Carrefour Group. Transition to IFRS. 29 th June 2005

Transcription

1 Carrefour Group Transition to IFRS 29 th June

2 Agenda 1. Review of IFRS standards and impacts on 2004 accounts 2. Opening Balance Sheet at January 1 st, Impacts on accounts at June 30 th,

3 Agenda 1. Review of IFRS standards and impacts on 2004 accounts 2. Opening Balance Sheet at January 1 st, Impacts on accounts at June 30 th,

4 What we said in December, 2004 In December 2004, the Group presented to the financial community those standards having an impact on the financial statements, the principal options chosen, and gave a preview of the major impacts on the balance sheet and the income statement : Key messages «EBIT stability as a % of net sales» «The principal impact on the Group s share of net income would come from ending the amortization of goodwill» «The principal impact to the balance sheet is the full integration of the financial service companies» «Increase in the net debt by an amount less than 2 days of operating working capital» «IFRS gearing end 2004 should be inferior to 100%» 4

5 Review of IFRS standards Principle The change of accounting standards was made compulsory as of January 1 st, 2005 by the EC regulation n 1606/2002 of July 19 th, The first accounts published according to IFRS will be those of the exercise 2005 presented with a comparison under fiscal year 2004 prepared in accordance with the same standards. Consequences for Carrefour Of the 38 standards which compose IFRS: - 3 standards have an impact solely on the presentation of the income statement (IAS 27: consolidated accounts, IAS 1: presentation of the financial statements, IAS 18: revenue recognition); - 5 standards have an impact on the profit of the Group (IAS 38: end of the depreciation of goodwill, IAS 17: leases, IAS 19: employee benefits, IAS 2: stocks, IFRS 2: stock-options and performance shares). 5

6 2004 : Review of IFRS standards 1. Standards with an impact on the presentation of accounts 2. Standards with an impact on profit 3. Other standards 4. Balance sheet at December 31st, General synthesis on 2004 accounts 6

7 2004 : Review of standards with an impact on the presentation of accounts 1. IAS 1 : Presentation of the financial statements 2. IAS 27 : Consolidated accounts 3. IAS 18 : Revenue recognition 7

8 IAS 1 : Presentation of the financial statements Principle No requirement for standard presentation of the balance sheet and the profit and loss account. Cancellation of the concept of extraordinary income. Choice of presentation of profit and loss account by «nature» or by «purpose». Consequences for Carrefour The presentation of the balance sheet remains the same. New presentation of the profit and loss account (see following page). The P&L presentation by «nature» has not changed. 8

9 IAS 1 : Presentation of the financial statements Sales through the cash registers and sales made to franchisees through Carrefour warehouses (unchanged definition) Euro millions June 2005 % ch. June 2004 Net sales Other revenues Revenues of ordinary activities Cost of sales Commercial margin SG&A EBITDA Depreciation & provisions Activity contribution Other income and expenses EBIT Cost of debt Income before tax Income tax Net income of consolidated companies Equity accounted companies Minority interests Discontinuing activities group share Discontinuing activities minority interests Net result group share Revenues from financial service companies Rental income Other income (Carrefour Vacances, franchisee rental fees, services ) Costs of the loyalty programme which are not financed by suppliers New figure New figure Including impairment charges, profit on divestments and other non-recurring items Cancellation of goodwill amortization Cancellation of extraordinary items 9

10 IAS 1 : Presentation of the financial statements 2004 Impacts D2004 FR GAAP Amortiz. / 40 years Adjustments Classification changes D04 IFRS pro forma Net sales , ,0 Other revenues 1 038, ,6 Revenues of ordinary activities 1 038, ,6 Non-recurring items on December 31st, 2004, consist of : Cost of sales (56 554,2) (84,2) (414,4) (57 052,8) - Non-recurring incomes* 162 M Commercial margin ,8 (84,2) 624, ,8 - Impairment losses (107 M ) Commercial margin rate - Restructuring costs 22,2% (100 M ) 22,9% SG&A - Stock-options and performance (11 792,9) shares costs (31 (6,3) M ) (89,0) (11 888,2) Other income (expense) 596,2 13,8 (610,0) Depreciation & provisions * Mainly capital gains on disposals (1 683,4) of assets 157,6 0,4 30,7 (1 494,7) Activity contribution 157,6 (76,3) (44,1) 3 270,9 Non-recurring items (37,9) (38,1) (76,0) EBIT 3 233,8 157,6 (114,2) (82,2) 3 195,0 Interest income (expense) (424,1) (48,7) (11,7) (484,5) Income before tax 2 809,7 157,6 (162,9) (93,9) 2 710,5 Income tax (836,4) (43,2) 39,8 32,6 (807,2) Income tax rate The result of discontinued activities -29,8% on December 31st, 2004, consists -29,8% Net profit from recurring operations of: of 101,4 consolidated companies - the capital gain from the sale of Modelo Continente 5 M * (60,7) 40,7 Minority interests - the latent loss from the sale (93,6) of investments in (4,1) Japan 13,4 (90 M ) (74,0) (158,3) Net income from recurring operations before 1 981,1 110,3 (109,7) goodwill amortization - group * vs. share 11 M in French Gaap because in IFRS, the 2004 depreciation of (196,0) 1 785,7 Amortization of goodwill the goodwill of Modelo Continente (319,3) is classified in capital gain. 319,3 Net income from recurring operations after goodwill amortization - group share 1 661,8 110,3 209,6 (196,0) 1 785,7 Non recurring income (expense) (246,2) 246,2 Discontinuing activities group share (5,8) (79,0) (84,8) Discontinuing activities minority interests Net result 1 509,2 114,4 190,4 45, ,2 Net result group share 1 386,8 110,3 203, ,9 10

11 IAS 27 : Consolidated accounts Principle Any subsidiaries over which we have a controlling interest must be fully consolidated. Consequences for Carrefour Within Carrefour, financial subsidiaries as well as insurance companies which are controlled by the group, have been until now consolidated by the equity method. In the future, these companies will be fully consolidated. In order to present this clearly in the financial statements :! We will show on the balance sheet, on a separate line, the debt which has been integrated.! Within the profit and loss account, the sales of these companies will be presented in «Other revenues». Countries concerned : France, Spain, Brazil, Argentina, Taiwan, Belgium 11

