Accounting Policies: Majestic Wine Annual Report
The purpose of this paper is to deliver a brief overview of accounting policies as they pertain to subsidiaries of Majestic Wine. This topic became of interest as research revealed that it comes up across policies, that various accounting policies must be interrelated in order to account for subsidiaries. This means that from an accounting and auditing standpoint the existence of subsidiaries is an important issue.
Endenich, Hoffjan, Schlichting and Trapp (2016) found that international companies tend to have harmonious accounting policies when it comes to subsidiaries. There is a growing awareness about the need for a global accounting system, and this has had an effect of making …show more content…
The name of all the companies which, having more than half of the voting rights, either directly or indirectly through other companies in the group, have not been treated as subsidiaries in the consolidation due to lack of control; the effects of the acquisition or disappropriation of subsidiaries on the financial position at the date to which the financial statements refer, and the results achieved by such operations in the period covered by them, as well as the same amounts corresponding to the preceding period, must be included. Also, the individual financial statements of the parent company, and a description of the method used to account for investments in subsidiaries, must be included (Sedki, Smith & Strickland, 2014).
Another way subsidiaries are important is that they may indicate influence over investors, owners or officers in the company. According to Deloitte (n.d.): “A holding of 20% or more of the voting power (directly or through subsidiaries) will indicate significant influence unless it can be clearly demonstrated otherwise [IAS 28.6]” (para. 9). However, this is not an issue with Majestic Wine. Furthermore, “the existence of significant influence by an investor may become evident in the following ways: [IAS 28.7] representation on the board of directors or equivalent governing body of the investee, participation in the
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The “three-tier system” for distribution does not favor small wineries. It places a different tax rate dependent on state, and the “Big Five” distributing companies hold 52% of the distributing market. Boutique distributors are not able to operate in all states, and are always at threat of being purchased by the major distributors.
Vincor International goal is to become one of the top five wine companies in the world in terms of earnings. In order to attain this goal they have implemented a corporate strategy that focuses on using their existing powerful position in market to help them developing sales, marketing, distribution capabilities on an international scale. The strategy also includes acquiring new wineries and wine brands in new emerging region in the wine market also called “New World regions”(Vincor, 2005) throughout the world.
In 2008, the Securities and Exchange Commission (SEC) issued a road map for the United States (US) to implement International Financial Reporting Standards (IFRS) that would eventually lead to the dissolution of US Generally Accepted Accounting Principles (US GAAP) (Cox 2008). US GAAP is rules based system of accounting that contains over 25,000 detailed pages of guidance, whereas IFRS is a principles based system of accounting that contains 2,500 pages of guidance. IFRS allows accountants to exercise professional judgment when making many decisions. This paper will compare and contrast US GAAP with IFRS on Intermediate Accounting Topics.
Current Situation: In 2016, Robin Budowski has almost acquired Château d’Agel – a previously unprofitable wine property in the South West of France. However, his dream of owning and running a vineyard does come with its own financial and operational risks. Robin may be the best candidate for this acquisition opportunity, but to make it worthwhile in the next 5 to 7-year time horizon, he has to decide which wine market he should focus his resources on, and how his wine can be effectively distributed across France and exported to foreign developing markets.
The goal of this Statement is to enhance the significance, similarity, and sincerity of the financial information that is provided by the reporting entity in a consolidated financial statement and by reporting standards as well as establishing accounting that are require. In cases of the ownership interest when subsidiaries are held by other parties other than the parent they must be clearly identified, meaning properly labeled. Also Changes in a parent's ownership interest while the parent holds its controlling financial interest in its subsidiary must be represented reliably. A parent's ownership interest in a subsidiary changes if the parent buys extra ownership interests in its subsidiary or if the parent offers some of its ownership interests in its subsidiary. It likewise changes if the subsidiary reacquires some of its ownership interests or the subsidiary issues extra ownership interests. Those exchanges are financially comparable, and this Statement requires that they be represented comparatively, as equity
The paper will use documented secondary sources to evaluate the corporation’s performance in the international business environment about the suitable managerial accounting processes that the
To further our investigation into The Wineries Industry, we will be analysing the finances of Majestic Wine (MW), a large UK based plc, and applying the findings to our own global company. MW has been operating for 35 years with 211 stores in their network (Majestic Wine Warehouse Ltd, 2015). The company offers a different way for us to Merge and Acquire in California. Instead of producing wine, we could introduce a wine retail experience to consumers and source a wide variety of wine and sommelier knowledge to provide them, or buy out a company already operating in this manner. MW source their products from a variety of New and Old World countries, including France, Italy, New Zealand and California (Majestic Wine
By the late 1990’s, more than 1500 wineries were in business, yet the top 20 produced approximately 90 percent of all American wine, by volume, and 85 percent, by value, at wholesale. Of these larger firms, a few were publicly held, with readily recognizable names: Robert Mondavi, Beringer, and Canadaigua. Probably the most well-known large firm was the privately owned and operated E & J Gallo Wine Company. Best known for its large production of less expensive wine labels, the firm had been expanding into the premium varietial market segment with it’s widely acclaimed winery, Gallo of Sonoma.
The problem that the company must address refers to determining if it is better to develop distribution and marketing strategies controlled by the company, or to allow the distribution of the products to be performed by the merchants. This is a difficult decision to make because of its implications. The fact that the company's wine products are distributed by merchants has its advantages. These merchants know the market very well, they know buyers, and they know how to attract them. The networking of these merchants seems to be important in efficiently distributing wine products. But the collaboration with such distributors also leads to increased costs in the case of Chateau Margaux. In case the company decides to control its distribution chain, the costs can be reduced. However, this can have certain disadvantages. Therefore, the company's managers must determine what the company should do about its distribution process and marketing strategy.
Weygandt, J. J. (2009). Accounting principles. (10 ed., pp. 109-117). John Wiley & Sons, Inc.
Divergent accounting practices can cause complications for investors who rely heavily on financial statements being prepared under different methods. The lack of comparability between companies from different countries can significantly affect the analysis of financial statements when making important investment decisions. The differences in accounting principles can cause problems for multinational corporations. Companies trying to gain access to foreign capital markets might have to present a set of financial statements in accordance with the accounting standards applied in that
In the Related Parties disclosure section, the Company states that the Parent entity (Clive Peeters Limited) has equity interests in 8 subsidiaries (Appendix 3). They disclose the compensations, shareholdings and share options of the key management personnel and any transactions made with key management personnel (Appendix 4). On other transactions with key management personnel of the
Ball, R. / Kothari, S. / Robin, A. (2000): The effect of international institutional factors on properties of accounting earnings, Journal of Accounting and Economics, Vol. 29, (2000) pp. 1-51.
“We had begun to realize that for historical reasons the wine business, unlike the packaged food industries- had very few truly multinational companies and therefore very few true global brands. Wine consumers were getting more discerning and knowledgeable in the early 1990s, and to our reasoning, a great opportunity existed for a company to build a well-known international wine brand of quality and reliability.” This was Steve Millar’s, the new CEO of the BRL Hardy’s rational behind taking BRL Hardy into the global arena.
The business environment appears to get smaller with each passing day. Therefore, accountants face troubles in remaining protected from the progressions that occur around the world (Diaconu and Coman 2006). Globalization hint at the regularly changing procedure of incorporation and connection among governments, individuals and organizations. The key three things that declare incorporate globalization venture, worldwide exchange and data innovation (Diaconu and Coman 2006). Globalization moves the world to another level and places it to more at the leading edge statures reliably. Outstandingly, globalization procedure have both negative and constructive effects on accounting (Godfrey and Chalmers 2007). This is unmistakable as in,