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 are organised on three levels. Businesses analyse and report their figures to the divisions, which then report the division-specific figures to Group Level. Analyses and controls for ensuring the accuracy of reporting are used on each of the three reporting levels. 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 levels.
Planning and performance reporting
The Group's financial development and achievement of financial objectives are monitored by financial reporting covering the entire Group. Monthly performance reporting includes actual Group, division and business specific results, changes compared to the previous year, comparison with forecasts, and forecasts for the current financial year. The Group's short-term financial planning is based on annual budgeting and quarterly updated forecasts extending to the end of the current financial year. The key financial indicators are sales performance for growth, comparable operating profit, comparable operating margin, and comparable return on capital employed for profitability, and free cash flow for cash flow, monitored by monthly internal reporting. Information on the Group's financial situation is provided in interim reports, the half year financial report, and the financial statements release. The Group's sales figures are published monthly.
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' sales, profits, capital employed and cash flow, as well as on the Group's financial items, cash flows and balance sheet position. The businesses are primarily responsible for the financial reporting and the accuracy of the 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 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 issues.
Public performance reporting
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 accounting 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 2021
The Covid-19 pandemic and poor predictability of the economic operating environment continued to impact the operations of the financial organisation in 2021. This emphasised the importance of up-to-date forecasts to support management decision-making, and the ability to respond to quickly changing situations. In 2021, we continued to harmonisation and automation of financial administration processes under the Digital Finance project. In Norway and Sweden, we continued the integration of the financial administration of acquired businesses. The Group initiated a project to harmonise financial processes and financial reporting related controls, by identifying key controls and related risks, as well as practices related to their implementation, documentation and monitoring.
Key actions in 2022
In 2022, we will continue the harmonisation and automation of financial administration processes through the utilisation of modern technologies. The harmonisation of key controls related to financial processes and financial reporting will be advanced in various businesses. Reporting will be automated and developed based on business needs.
Accounting policies and financial administration IT systems
Kesko Group complies with the International Financial Reporting Standards (IFRS) approved for adoption by the European Union. The accounting policies applied by the Group have been compiled in an accounting manual, which is updated as the standards are amended. The manual contains instructions for Group companies and for preparing the consolidated financial statements. Kesko Group's financial administration information is generated from division and company specific enterprise resource planning systems and basic finance systems into the Group's centralised consolidation system to produce the Group's key financial reports. The key systems used to generate financial information have been certified and secured by back-up systems, and they are controlled and checked regularly to ensure reliability and continuity.