12 IAS 27 : Consolidated accounts 2004 Impacts Integration of financial companies Net sales Other revenues 496,0 Revenues of ordinary activities 496,0 Cost of sales (168,2) Commercial margin 327,8 Commercial margin rate SG&A (160,8) Other income (expense) Depreciation & provisions (11,3) Activity contribution 155,7 Non-recurring items (0,7) EBIT 155,0 Interest income (expense) 2,3 Income before tax 157,3 Income tax (51,4) Income tax rate Net profit from recurring operations of (60,7) consolidated companies Minority interests (45,2) Net income from recurring operations before goodwill amortization - group share Amortization of goodwill Net income from recurring operations after goodwill amortization - group share Non recurring income (expense) Discontinuing activities group share Discontinuing activities minority interests Net result 45,2 Net result group share In m Assets Integration of financial companies Intangible assets Tangible assets 3 Financial assets (285) Investment properties Bank loans portfolio Other receivables 57 Total In m Liabilities Integration of financial companies Shareholders equity - Group share 2 Minority interests 209 Shareholders equity 211 Provisions 81 Net debt (306) Operating working capital Bank loans refinancing Other liabilities 91 Total

13 IAS 18 : Revenue recognition Principle IAS 18 defines sales as the gross inflow of economic benefits arising from the ordinary operating activities of a company. For sales to be recognised, most of the property risks and rewards of goods or services must be transferred to the customer. Consequences for Carrefour! The composition of sales is unchanged (sales through cash registers and sales made to franchisees through Carrefour warehouses).! Additional revenues (revenue from financial services, Carrefour Vacances, franchisee income ) will be shown in a separate line at the top of the profit and loss account. 13

14 IAS 18 : Revenue recognition 2004 Impacts D04 IFRS pro forma Net sales ,0 Other revenues 1 038,6 Revenues of ordinary activities ,6 Cost of sales (57 052,8) Commercial margin ,8 Commercial margin rate 22,9% SG&A (11 888,2) Other income (expense) Depreciation & provisions (1 494,7) Activity contribution 3 270,9 Non-recurring items (76,0) EBIT 3 195,0 Interest income (expense) (484,5) Income before tax 2 710,5 Income tax (807,2) Income tax rate -29,8% Net profit from recurring operations of consolidated companies 40,7 Minority interests (158,3) Net income from recurring operations before goodwill amortization - group share 1 785,7 Amortization of goodwill Net income from recurring operations after goodwill amortization - group share 1 785,7 Non recurring income (expense) Discontinuing activities group share (84,8) Discontinuing activities minority interests Net result 1 859,2 Net result group share 1 700,9 Other revenues at December 31st, 2004, consist of : - Rental and sub leasing incomes 335 M - Revenues of financial companies 495 M - Others* 209 M * Essentially consists of receipts from stores and franchisees and unfunded coupons by the suppliers 14

15 2004 Income statement Classification changes Classification changes Integration of financial companies Classification of non recurring items Others Net sales Other revenues 1 038,6 496,0 (36,6) 579,2 Revenues of ordinary activities 1 038,6 496,0 (36,6) 579,2 Cost of sales (414,4) (168,2) 23,8 (270,0) Commercial margin 624,2 327,8 (12,8) 309,2 Commercial margin rate SG&A (89,0) (160,8) 0,7 71,1 Other income (expense) (610,0) (610,0) Depreciation & provisions 30,7 (11,3) (3,2) 45,2 Activity contribution (44,1) 155,7 (15,3) (184,5) Non-recurring items (38,1) (0,7) (235,9) 198,5 EBIT (82,2) 155,0 (251,2) 14,0 Interest income (expense) (11,7) 2,3 (14,0) Income before tax (93,9) 157,3 (251,2) Income tax 32,6 (51,4) 84,0 Income tax rate Net profit from recurring operations of consolidated companies (60,7) (60,7) Minority interests (74,0) (45,2) (28,8) Net income from recurring operations before goodwill amortization - group share (196,0) (196,0) Amortization of goodwill Net income from recurring operations after goodwill amortization - group share (196,0) (196,0) Non recurring income (expense) 246,2 246,2 Discontinuing activities group share (79,0) (79,0) Discontinuing activities minority interests Net result 45,2 45,2 Net result group share 15

16 2004 Income statement Classification changes Others Net sales Other revenues 579,2 Revenues of ordinary activities 579,2 Cost of sales (270,0) Commercial margin 309,2 Commercial margin rate SG&A 71,1 Other income (expense) (610,0) Depreciation & provisions 45,2 Activity contribution (184,5) Non-recurring items 198,5 EBIT 14,0 Interest income (expense) (14,0) Income before tax Income tax Income tax rate Net profit from recurring operations of consolidated companies Minority interests Net income from recurring operations before goodwill amortization - group share Amortization of goodwill Net income from recurring operations after goodwill amortization - group share Non recurring income (expense) Discontinuing activities group share Discontinuing activities minority interests Net result Net result group share Reclassification of rental income formerly classed in «Other income (expense)» or in reduction to rental expenses. Reclassification of other income formerly classed in «Other income (expense)» or in «Commercial margin». Reclassification of Hard-Discount supply chain costs in Commercial margin. Reclassification of pre-opening costs by nature and reclassification of revenues from sub-leases formerly accounted for in reduction to rental expenses. Mainly reclassification of supplier discounts in Commercial margin. 16

17 2004 : Review of IFRS standards 1. Standards with an impact on the presentation of accounts 2. Standards with an impact on profit 3. Other standards 4. Balance sheet at December 31st, General synthesis on 2004 accounts 17

18 2004 : Review of standards with an impact on profit 1. IAS 38 : end of goodwill amortization 2. IAS 17 : financial leases 3. IAS 19 : employee benefits 4. IAS 2 : inventories 5. IFRS 2 : stock-options options 18

19 IAS 38 : Intangible assets Principle The definition and terms of accounting of intangible assets under IFRS are based on the notion of control of the asset and not only on the legal notion of property as it is defined under French accounting principles. Goodwill amortization is cancelled (replaced by impairment tests). Consequences for Carrefour No material reclassifying of intangible assets as goodwill. End of goodwill amortization :! Only earnings per share before goodwill remains ;! Net result before and after goodwill amortization are similar. 19

