Analyze and compare the financial statements of General Mills

In this case study, I will analyze and compare the financial statements of General Mills and the Meiji Holdings Company Limited, which are amongst the largest firms in the food industry. I will also talk about the accounting standards, the differences between both company’s annual statements and the differences between Annual Reports, a 10-K and the Corporate Social Responsibility Report. General Mills and Meiji Holdings Company Limited utilizes different accounting standards. General Mills uses the Financial Accounting Standards Board (FASB) which administers standards known as the Generally Accepted Accounting Principles (GAAP) United States (General Mills, 2013). Meiji Holdings Company Limited utilizes the Japanese version of the GAAP.

For General Mills, audits are conducted in accordance with the Public Company Accounting Oversight Board (PCAOB) United States. These standards require that an external auditor plans and performs the audits to make sure that the financial statements of the company are free of mistakes and whether effective internal control over financial reporting is being maintained. The Meiji Holdings Company Limited also uses outside sources to conduct their audits. When looking over the General Mills balance sheet, I notice that the non-current assets are being reported separately from the current assets and the non-current liabilities are reported separately from the current liabilities. In addition, only current assets that are expected to be realized within the company’s financial year are shown. Also, the company’s cash flow statement, cash payments and receipts are classified into financing activities, operating activities and investing activities.

When researching the Meiji Holding Companies balance sheet, I noticed that it’s categorized into net assets, liabilities and entity’s assets. These assets are further divided into fixed assets, deferred charges and current assets. This makes it totally different from the General Mills balance sheet. The liabilities on the other hand are categorized into fixed liabilities and current liabilities. The net assets comprise of translation adjustments, shareholders equity, and stock options. The Shareholders equity consists of treasury shares, stated capital, retained earnings and additional paid in capital. The income statement is unique for Meiji Holdings Company limited. The expenses are classified according to their nature and the profit is formulated in steps. This differs from the General Mills company income statement where a multiple step method is utilized.

For example, the cost of sales is deducted from the total sales, the current gross profit and the current income before income tax. An Annual Report is a comprehensive report on a company’s activities throughout the previous year. Annual reports are intended to give shareholders and other interested people information about the company’s activities and financial performance. They may be considered as grey literature. Most places require companies to prepare and disclose annual reports, and many require the annual report to be filed at the company’s registry. Companies listed on a stock exchange are also required to report at more frequent intervals depending on the rules of the stock exchange involved. A Form 10-K is an annual report required by the U.S. Securities and Exchange Commission (SEC), which gives a full summary of a company’s financial performance.

The difference between a 10-K and an annual report is that the 10-K is more detailed, longer and its information requirements and format are determined by the SEC. The 10-K includes information such as company history, organizational structure, executive compensation, equity, subsidiaries and audited financial statements, among other information. Companies with more than $10 million in assets and a class of equity securities that is held by more than 500 owners must file annual and other periodic reports, regardless of whether the securities are publicly or privately traded. If a shareholder requests a company’s Form 10-K, the company must provide a copy. In addition, most large companies must disclose on Form 10-K whether the company makes it periodic and current reports available, free of charge, on its website.

Form 10-K, as well as other SEC filings may be searched at the EDGAR database on the SEC’s website. Corporate social responsibility (CSR) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism that has business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. CSR is a process with the aim to embrace responsibility for the company’s actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered stakeholders. CSR is titled to aid an organization’s mission as well as a guide to what the company stands for and will uphold to its consumers.

Development business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. Unlike the 10-K and annual reports that gives financial information, corporate social responsibility report is designed to communicate a corporation social responsibility commitment and its growth and direction as a socially aware enterprise and has a neutral impact on financial outcomes. Both General Mills Company and Meiji Holdings Company release annual reports and corporate social responsibility reports to their stakeholders. General Mills Company is required by law to file a 10-k report (General Mills, 2013).

Below, I’ve prepared a summary of financial statements from both General Mills and the Meiji Holdings Company to determine and compare their performance, growth and profitability. The financial statements show that General Mills is the more profitable company of the two with a gross margin of 36% while The Meiji Holdings Company Limited gross margin is at 34%. General Mills operating margin is much higher at 16% than the Meiji Holdings Company Limited at 3%. From the research, it shows that both company’s revenues increased each year, but the income pattern was a little different increasing in 2011 and 2013 and decreasing in 2012. The size difference between the two companies maybe one of the reasons for the difference in profitability.

References
General Mills. (2013). Annual Report, Overview and Publications. Retrieved July 19, 2014, from General Mills. Meiji Holdings. (2013). Meiji Group. Retrieved May July 19, 2014, from Meiji Holdings Co., Ltd.: Annual report. (2014, June 19). In Wikipedia, The Free Encyclopedia. Retrieved July 20, 2014 from http://en.wikipedia.org/w/index.php?title=Annual_report&oldid=613550769

Wild, J. (2008). Financial Statement Analysis. McGraw-Hil.