The case of H&M and Inditex

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The case of H&M and Inditex

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Abstract

The International Accounting Standards Committee (IASC) dates back its formation to 1973. It was however restructured in 2001 when the name was changed to ?The International Accounting Standards Board (IASB)'. The IASB is an independent private sector body. The prime objective of the IASB is to promote convergence and concentration of accounting principles that are applied widely by businesses and other organizations for financial reporting across the world. Some of the other key advantages are listed below.
? Comparing companies at the financial level will require the harmony and unison of the accounts of various companies'. This makes comparison a less burdensome task. The role of the IASB in this situation is to satisfy the informational needs of international corporations.
? The IASB focuses on the creation and displaying of companies' consolidated accounts and the corresponding financial statements. The IASB ensures that authenticity is maintained while disclosing the relevant information to investors and shareholders.
If the motives of the IASB are as mentioned above, the Swedish GAAP is designed to suit the needs of a different sector of audience. The audience panel comprises of not only international investors and large companies but also for smaller firms and a large variety of stakeholders.

Financial statement framework and format
Adjustments to IFRS
Auditors' reports
Risk management
1. Fashion risk
2. Financial risk
Ethic discussions
1. What are the ethic issues in textile industries?
2. How do both companies deal with these ethic issues?

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[...] Liquid assets and short-term investments have been classified as assets where they have been recognised at fair values and where the change in value is recognised in the income statement 6. The effect of transition of both groups has created an increase in profit before tax. See the below synthetic table figures in euros Profits accordingto accounting principles applied Effects of transition to IFRS Profits according to IFRS H&M Inditex Auditors' reports The main target of auditing is quite the same between the two auditor's reports. [...]

[...] In this paper we will compare the companies H&M and Inditex which are both working in the field of textile manufacturing/retailing and have about the same revenues in their financial statements for 2005. The comparison of these two companies is interesting because Inditex uses the regulations of the IAS for its annual reports while H&M uses the regulations of the Swedish GAAP for its annual statements. We want to point out the differences in certain fields between 1 Corporate Financial Reporting A Global Percepective, Hervé Stolowy & Michel J. [...]

[...] The standards between Sweden, Spain and IFRS differ, and one of the greatest differences is that under the Swedish law, the auditors must give a statement of administration too http://www.iasplus.com/standard/ias32.htm 6 H&M Annual Report (2005) p53 H&M was audited by Ernst & Young, and Inditex by KPMG, both big international auditing companies. The size of the two groups demand a large auditor organization. The auditors address their reports to the shareholders (or the annual general meeting) of the company. They evaluate the consolidated financial statements as well as the parent company's financial statements and accounting. [...]

[...] But since Inditex has 3000 outlets in 64 countries in 7 http://www.wharton.universia.net/index.cfm?fa=viewfeature&id=1050&language=english four continents and H&M operates in 24 countries, they are exposed to currency risks due to the fact that any fluctuation in the US Dollar, the Mexican Peso, the Japanese Yen and the Pound Sterling rate will have an instant effect on their future commercial transactions and assets and liabilities recorded in currencies other than the company's operating currency, and the value of their financial instruments may vary due to the changes in exchange rates. [...]

[...] In the textile industry, companies as H&M and Inditex explain in their report the different kinds of investments, the codes of conduct they have, and they explain why they do it. H&M does not own any factory and it sets up high standards in the respect of working conditions and also tries to improve its code of conduct. Here you find the eight codes of conduct of o Legal requirements o Factory conditions o Child Labour o Housing conditions o Safety o Environment o Workers' rights o Inspections and compliance In 2004, H&M developed a new platform for working with the code of conducts. [...]

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