20 IAS 38 : Intangible assets 2004 Impacts End of GW amortization Net sales Other revenues Revenues of ordinary activities Cost of sales Commercial margin Commercial margin rate SG&A Other income (expense) Depreciation & provisions Activity contribution Non-recurring items EBIT Interest income (expense) Income before tax Income tax Income tax rate Net profit from recurring operations of consolidated companies Minority interests Net income from recurring operations before goodwill amortization - group share Amortization of goodwill 319,3 Net income from recurring operations after 319,3 goodwill amortization - group share Non recurring income (expense) Discontinuing activities group share Discontinuing activities minority interests Net result 319,3 Net result group share 319,3 In m Assets End of goodwill amortization Intangible assets 319 Tangible assets Financial assets Investment properties Bank loans portfolio Other receivables Total 319 In m Liabilities End of goodwill amortization Shareholders equity - Group share 319 Minority interests Shareholders equity 319 Provisions Net debt Operating working capital Bank loans refinancing Other liabilities Total

21 IAS 17 : Leases Principle Real-estate rents are analyzed by accounting and legal criteria (transfer of property, contract length / economic life of the asset, discounted rents / value of the asset ) and classified either as operational leases (lease expense in P&L), or financial leases, the accounting treatment of which is equivalent to a leasing contract : the rent is fragmented between amortization and financial interest. The asset is registered on the balance sheet with along with a corresponding liability. Consequences for Carrefour! More than 2000 contracts reviewed.! Financial lease contracts have already been restated in the consolidated accounts.! Since 2001, all new «sale & lease-back» contracts conform with IAS 17. The impact of applying IAS 17 is limited (around 30 contracts re-qualified). 21

22 IAS 17 : Leases 2004 Impacts Leases (IAS 17) Net sales Other revenues Revenues of ordinary activities Cost of sales Commercial margin Commercial margin rate SG&A 18,5 Other income (expense) Depreciation & provisions (11,2) Activity contribution 7,3 Non-recurring items EBIT 7,3 Interest income (expense) (14,1) Income before tax (6,8) Income tax 1,9 Income tax rate Net profit from recurring operations of consolidated companies Minority interests 1,0 Net income from recurring operations before (3,9) goodwill amortization - group share Amortization of goodwill Net income from recurring operations after (3,9) goodwill amortization - group share Non recurring income (expense) Discontinuing activities group share Discontinuing activities minority interests Net result (4,9) Net result group share (3,9) In m Assets Leases (IAS 17) Intangible assets Tangible assets 226 Financial assets (3) Investment properties Bank loans portfolio Other receivables (16) Total 207 In m Liabilities Leases (IAS 17) Shareholders equity - Group share (37) Minority interests (6) Shareholders equity (43) Provisions Net debt 245 Operating working capital Bank loans refinancing Other liabilities 5 Total

23 IAS 19 : Employee benefits Principle IAS 19 concerns all benefits which might form part of an employee s remuneration and requires that all the benefits accruing to employees are calculated on a «fair value» basis whatever their nature or due date. IFRS requires that companies recognise and account for a greater number of employee benefits than those under French GAAP. Consequences for Carrefour! The Group already accounts for its pension obligations.! Taking into account its social legislation, Belgium is the main country affected by this standard (pre-pension plans, time-credit fund ). In fact, these commitments are not based on legal obligations but rather on precedent. The high probability of their realization necessitates their inclusion under IFRS.! The Group has decided to apply the corridor method; if the impact of variations in the actuarial hypotheses on net income are within plus or minus 10% (the corridor) they are not accounted for. 23

24 IAS 19 : Employee benefits 2004 Impacts Employee benefits (IAS 19) Net sales Other revenues Revenues of ordinary activities Cost of sales Commercial margin Commercial margin rate SG&A (9,0) Other income (expense) 13,8 Depreciation & provisions Activity contribution 4,8 Non-recurring items EBIT 4,8 Interest income (expense) (32,7) Income before tax (27,9) Income tax 2,8 Income tax rate Net profit from recurring operations of consolidated companies Minority interests Net income from recurring operations before (25,1) goodwill amortization - group share Amortization of goodwill Net income from recurring operations after (25,1) goodwill amortization - group share Non recurring income (expense) Discontinuing activities group share Discontinuing activities minority interests Net result (25,1) Net result group share (25,1) In m Assets Employee benefits (IAS 19) Intangible assets Tangible assets Financial assets Investment properties Bank loans portfolio Other receivables Total 0 In m Liabilities Employee benefits (IAS 19) Shareholders equity - Group share (318) Minority interests (2) Shareholders equity (320) Provisions 531 Net debt Operating working capital Bank loans refinancing Other liabilities (211) Total 0 24

25 IAS 2 : Inventories Principle The valuation of inventories on the balance sheet must include all the costs* associated with the cost of buying the product sold (i.e., items accounted for as margin). The Group has decided to :! Include all the direct costs in the valuation of inventories on the balance sheet (taking into account logistics costs up to the point when the product is in the warehouse of the store, as well as any rebates from suppliers).! Account for services billed to suppliers as commercial margin, and thus incorporate these invoices in the valuation of the stock.! Impact on Group Share Net Equity as of 1 st January 2004 : (363) M * Except for exchange rate losses and gains 25

26 IAS 2 Inventories 2004 Impacts Inventories (IAS 2) Net sales Other revenues Revenues of ordinary activities Cost of sales (84,2) Commercial margin (84,2) Commercial margin rate SG&A (0,5) Other income (expense) Depreciation & provisions Activity contribution (84,7) Non-recurring items EBIT (84,7) Interest income (expense) (0,6) Income before tax (85,3) Income tax 25,2 Income tax rate Net profit from recurring operations of consolidated companies Minority interests 5,0 Net income from recurring operations before (55,1) goodwill amortization - group share Amortization of goodwill Net income from recurring operations after (55,1) goodwill amortization - group share Non recurring income (expense) Discontinuing activities group share Discontinuing activities minority interests Net result (60,1) Net result group share (55,1) In m Assets Inventories (IAS 2) Intangible assets Tangible assets Financial assets Investment properties Bank loans portfolio Other receivables 181 Total 181 In m Liabilities Inventories (IAS 2) Shareholders equity - Group share (418) Minority interests (36) Shareholders equity (454) Provisions Net debt Operating working capital 635 Bank loans refinancing Other liabilities Total

