Julio, Cîroc, Buchanan's, and Ketel One (Diageo, 2023).

Financial Performance
1. Profitability Ratios
2. Liquidity Ratios
3. Efficiency Ratios
4. Investor Ratios
Group Structure
Accounting Standards

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[...] In both cases, there are increments during the year 2023 compared to 2022, and these results confirm that more returns were provided to the investors (Tenakwah, 2022). 3. Group Structure The consolidated financial statements provide a concise overview of the company's and its subsidiaries' performance, including the group's proportionate share of associates and joint ventures. Acquisitions are recorded using the acquisition technique, which involves valuing identified assets, liabilities, and contingent liabilities at their fair value on the date of purchase. Diageo has bought many firms throughout the last year. In 2022, it purchased Don Papa Rum and Chat Noir Co. Inc. [...]

[...] The purchases included obtaining a stake in 21Seeds, Casa UM, and Vivanda. In addition, Diageo purchased Aviation Gin LLC and Davos Brands LLC to bolster its presence in the high-end gin market. Diageo finalised the transaction on May selling their brewery in Cameroon, Guinness Cameroun S.A., for a total of £384 million. In the fiscal year ending on June the Cameroon activities that were terminated generated £101 million in net sales and £26 million in operating profit (Yahoo Finance, 2024) During the fiscal year ending on June Diageo paid ZAR 133 million as deferred consideration for the sale of United National Breweries. [...]

[...] Additional obligations consist of upcoming minimum lease payments for short-term leases and leases of low-value assets, resulting in a total of £11 million in future cash outflows for leases that have not yet begun (Diageo, 2024). The group conducts transactions with its associated parties on conditions comparable to arm's length transactions. The associates and joint ventures mainly focus on premium drinking goods but also provide managerial services. The critical management staff includes the Executive and Non-Executive Directors, members of the Executive Committee, and the Company Secretary. Non-executive directors do not earn remuneration in the form of share-based payments or post-employment perks. The primary group firms primarily impact the group's income and assets (Tenakwah, 2022). [...]

[...] Operating firms have the authority to conduct the commercial activities mentioned in the countries specified with their subsidiaries and other companies within the group. 4. Accounting Standards By reporting obligations, Diageo plc has denominated its operations in US dollars rather than sterling as of July The growing proportion of the group's net sales and costs in the US and other countries with solid dollar correlations is the reason for this shift. To better match performance reporting with business exposures, the firm has retroactively shifted its presentation currency to the US dollar (Agana et al., 2023). [...]

[...] 6. References Agana, J.A., Zamore, S. and Domeher, D IFRS adoption: A systematic review of the underlying theories. Journal of Financial Reporting and Accounting. Bloomberg 2024. Diageo PLC Stokes and Market Value. Available at: https://www.bloomberg.com/profile/company/DGE:LN [Accessed: 3 May 2024]. Diageo 2023. Annual Reports 2023. Available at: https://media.diageo.com/diageo-corporate-media/media/p1bljst1/diageo-annual-report-2023.pdf [Accessed: 3 May 2024]. [...]

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