Kesko's management model
Kesko’s financial reporting and planning are based on Kesko Group’s management model. The Group units’ financial results are reported and analysed internally within the Group on a monthly basis and disclosed in quarterly interim reports, the half year financial report and the financial statements release. Financial forecasts are updated quarterly, in addition to which significant changes are taken into account in the monthly performance forecasts. The Group’s and its units’ strategies and related long-term financial plans are updated annually.
Roles and responsibilities
Kesko Group’s financial reporting and its supervision is organised in three levels. Businesses analyse and report their figures to the divisions, which then report the division-specific figures to Group Accounting. Analyses and controls for ensuring the accuracy of reporting are used at each reporting level. The accuracy of reporting is ensured with automated and manual controls at every reporting level. The implementation of the analyses and controls is supervised on a monthly basis at the company, business, division and Group level.
Planning and performance reporting
The Group’s financial performance and the achievement of financial targets are monitored through Group-wide financial reporting. Monthly performance reporting includes actual Group, division and business specific results, changes compared to the previous year, comparison with forecasts, and forecasts for the next 12 months. The Group’s short-term financial planning is based on annual budgeting and quarterly updated forecasts extending over the following 12 to 15 months. The key financial indicator for growth is sales performance, while those for profitability are comparable operating profit and comparable return on capital employed, monitored by monthly internal reporting. Information on the Group’s financial situation is provided in interim reports, a half year financial report and the financial statements release. The Group’s sales figures are published each month.
Performance reporting to the Group's top management
Performance reporting to the Group’s top management comprises monthly reports on the Group’s, divisions’, businesses’ and subsidiaries’ profits and capital employed, as well as the Group's balance sheet information. Each business is primarily responsible for the financial reporting and the accuracy of figures. The controlling function of each division analyses the whole division’s figures for which the division's financial management is responsible. The Group is responsible for the whole Group’s figures. The key items in the income statement, capital employed and balance sheet are analysed monthly at the business, division and Group level, based on a documented division of duties and predefined reports. This makes real-time information on the financial situation constantly available and enables real-time responses to possible flaws. Performance reporting to management also includes Group level monitoring of sales on a weekly, monthly and quarterly basis.
Public performance reporting comprises interim reports, a half year financial report, the financial statements release, the annual financial statements and monthly sales reports. The same principles and control methods are applied to public performance reporting as to monthly performance reporting. The Audit Committee reviews the interim report, the half year financial report and the financial statements and gives a recommendation on their reviewing to the Board of Directors. The Board approves the interim report, the half year financial report and the financial statements before they are published.
Key actions in 2016
In 2016, the simplification of the Group’s legal structure continued and the focus was on the integration of the businesses of the acquired Onninen Oy, Suomen Lähikauppa and Oy AutoCarrera Ab. By the end of the year, 223 Siwa and Valintalo stores of Suomen Lähikauppa had been converted into K-Markets. In connection with the conversion, the stores adopted Kesko Group’s information systems and were connected to the Group’s centralised financial management. During the year, Rautakesko Ltd and five other Finnish limited liability companies engaging in business operations were merged into Kesko Corporation and six real estate companies into their parent companies. The centralization of the Group companies’ financial management routines to the Shared Service Centre continued in Finland, as VV-Auto Group Oy’s basic financial management processes were transferred to the Shared Service Centre.
Key actions in 2017
In 2017, the simplification of the Group’s legal structure in Finland will continue, as the pending mergers are completed. In addition, improving the efficiency of the Group companies’ financial management and conversion to electronic format will be continued in Finland.
Accounting policies and financial management IT systems
Kesko Group complies with the International Financial Reporting Standards (IFRSs) endorsed by the European Union. The accounting policies applied by the Group have been compiled in the accounting manual, updated as the standards are amended. The manual contains guidelines for separate companies and the parent company, as well as guidelines for the preparation of the consolidated financial statements. Kesko Group’s financial management information is generated from division-specific enterprise resource planning systems via a centralised and controlled shared interface into the Group’s centralised consolidation system to produce the Group’s key financial reports. The key systems used in the production of financial information have been certified and secured by back-up systems, and they are controlled and checked regularly to ensure reliability and continuity.