27 IFRS 2 : Stock options Principle Under IFRS, stock options are considered to be a free distribution of call options to personnel. The theoretical cost of the call options (established by standard valuation method) is then added back into the company s payroll and is distributed over the period up to the expiration date (normally 4 years). This cost is calculated on the allotment date and cannot be modified. The standard is applicable to all financial instruments granted after November 7, 2002, and unused as of January 1, This principle does not exist under French standards. 27

28 IFRS Impacts Stock-options (IFRS 2) Net sales Other revenues Revenues of ordinary activities Cost of sales Commercial margin Commercial margin rate SG&A Other income (expense) Depreciation & provisions Activity contribution Non-recurring items (30,6) EBIT (30,6) Interest income (expense) Income before tax (30,6) Income tax 10,7 Income tax rate Net profit from recurring operations of consolidated companies Minority interests Net income from recurring operations before (19,9) goodwill amortization - group share Amortization of goodwill Net income from recurring operations after (19,9) goodwill amortization - group share Non recurring income (expense) Discontinuing activities group share Discontinuing activities minority interests Net result (19,9) Net result group share (19,9) No impact on shareholders equity 28

29 2004 Income statement - Adjustments Adjustments End of GW amortization Net result group share 203,8 319,3 (3,9) (25,1) (55,1) (19,9) (11,5) 29 Leases (IAS 17) Employee benefits (IAS 19) Inventories (IAS 2) Stock-options (IFRS 2) Other adjustments Net sales Other revenues Revenues of ordinary activities Cost of sales (84,2) (84,2) Commercial margin (84,2) (84,2) Commercial margin rate SG&A (6,3) 18,5 (9,0) (0,5) (15,3) Other income (expense) 13,8 13,8 Depreciation & provisions 0,4 (11,2) 11,6 Activity contribution (76,3) 7,3 4,8 (84,7) (3,7) Non-recurring items (37,9) (30,6) (7,3) EBIT (114,2) 7,3 4,8 (84,7) (30,6) (11,0) Interest income (expense) (48,7) (14,1) (32,7) (0,6) (1,3) Income before tax (162,9) (6,8) (27,9) (85,3) (30,6) (12,3) Income tax 39,8 1,9 2,8 25,2 10,7 (0,8) Income tax rate Net profit from recurring operations of consolidated companies Minority interests 13,4 1,0 5,0 7,4 Net income from recurring operations before goodwill amortization - group share (109,7) (3,9) (25,1) (55,1) (19,9) (5,7) Amortization of goodwill 319,3 319,3 Net income from recurring operations after goodwill amortization - group share 209,6 319,3 (3,9) (25,1) (55,1) (19,9) (5,7) Non recurring income (expense) Discontinuing activities group share (5,8) (5,8) Discontinuing activities minority interests Net result 190,4 319,3 (4,9) (25,1) (60,1) (19,9) (18,9)

30 2004 : Review of IFRS standards 1. Standards with an impact on the presentation of accounts 2. Standards with an impact on profit 3. Other standards 4. Balance sheet at December 31st, General synthesis on 2004 accounts 30

31 Review of other standards Standard Principle Consequences for Carrefour IAS 12 : Deferred taxes Deferred tax is recognised on an undiscounted basis The only impact of the application of IAS Standard 12 is on opening shareholders equity (an impact of -92 M ). IAS 14 : Segment reporting IAS 16 : Fixed assets IAS 14 recommends that data on the balance sheet and profit and loss account should be given on two levels The residual value of a fixed asset can be recognised at the end of its depreciable life (and thus depreciation is limited to the purchase price minus the residual value). A revaluation of fixed assets (by category) is also possible. Depreciation can be calculated on each component of a fixed asset where the cost of that component is significant. This impact originates essentially from the recognition of a differed tax liability relative to the theoretical tax charge arising from two PSDI loans (Prêts Subordonnés à Durée Indéterminée) subscribed in 1991 and st level : by Geography (France, Europe, America, Asia) 2nd level : by activity (hypers, supers, HD, others) Given that the Group typically retains its assets, the residual value of fixed assets, once depreciated, is nil (fixed assets are thus fully depreciated). The Group has opted not to revalue fixed assets (maintaining historical cost). The Group has already applied the principle of calculating depreciation on each component of a fixed asset. 31

32 Review of other standards Standard Principle Consequences for Carrefour IAS 36 : Asset depreciation IAS 36 ensures that assets are booked at a value which does not exceed their recoverable value. The standard makes uniform impairment tests for all categories of assets. Impairment tests are undertaken: -Systematically for non amortized assets (goodwill ). The Group has already completed (since 2000) impairment tests on its main assets (constructions and goodwill). As a consequence, the adoption of the standard IAS 36 has no impact on the Carrefour opening balance sheet. -In case of any sign of a loss of value for all other fixed assets. IAS 40 : Investment properties For buildings which count as «investment property» (property held for rents or to enhance the corporate value), IAS 40 gives the possibility of revaluing the investment buildings at fair value. Whatever option the company chooses, the standard requires the fair value of these assets to be disclosed in the notes. Shopping malls constitute investment property. The Group has opted not to revalue its investment property. The fair value of these buildings will be given in the notes to the financial statements, calculated on the basis of a multiple of rents. 32

33 Review of other standards Standard Principle Consequences for Carrefour IFRS 1 : First adoption of IFRS IFRS 1 is about how IFRS standards should be adopted. This standard offers several options among which:!possibility of resetting to zero translation adjustments accumulated up to January 1st, 2004 (transfer of translation adjustments in undistributed profits);!no retrospective restatement of Group consolidation booked before January 1st, 2004 ;!Possibility of applying IAS 32 and IAS 39 on January 1st, 2005 with no pro forma comparison in 2004.!Possibility of proceeding to partial asset revaluations on January 1st, 2004.!Possibility of booking any shortfall related to employee benefits in opening shareholders equity. "Transfer on January 1st, 2004 of translation adjustments in undistributed profits (reserves); "No restatement of Group consolidation made before January 1st, 2004 (which would have led to new accounting for the Carrefour / Promodès merger). "Adopting the standards IAS 32 and 39 on January 1st, 2005 with no pro forma comparison in "No asset revaluation. "Any shortfall related to employee benefits will be accounted for in the opening shareholders equity. 33

