The General Mills Ltd. and Meiji Holdings Company: Financial Accounting

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Accounting standards

General Mills Ltd. is based in the United States and it uses the Generally Accepted Accounting Principles (GAAP) (General Mills, Inc., 2015). The standards are developed by the Financial Accounting Standards Boards. Meiji Holdings Company also uses GAAP, but the Japanese version of the standard (Meiji Holdings Co., Ltd., 2014).

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Auditing standards

When it comes to the auditing standards, the external auditor of General Mills Ltd., that is KPMG, makes use of the guidelines provided by the Public Company Accounting Oversight Board (PCAOB) to carry out their audit activities. On the other hand, Ernest & Young are the external auditors of Meiji Holdings (General Mills, Inc., 2015). The auditor makes use of the auditing standards that are generally accepted in Japan. Thus, there is no specific standard that is being used by the company (Meiji Holdings Co., Ltd., 2014). The procedures used by both companies basically entails planning, carrying out audit and providing assurance on whether the financial statements provide true & fair and are free of extensive misstatements (General Mills, Inc., 2015; Meiji Holdings Co., Ltd., 2014).

Differences in the financial statements

There are a number of differences that can be spotted in the financial statements of the two companies. In the balance sheet, General Mills does not clearly separate between current and non-current assets and liabilities. However, in the case of Meiji Holdings, there is a clear separation of these items. There is also a difference in how the two companies treat changes in current assets and liabilities in the cash flow statement. In the case of General Mills, the items are shown at the end of the cash flow statement. However, in the case of Meiji Holdings, the items are recorded under cash flow generated from operating activities. Further, it can be observed that Meiji Holdings prepares a statement of changes in net assets. This statement is not available in the case of General Mills (General Mills, Inc., 2015; Meiji Holdings Co., Ltd., 2014). Also, a review of the annual reports shows that General Mills, Inc. prepares the consolidated statements of total equity and redeemable interest. Meiji Holdings does not prepare this statement. The statement of changes in net assets and consolidated statements of total equity and redeemable interest differs in content (Baruch College – The City University of New York (CUNY), 2008). Finally, the financial statements for Meiji Holdings contain more information than those for General Mills. This implies that there is more disclosure in the case of Meiji Holdings than in General Mills (General Mills, Inc., 2015; Meiji Holdings Co., Ltd., 2014).

Differences in the statements

The main difference between form 10k and an annual report is that the annual report provides more information, images, comments from the company, and graphical representation of the performance of a company than form 10-K. The CSR report gives information on the impact of the company on social welfare and its effect on the environment. The two companies prepared the three reports.

Comparability of annual reports

Despite the minor differences in the content and the reports prepared, the financial results of the two companies are comparable because all the basic financial statements for the two companies are presented. In addition, all the basic necessary information in those statements is provided. The use of different versions of GAAP does not hinder the ability to compare the performance of the companies.

Financial Information

The table presented below shows a summary of financial information drawn from the financial statements of the two companies. The summary will cover a period of three years, that is, between 2012 and 2014.

General Mills, Inc

May-2012
USD million
May-2013
USD million
May-2014
USD million
Balance sheet
Current assets 3,691 4,299 4,394
Non current assets 17,405 18,359 18,752
Total assets 21,097 22,658 23,146
Current liabilities 3,843 5,294 5,424
Non current liabilities 10,832 10,692 11,187
Total liabilities 14,675 15,986 16,611
Stockholders’ equity 10,832 10,692 11,187
Income statement
Revenue 16,658 17,774 17,910
Gross profit 6,045 6,424 6,370
Operating profit 2,562 2,852 2,957
Net profit 1,567 1,855 1,824
Cash flow statement
Net cash provided by operating activities 2,402 2,926 2,541
Net cash used for investing activities (1,871) (1,515) (562)
Net cash flow used for financing activities (661) (1,140) (1, 824)
Net change in cash (148) 270 126
Free cash flow 1,726 2,312 1,878

Meiji Holdings Co. Ltd

March-2012
JPY million
March -2013
JPY million
March -2014
JPY million
Balance sheet
Current assets 322,531 341,211 329,071
Non current assets 427,454 444,303 450,390
Total assets 749,985 785,514 779,461
Current liabilities 352,500 309,764 261,466
Non current liabilities 105,895 162,368 197,548
Total liabilities 458,395 472,132 459,014
Stockholders’ equity 298,491 320,609 328,121
Income statement
Revenue 1,109,275 1,126,520 1,148,076
Gross profit 370,775 382,685 394,063
Operating profit 20,191 25,860 36,496
Net profit 7,051 16,847 18,992
Cash flow statement
Net cash provided by operating activities 30,597 50,622 63,847
Net cash used for investing activities (44,314) (39,504) (47,293)
Net cash flow used for financing activities 4,861 (9,411) (18,194)
Net change in cash (8,917) 2,041 (850)
Free cash flow (7,735) 12,954 16,810

Profitability

Based on the data provided in the previous section, it can be observed that the financial statements of General Mills, Inc. are prepared using USD while those for Meiji Holdings Co. Ltd. are prepared using Japanese Yen. At present, the exchange rate between USD and Japanese Yen is more than 118. When the financial results are compared using one currency, it can be observed that the General Mills, Inc. is more profitable than Meiji Holdings Co. Ltd. because it has higher values of net income. Further, profitability can be compared by computing ratios for the two companies. The ratios are presented in the table below.

