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 within the Group on a monthly basis, and published as interim reports quarterly. Financial forecasts are prepared for quarterly periods, in addition to which any 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 control is organised in three levels. The subsidiaries analyse and report their figures to the respective 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 by using automated and manual controls at every reporting level. The implementation of the analyses and controls is supervised on a monthly basis at the Company, division and Group level.
Planning and performance reporting
The Group's financial performance and the achievement of financial objectives are monitored in Group-wide financial reporting. Monthly performance reporting includes Group, division and subsidiary 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 forecasts drawn up by the quarter, extending for the following 12 to 15 months. The key financial indicator for growth is sales performance, while those for profitability are operating profit excluding non-recurring items and the return on capital employed excluding non-recurring items, monitored in monthly internal reporting. Information on the Group's financial situation is communicated in interim reports and the financial statements release. The Group's sales figures are published in a stock exchange release each month.
Financial planning takes place at the subsidiary, division and Group level in the form of annual budgeting and a rolling forecast. Forecasts are updated quarterly, and any significant changes are taken into account in the performance forecasts reported monthly.
Performance reporting to the Group's top management comprises monthly reports on the subsidiaries', divisions' and the Group's income statements and balance sheets. Each subsidiary is primarily responsible for the financial reporting and the accuracy of its 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 and the balance sheet are analysed monthly at the Company, division and Group level, based on the 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. The performance reports provided to the top management also include Group level monitoring of sales on a weekly, monthly and quarterly basis.
Public performance reporting comprises interim reports, the financial statements release, annual financial statements, the Report by the Board of Directors 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 and the financial statements and gives a recommendation on their handling to the Board. The Board approves the interim report and the financial statements before they are published.
Key actions in 2015
Kesko Group completed the project for harmonising the Kesko Group’s financial management information systems. The information system serves both the Group companies and the K-Group's retailers. In Finland and Russia, the centralisation of the Group companies' financial management routines in the Shared Services Centre continued. The Group's shared information system for financial management was introduced in Norway in the building and home improvement trade company. In addition, improving the efficiency of financial management routines and converting them to electronic format was continued in cooperation with the Group companies.
Kesko Group started planning and implementing the simplification of the Group’s legal structure.
Key actions in 2016
In 2016, the simplification of the Group’s legal structure will continue. In addition, improving the efficiency of the Group companies' financial management and conversion to electronic format in both Finland and Russia will continue.
Accounting policies and financial management IT systems
Kesko Group has adopted the International Financial Reporting Standards (IFRS) endorsed by the European Union. The accounting policies applied by the Group are included in the accounting manual, updated as the standards are amended. The manual contains guidelines for separate companies, the parent company, and guidelines for the preparation of the consolidated financial statements.
Kesko Group's financial management information is generated by division-specific enterprise resource planning systems, via a centralised and controlled common 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.