34 IAS 32/39 : Financial instruments Given their belated adoption, the application of IAS Standards 32 and 39 was optional in The principal consequences of their application are as follows : - commitments given (puts) to minority interests of fully consolidated subsidiaries should be accounted for as financial debt at their actual value; " quantitative impact 2005 to be analyzed. - liabilities and debts over which the company retains its rights and contractual obligations must be kept on the balance sheet ; " a part of the current debt securitization plan will be re-consolidated. 34

35 IAS 32/39 : Financial instruments - derivative instruments (swaps, floors, options ) are accounted for on the balance sheet at their fair value and any variations to their fair value are accounted for in net income ; - it is possible, under certain conditions, to apply the principle of hedge accounting. In this case, debt is accounted for at its fair value and any variation to this is entered in net income ; " the Group applies the principle of hedge accounting which will limit the volatility of net income. - Investments in non-consolidated companies are evaluated at their fair value. " Little impact for the Group. Other than the application of the standards 32 and 39, financial income is affected by changes of classification within the income statement (example: classification of supplier discounts as commercial margin rather than financial income). 35

36 Treasury shares (IAS 32) Principle Under IFRS, treasury shares must be written off against shareholder equity. Consequences for Carrefour Treasury shares held to serve stock-option plans were classified until now as transferable investment securities and were included in the calculation of the net debt. In the event of loss of value, a reserve was allocated against profit. Under IFRS, treasury shares will be written off against shareholder equity and share price movements will not affect the financial statements. Given that the Carrefour Group has not opted for the early application of IAS 32 and 39, only the 2005 accounts will be impacted by this change of classification (pro forma information will be given for 2004). Pro forma impact on shareholders equity as of 31/12/04 : (299 m) Pro forma impact on net debt as of 31/12/04 : +311 m Pro forma impact on 2004 result : +12 m 36

37 Off balance sheet commitments Off balance sheet commitments under IFRS will be similar to those presented under the French standards on the whole. However, because they are included in the balance sheet under IFRS, the following will no longer be presented as off balance sheet:! rents payable related to contracts qualifying as financial leases! the pension fund in Belgium. 37

38 Specific point Amortization of constructions Change in Accounting Estimate

39 Amortization of constructions In May 2005, the Group decided to modify the useful life of its constructions from 20 to 40 years. This decision was motivated by several factors : # more and more of our stores are 20 years old and continue to be operated without needing to make structural changes to the constructions ; # the majority or our international competitors amortize their constructions over periods ranging from 35 to 50 years; # valuations of stores, made by experts as part of the creation of a European real estate company (the Carrefour Property project completion 2005), reveal that constructions continue to have a significant market value after 20 years. 39

40 The changeover to IFRS does not justify the modification to the useful life of constructions, French accounting standards and IFRS being similar on this point (amortization over the useful life of an asset). The decision taken by the Group to modify the useful life of its constructions having not been taken until May 2005 (in consideration of reports by independent experts), this decision constitutes a change in valuation. By consequence : Amortization of constructions # The amortization period of constructions is raised, from 2005, from 20 to 40 years (or over the length of the rental contract if inferior) # The change in length is effective from January 1, 2005 forward # Pro forma information for 2004 will be provided For the sake of simplicity, although the change to the length of amortization is not an IFRS adjustment, the IFRS financial statements presented hereinafter are restated with this modification. 40

41 Amortization of constructions 2004 Impacts Amortiz. / 40 years Net sales Other revenues Revenues of ordinary activities Cost of sales Commercial margin Commercial margin rate SG&A Other income (expense) Depreciation & provisions 157,6 Activity contribution 157,6 Non-recurring items EBIT 157,6 Interest income (expense) Income before tax 157,6 Income tax (43,2) Income tax rate Net profit from recurring operations of consolidated companies Minority interests (4,1) Net income from recurring operations before 110,3 goodwill amortization - group share Amortization of goodwill Net income from recurring operations after 110,3 goodwill amortization - group share Non recurring income (expense) Discontinuing activities group share Discontinuing activities minority interests Net result 114,4 Net result group share 110,3 In m Assets Amortization / 40 years Intangible assets Tangible assets 158 Financial assets Investment properties Bank loans portfolio Other receivables Total 158 In m Liabilities Amortization / 40 years Shareholders equity - Group share 110 Minority interests 4 Shareholders equity 114 Provisions Net debt Operating working capital Bank loans refinancing Other liabilities 43 Total

42 2004 : Review of IFRS standards 1. Standards with an impact on the presentation of accounts 2. Standards with an impact on profit 3. Other standards 4. Balance sheet at December 31st, General synthesis on 2004 accounts 42

43 Balance sheet at December 31 st, 2004 In m Assets D2004 French Gaap Adjustments Classification changes D2004 IFRS Amortization / 40 years D2004 IFRS proforma Intangible assets (147) Tangible assets (473) Financial assets (286) Investment properties Bank loans portfolio Other receivables (20) Total In m Liabilities D2004 French Gaap Adjustments Classification changes D2004 IFRS Amortization / 40 years D2004 IFRS proforma Shareholders equity - Group share (602) Minority interests Shareholders equity (453) Provisions Net debt (61) Operating working capital Bank loans refinancing Other liabilities (115) (336) Total

44 B/S at December 31 st, 2004 Adjustments In m Assets Integration of financial companies End of goodwill amortization Employee benefits (IAS 19) Leases (IAS 17) Inventories (IAS 2) Preopenings costs and rebates Deferred taxes (IAS 12) Other restatements Intangible assets 319 (10) Tangible assets (36) Financial assets (285) (3) 2 Investment properties Bank loans portfolio Other receivables 57 (16) 181 (26) (16) Total (26) (14) (46) In m Liabilities Integration of financial companies End of goodwill amortization Employee benefits (IAS 19) Leases (IAS 17) Inventories (IAS 2) Preopenings costs and rebates Deferred taxes (IAS 12) Other restatements Shareholders equity - Group share (318) (37) (418) (22) (90) (38) Minority interests 209 (2) (6) (36) (4) (4) (8) Shareholders equity (320) (43) (454) (26) (94) (46) Provisions Net debt (306) 245 Operating working capital 635 Bank loans refinancing Other liabilities 91 (211) 5 Total (26) (14) (46) 44