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General Mills, Inc. May-2012 May-2013 May-2014
Gross profit margin 36.29% 36.14% 35.57%
Operating profit margin 15.38% 16.05% 16.51%
Net profit margin 9.41% 10.44% 10.18%
Return on assets 7.43% 8.19% 7.88%
Return on equity 14.47% 17.35% 16.30%
Meiji Holdings Co. Ltd. March-2012 March -2013 March -2014
Gross profit margin 33.42% 33.97% 34.32%
Operating profit margin 1.82% 2.30% 3.18%
Net profit margin 0.64% 1.50% 1.65%
Return on assets 0.94% 2.14% 2.44%
Return on equity 2.36% 5.25% 5.79%

Even though the two companies have relatively equal amounts of gross profit margin, the operating profit margin, net profit margin, return on asset, and return on equity for General Mills, Inc. are higher than those of Meiji Holdings Co. Ltd. Thus, it can be concluded that General Mills, Inc. is more profitable than Meiji Holdings Co. Ltd.

Growth of revenue and income

The table presented below shows a summary of growth of revenue and income for the two companies.

General Mills, Inc

May-12 May-13 May-14
Growth in revenue 6.70% 0.77%
Growth in net income 18.38% -1.67%

Meiji Holdings Co. Ltd

Mar-12 Mar-13 Mar-14
Growth in revenue 1.55% 1.91%
Growth in net income 138.93% 12.73%

The growth rate of revenue and income differed across the two companies. On average, General Mills, Inc. had a higher growth rate in revenue than Meiji Holdings Co. Ltd. However, Meiji Holdings Co. Ltd. had a higher growth rate in net income than General Mills Inc. In the case of Meiji Holdings Co. Ltd. the net income grew at a higher rate than revenue. This implies that growth in net income is attributed to non-operating activities. A similar trend was observed in the case of General Mills, Inc. Thus, it can be noted that the revenue and net income of the two companies do not grow at the same rate.

Discussion on profitability

As mentioned in the previous section, General Mills is more profitable than Meiji Holdings. The higher profitability of General Mills, Inc. can be attributed to higher levels of sales, lower cost of sales and lower operating expenses as compared to Meiji Holdings Co. Ltd. Even though the two companies operates in a similar industry, it can be observed that the operations of General Mills, Inc. covers a wider geographical region than those of Meiji Holdings. This explains why it has a higher revenue than Meiji Holdings. Further, it can be noted that the non-operating activities of Meiji Holdings reduces the net income significantly (Walther, 2012).

References

Baruch College – The City University of New York (CUNY). (2008). Guide to financial statements. Web.

General Mills, Inc. (2015). Annual and other reports. Web.

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Meiji Holdings Co., Ltd. (2015). 2014 annual report. Web.

Walther, L. (2012). Principles of accounting. Web.

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BusinessEssay. (2022, March 30). The General Mills Ltd. and Meiji Holdings Company: Financial Accounting. Retrieved from https://business-essay.com/the-general-mills-ltd-and-meiji-holdings-company-financial-accounting/

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BusinessEssay. (2022, March 30). The General Mills Ltd. and Meiji Holdings Company: Financial Accounting. https://business-essay.com/the-general-mills-ltd-and-meiji-holdings-company-financial-accounting/

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"The General Mills Ltd. and Meiji Holdings Company: Financial Accounting." BusinessEssay, 30 Mar. 2022, business-essay.com/the-general-mills-ltd-and-meiji-holdings-company-financial-accounting/.

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BusinessEssay. (2022) 'The General Mills Ltd. and Meiji Holdings Company: Financial Accounting'. 30 March.

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BusinessEssay. 2022. "The General Mills Ltd. and Meiji Holdings Company: Financial Accounting." March 30, 2022. https://business-essay.com/the-general-mills-ltd-and-meiji-holdings-company-financial-accounting/.

1. BusinessEssay. "The General Mills Ltd. and Meiji Holdings Company: Financial Accounting." March 30, 2022. https://business-essay.com/the-general-mills-ltd-and-meiji-holdings-company-financial-accounting/.


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BusinessEssay. "The General Mills Ltd. and Meiji Holdings Company: Financial Accounting." March 30, 2022. https://business-essay.com/the-general-mills-ltd-and-meiji-holdings-company-financial-accounting/.