45 In m B/S at December 31 st, 2004 Classification changes Assets Investment properties (IAS 40) Prepaid leases Others Classification changes Intangible assets (75) (72) (147) Tangible assets (481) 8 (473) Financial assets Investment properties Bank loans portfolio Other receivables (9) (11) (20) Total In m 0 Liabilities Investment properties (IAS 40) Prepaid leases Others Classification changes Shareholders equity - Group share 0 Minority interests 0 Shareholders equity Provisions Net debt Operating working capital Bank loans refinancing 0 Other liabilities (336) (336) Total

46 2004 : Review of IFRS standards 1. Standards with an impact on the presentation of accounts 2. Standards with an impact on profit 3. Other standards 4. Balance sheet at December 31st, General synthesis on 2004 accounts 46

47 2004 Income Statement - Synthesis D2004 FR GAAP Amortiz. / 40 years Adjustments Classification changes D04 IFRS pro forma Net sales , ,0 Other revenues 1 038, ,6 Revenues of ordinary activities 1 038, ,6 Cost of sales (56 554,2) (84,2) (414,4) (57 052,8) Commercial margin ,8 (84,2) 624, ,8 Commercial margin rate 22,2% 22,9% SG&A (11 792,9) (6,3) (89,0) (11 888,2) Other income (expense) 596,2 13,8 (610,0) Depreciation & provisions (1 683,4) 157,6 0,4 30,7 (1 494,7) Activity contribution 157,6 (76,3) (44,1) 3 270,9 Non-recurring items (37,9) (38,1) (76,0) EBIT 3 233,8 157,6 (114,2) (82,2) 3 195,0 Interest income (expense) (424,1) (48,7) (11,7) (484,5) Income before tax 2 809,7 157,6 (162,9) (93,9) 2 710,5 Income tax (836,4) (43,2) 39,8 32,6 (807,2) Income tax rate -29,8% -29,8% Net profit from recurring operations of consolidated companies 101,4 (60,7) 40,7 Minority interests (93,6) (4,1) 13,4 (74,0) (158,3) Net income from recurring operations before goodwill amortization - group share 1 981,1 110,3 (109,7) (196,0) 1 785,7 Amortization of goodwill (319,3) 319,3 Net income from recurring operations after goodwill amortization - group share 1 661,8 110,3 209,6 (196,0) 1 785,7 Non recurring income (expense) (246,2) 246,2 Discontinuing activities group share (5,8) (79,0) (84,8) Discontinuing activities minority interests Net result 1 509,2 114,4 190,4 45, ,2 Net result group share 1 386,8 110,3 203, ,9 47

48 2004 Income Statement EBIT EBIT 2004 FR GAAP ,5% of net sales IAS 27 : Integration of financial companies 155 IAS 1 :Classification changes of non recurring items (251) (0,3%) of net sales IAS 2 : Inventories (85) Change of classification of discounts 34 IFRS 2 : Stock-options (31) Others (19) EBIT 2004 IFRS Amortization of constructions on 40 years 158 EBIT 2004 IFRS pro forma ,4% of net sales 48

49 2004 Income Statement EBIT Group France Europe America Asia (excl. France) EBIT 2004 FR GAAP IAS 27 : Integration of financial companies IAS 1 :Classification changes of non recurring items (251) (45) (76) (94) (35) Others (100) (14) (48) (19) (20) EBIT 2004 IFRS (20) 94 Amortization of constructions on 40 years EBIT 2004 IFRS pro forma (6)

50 2004 Income Statement Financial result Financial result 2004 FR GAAP (424,1) 0,6% of net sales IAS 19 : Employee benefits (32,7) IAS 17 : Leases (14,1) Change of classification of discounts (34,0) Others 20,4 Financial result 2004 IFRS (484,5) 0,7% of net sales 50

51 Balance sheet at December 31 st, 2004 In m Assets D2004 French Gaap Adjustments Classification changes D2004 IFRS Amortization / 40 years D2004 IFRS proforma Intangible assets (147) Tangible assets (473) Financial assets (286) Investment properties Bank loans portfolio Other receivables (20) Total In m Liabilities D2004 French Gaap Adjustments Classification changes D2004 IFRS Amortization / 40 years D2004 IFRS proforma Shareholders equity - Group share (602) Minority interests Shareholders equity (453) Provisions Net debt (61) Operating working capital Bank loans refinancing Other liabilities (115) (336) Total

52 B/S at December 31 st, 2004 Net debt en M 2004 Net debt FR GAAP (6 794) Impact of IAS 17 (leases) (245) Net debt of financial companies 306 Others (37) Net debt IFRS (6 770) Restatement of treasury shares (311) Net debt IFRS proforma (7 081) 52

53 Operating working capital at December 31 st, 2004 FR GAAP IFRS Inventories (6 243) (5 621) Customers (1 057) (1 137) Suppliers Operating working capital in number of days 32,2 37,5 53

54 Reminder of the financial ratios formerly presented : EBITDA / financial income (expense) EBIT / financial income (expense) Changes under IFRS : Financial ratios at December 31 st, 2004 The financial ratios formerly presented by the Group are no longer pertinent under IFRS. EBIT and EBITDA will now include non-recurring elements (formerly presented as nonrecurring income/expense) and financial income now includes the cost associated with the updated employee benefit commitments (interest costs). Therefore, from now on we propose calculating the financial ratios according to the methods used by the ratings agencies, based on the following restated aggregates : - EBIT before non-recurring elements = Activity contribution (AC) - EBITDA before non-recurring elements = Activity contribution before depreciation and amortization - financial income before interest costs 54

55 Financial ratios at December 31 st, 2004 Activity contribution Depreciation and amortization Activity contribution w/o depr. and amortization Financial expenses 484,5 Interest costs (32,7) Financial expenses w/o int. costs 451,8 55

56 Financial ratios at December 31 st, 2004 FR GAAP IFRS Gearing (before appropriation*) 81,6% 84,7% EBITDA / Financial expenses 11,6x n/a AC w/o amort. & depr. / financial expense w/o interest costs n/a 10,5x EBIT / financial expenses 7,6x n/a Activity contribution (AC) / financial exp. w/o interest costs n/a 7,2x Cash flow / Net debt 50% 51% * IFRS standards no longer authorize the presentation after appropriation as dividends are not considered to be debt upon closing. 56

57 EPS after GW at December 31st, 2004 French Gaap IFRS Proforma * IFRS proforma after treasury shares ** EPS 2,33 2,50 2,55 EPS after dilution 2,29 2,46 2,50 EPS after dilution before non current items 2,29 2,73 2,78 NB : EPS is based on Group share of net income before discontinuing operations * with constructions amortized over 40 years ** 8,3M treasury shares restated under IAS 32/39, applicable in

58 Shareholders equity at December 31 st, 2004 FR GAAP (before appropriation) IAS 2 (Inventories) (455) IAS 19 (Employee benefits) (320) IAS 27 (Integration of financial companies) 212 IAS 12 (Deferred taxes) (94) IAS 8 (accrued expenses) (26) IAS 17 (leases) (44) End of goodwill amortization 319 Others (45) IFRS (before appropriation) Amortization of constructions / 40 years 114 IFRS pro forma

59 Agenda 1. Review of IFRS standards and impacts on 2004 accounts 2. Opening Balance Sheet at January 1 st, Impacts on accounts at June 30 th,

60 In m Opening B/S at January 1 st, 2004 Assets D2003 FR GAAP Adjustments Classification changes D2003 IFRS Intangible assets (5) (440) Tangible assets (353) Financial assets (256) Investment properties Bank loans portfolio Other receivables (121) Total (37) In m Liabilities D2003 FR GAAP Adjustements Classification changes D2003 IFRS Shareholders equity - group share (892) Minority interests Shareholders equity (746) Provisions Net debt (41) Operating working capital Bank loans refinancing Other liabilities (540) Total (37)

61 Opening B/S at January 1 st, 2004 (adjustments) In m Assets IAS 27 Financial companies IAS40 Invetment properties IAS 19 Employee benefits IAS 17 Leases IAS 2 Inventories Preopening costs and rebates IAS 12 Deferred taxes Intangible assets (5) Tangible assets (503) 197 (47) Financial assets (273) 5 12 Investment properties 503 Bank loans portfolio Other receivables (59) (13) Total (59) (9) (40) In m Liabilities IAS 27 Financial companies IAS40 Invetment properties IAS 19 Employee benefits IAS 17 Leases IAS 2 Inventories Preopening costs and rebates IAS 12 Deferred taxes Shareholders equity - group share 0 0 (314) (33) (363) (48) (100) (33) Minority interests (2) (6) (32) (2) (2) (2) Shareholders equity (316) (39) (395) (50) (102) (35) Provisions (0) Net debt (278) 250 (13) Operating working capital Bank loans refinancing Other liabilities 116 (8) (14) (7) (9) 13 (10) Total (59) (9) (40) Others Others 61

62 Shareholders equity at January 1 st, 2004 FR GAAP (before appropriation) IAS 2 (Inventories) (395) IAS 19 (Employee benefits) (316) IAS 27 (Integration of financial companies) 190 IAS 12 (Deferred taxes) (92) IAS 8 (accrued expenses) (50) IAS 17 (leases) (36) End of goodwill amortization Others (48) IFRS (before appropriation)

63 Agenda 1. Review of IFRS standards and impacts on 2004 accounts 2. Opening Balance Sheet at January 1st, Impacts on accounts at June 30 th,

64 Impacts on accounts at June 30 th, Income Statement 2. Balance Sheet 3. Net equity 64

65 Income Statement at June 30 th, 2004 J04 FR GAAP Amortiz. / 40 ans Adjustments Classification changes J04 IFRS proforma Net sales , ,7 Other revenues (0,1) 451,5 451,4 Revenues of ordinary activities (0,1) 451, ,0 Cost of sales (27 004,1) (5,3) (116,6) (27 126,0) Commercial margin 7 544,6 (5,3) 334, ,1 Commercial margin rate 21,8% 22,8% SG&A (5 826,5) 4,8 (31,1) (5 852,8) Other income (expense) 309,6 14,5 (324,1) Depreciation & provisions (813,9) 76,6 1,6 16,5 (719,1) Activity contribution 76,6 15,6 (3,8) 1 302,2 Non-recurring items (14,8) 19,0 4,2 EBIT 1 213,8 76,6 0,8 15, ,6 Interest income (expense) (218,2) (27,0) 2,4 (242,8) Income before tax 995,6 76,6 (26,1) 17, ,8 Income tax (320,1) (21,2) 16,9 31,3 (293,1) Income tax rate -32,1% -27,6% Net profit from recurring operations of consolidated companies 44,3 (28,9) 15,4 Minority interests (29,6) (2,2) (2,7) (14,2) (48,7) Net income from recurring operations before goodwill amortization - group share 690,2 53,2 (11,9) 5,9 737,4 Amortization of goodwill (159,4) 159,4 0,0 Net income from recurring operations after goodwill amortization - group share 530,9 53,2 147,5 5,9 737,4 Non recurring income (expense) 0,4 (0,4) Discontinuing activities group share 0,7 0,7 Discontinuing activities minority interests Net result 560,9 55,4 150,1 20,3 786,7 Net result group share 537,5 53,2 147,5 738,2 65

66 Income Statement at June 30 th, Adjustments Adjustments End of GW amortization Leases (IAS 17) Employee benefits (IAS 19) Inventories (IAS 2) Stock-options (IFRS 2) Accrued expenses Other ajustments Net sales Other revenues (0,1) (0,1) Revenues of ordinary activities (0,1) (0,1) Cost of sales (5,3) (16,2) 10,9 Commercial margin (5,3) (16,2) 10,9 Commercial margin rate SG&A 4,8 12,5 (7,6) (0,1) (2,3) 2,4 Other income (expense) 14,5 7,7 6,8 Depreciation & provisions 1,6 (7,0) 0,1 8,6 Activity contribution 15,6 5,5 0,1 (16,3) 15,4 11,0 Non-recurring items (14,8) (14,8) EBIT 0,8 5,5 0,1 (16,3) (14,8) 15,4 11,0 Interest income (expense) (27,0) (9,1) (12,5) 0,2 (5,5) Income before tax (26,1) (3,6) (12,4) (16,3) (14,8) 15,6 5,4 Income tax 16,9 1,0 1,7 6,9 5,3 (4,7) 6,7 Income tax rate Net profit from recurring operations of consolidated companies Minority interests (2,7) 0,5 1,6 (0,4) (4,4) Net income from recurring operations before goodwill amortization - group share (11,9) (2,1) (10,7) (7,9) (9,6) 10,5 7,8 Amortization of goodwill 159,4 159,4 Net income from recurring operations after goodwill amortization - group share 147,5 159,4 (2,1) (10,7) (7,9) (9,6) 10,5 7,8 Non recurring income (expense) Discontinuing activities group share Discontinuing activities minority interests Net result 150,1 159,4 (2,6) (10,7) (9,5) (9,6) 10,9 12,1 Net result group share 147,5 159,4 (2,1) (10,7) (7,9) (9,6) 10,5 7,8 66

67 Income Statement at June 30 th, 2004 Classification changes Classification changes Integration of financial companies Classification of non recurring Others Net sales Other revenues 451,5 247,9 203,6 Revenues of ordinary activities 451,5 247,9 203,6 Cost of sales (116,6) (94,9) (21,7) Commercial margin 334,9 153,0 181,9 Commercial margin rate SG&A (31,1) (72,8) 41,7 Other income (expense) (324,1) (1,0) (323,1) Depreciation & provisions 16,5 (5,6) 22,2 Activity contribution (3,8) 73,5 (77,3) Non-recurring items 19,0 (61,3) 80,3 EBIT 15,4 73,5 (61,3) 3,0 Interest income (expense) 2,4 0,1 5,4 (3,0) Income before tax 17,8 73,6 (55,9) 0,0 Income tax 31,3 (24,3) 55,6 Income tax rate Net profit from recurring operations of consolidated companies (28,9) (28,9) Minority interests (14,2) (20,4) 6,2 Net income from recurring operations before goodwill amortization - group share 5,9 (0,0) 5,9 0,0 Amortization of goodwill Net income from recurring operations after goodwill amortization - group share 5,9 (0,0) 5,9 0,0 Non recurring income (expense) (0,4) (0,4) Discontinuing activities group share 0,7 0,7 Discontinuing activities minority interests Net result 20,3 20,4 (0,7) 0,0 Net result group share (0,0) (0,0) 0,0 0,0 67

68 Balance Sheet at June 30 th, 2004 In m Assets J2004 FR GAAP Adjustments Classification changes J2004 IFRS Amortization / 40 ans J2004 IFRS pro forma Intangible assets (363) Tangible assets (349) Financial assets (270) Investment properties Bank loans portfolio Other receivables (139) Total In m Liabilities J2004 FR GAAP Adjustments Classification changes J2004 IFRS Amortization / 40 ans J2004 IFRS pro forma Shareholders eqyuity - group share (729) Minority interests Shareholders equity (588) Provisions Net debt (81) Operating working capital Bank loans refinancing Other liabilities (537) Total

69 Balance Sheet at June 30 th, Adjustments In m Assets Financial companies (IAS 27) End of GW amortization Investment properties (IAS40) Employee benefits (IAS 19) Leases (IAS 17) Inventories (IAS 2) Preopenings costs and rebates (IAS 8) Deferred taxes (IAS 12) Intangible assets 159 (6) Tangible assets (498) 197 (48) Financial assets (270) Investment properties 498 Bank loans portfolio Other receivables (40) 4 Total (40) 0 (50) In m Liabilities Financial companies (IAS 27) End of GW amortization Investment properties (IAS40) Employee benefits (IAS 19) Leases (IAS 17) Inventories (IAS 2) Preopenings costs and rebates (IAS 8) Deferred taxes (IAS 12) Shareholders eqyuity - group share (0) 159 (325) (35) (371) (38) (81) (38) Minority interests 186 (2) (6) (34) (2) 3 (3) Shareholders equity (327) (41) (405) (40) (78) (41) Provisions Net debt (319) 238 Operating working capital Bank loans refinancing Other liabilities 81 (9) Total (40) 0 (50) Others Others 69

70 In m Balance Sheet at June 30 th, 2004 Classification changes Assets GW on equity accounted companies Prepaid leases Others Classification changes Intangible assets (224) (133) (6) (363) Tangible assets Financial assets Investment properties 0 Bank loans portfolio 0 Other receivables (139) (139) Total In m Liabilities GW on equity accounted companies Prepaid leases Others Classification changes Shareholders eqyuity - group share 0 Minority interests 0 Shareholders equity Provisions Net debt Operating working capital Bank loans refinancing 0 Other liabilities (537) (537) Total Reclassification of 0 rents prepaid more 0 than one year in advance as long-term investments. 70

71 Shareholders equity at June 30 th, 2004 FR GAAP (before appropriation) IAS 2 (Inventories) (405) IAS 19 (Employee benefits) (327) IAS 27 (Integration of financial companies) 186 IAS 12 (Deferred taxes) (82) IAS 8 (accrued expenses) (40) IAS 17 (leases) (41) End of goodwill amortization 159 Others (40) IFRS (before appropriation) Amortization of constructions / 40 years 56 IFRS pro forma

72 In December 2004, the Group presented to the financial community those standards having an impact on the financial statements, the principal options chosen, and gave a preview of the major impacts on the balance sheet and the income statement : Key messages Reminder of announcements 2004 IFRS «EBIT stability as a % of net sales» EBIT / net sales went from 4.45% to 4.40% «The principal impact on the Group s share of net income The Group s share of net income increased would come from ending the amortization of goodwill»! by + 314M of which +319M came from ending amortization of goodwill. «The principal impact to the balance sheet is the full Total assets increased by +2,946M of which integration of the financial service companies» +2,757 M came from financial service companies. «Increase in the net debt by an amount less than Net debt increased by 287M, equal to 2 days of operating working capital» 1,9 days of operating working capital * «IFRS gearing end 2004 should be inferior to 100%» Gearing is 102% * * After cancelling all treasury shares and before appropriation of dividends. Without these elements, net debt is reduced to 41 M and the gearing is 84.7% under IFRS, vs. 81.6% in French GAAP.!!!! 72

73 Conclusion # The figures and options presented here are in line with those announced at the end of December 2004; # The adjustments and reclassifications on the balance sheet and the income statement are few, easily identifiable, and relatively constant from one year to the next ; # The Group s principles of simplicity and clarity have been upheld. 73