Burberry company analysis and management accounting Essay

Burberry 2012

  1. Background

Burberry was found in 1856 by Thomas Burberry. It is 156 old ages old company which produces trench coats which was worn by British soldiers during the World War which so later it became a company s icon. Its digital luxury placement and advanced medium of the trench coat, hallmarks and Prorsum knight heritage icon makes the trade name purer and more captivating and globally across genders and coevals. It has core values of Protect, Explore and Inspire Burberry doesn’t merely run on retailing but besides operated with sweeping concern and besides licencing web. Burberry operates on four chief parts which is Europe, America, Asia and Rest of the universe. On the gross 2012 / 2013 Asia Pacific had 39 % of retails, Europe 30 % , Americas 25 % and Rest of World 6 % , Burberry merchandise was apparels, bags, cosmetics and aromas which falls under manner. Burberry has 500 shops in over 50 states. Its retail history was 71 % gross and wholesale of 24 % .

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Thomas s vision of the company was making “ advanced functional outerwear” which was first vision bit by bit over the old ages around 2006, the vision of the Burberry was to be First company who is FULLY DIGITAL and to a physique a SOCIAL endeavor.


Thomas s ends was to make coats that would maintain an single both warm and dry regardless of the conditions nevertheless latest ends is to wholly combination among the company, its employees and clients and its trade name.


Its mission statement was to concentrate on enlargement.


Gross has increase to 8 % which is ?1999M and so Adjusted net income before revenue enhancement is ?4428M with addition of 14 % , Adjusted net incomes per portion is 70p and the retail gross is about 1417 M which lead Capital outgo to be ?176M and the Year-end net income is about ?297M.


There is a board consist of 4 chief commissions which are Audit Committee, Nomination Committee and Remuneration and Chief Executive Officer which so has Senior direction squad and Risk Committee which so branches to Supply concatenation hazard Committee, Global Health and Safety Committee and Global Ethics Committee

2.0 Managerial determination

2.1 Tactical efficiency ( pg. 9 )

“The Group besides acted to heighten near-term efficiency. Discretionary disbursals were tightly controlled and stock list was closely managed at all phases of the procedure in maintaining with softer sales.”

2.2 Termination of license relationship/ Fragrance and beauty intangible plus ( pg114 )

“The Group made a payment to Interparfums SA of ˆ181.2m on 21 December 2012 to end the bing aroma and beauty license relationship ( ?142.2m at the topographic point rate at the clip of exercising ) . This has resulted in the acknowledgment of an intangible plus of ?70.9m and an disbursal of ?71.3m in the current period. In order to place the transporting value of the intangible plus acquired, direction was required to gauge the incremental income that will be earned by the Group from 1 April 2013 to 31 December 2017, which represents the staying period of the original license, prior to its expiration. A value-in-use computation has been performed, based on the cardinal prognosis premises including: gross revenues of merchandises until 2017, by merchandise class ; operating borders achieved on this activity ; revenue enhancement charged on the incremental net incomes ; the working capital required to back up this activity ; and awaited revenue enhancement alleviation on the payment made to get the intangible plus. Such forecast premises are inherently unsure and the existent hard currency flows between 1 April 2013 and 31 December 2017 may differ materially from these premises. Mention to notes 6 and 11 for farther inside informations of the accounting for this transaction.”

2.3 Cash flow hedges ( pg. 137 )

“The Group Income Statement is affected by minutess denominated in foreign currency. To cut down exposure to currency fluctuations, the Group has a policy of fudging foreign currency denominated minutess by come ining into forward foreign exchange contracts. These minutess are recorded as hard currency flow hedges. The Group’s foreign currency denominated minutess originate chiefly from royalty income, gross revenues and purchases. The Group manages these exposures through the usage of forward foreign exchange contracts.”

2.4 Share monetary value hazard ( pg143 )

“The Group is exposed to employer’s national insurance liability due to the execution of assorted employee portion based incentive strategies. To cut down exposure to fluctuations in the employer’s national insurance liability due to motions in the Group’s portion monetary value, the Group has a policy of come ining into equity barters at the clip of allowing portion options and awards. The Group does non seek hedge accounting intervention for equity barters. The Group monitors its exposure to fluctuations in the employer’s national insurance liability on an on-going footing. An increase/decrease in the portion monetary value of 50.0p would hold resulted in an increase/decrease in net income after revenue enhancement of ?1.2m ( 2012: ?0.8m ) .”

2.5 Fiscal coverage ( pg. 88 )

“Management is responsible for set uping and keeping equal internal controls over fiscal coverage. These controls are designed to supply sensible confidence sing the dependability of fiscal coverage and the readying of fiscal statements for external coverage purposes” .

2.6 Chief hazards ( pg60 )

“The Board and the executive direction squad utilize a combination of different and complementary accomplishments to measure the hazards confronting the concern. In finding its hazard appetite the Board considers a assortment of information when reexamining the Group operations and in O.K.ing cardinal affairs reserved for its decision.”

2.7 Operating net income analysis ( pg. 57 )

“The operating disbursals to gross ratio increased by 110 footing points, driven in portion by the displacement to retail. Of the ?94m addition, over half related to net new infinite. Spending by the largest corporate maps ( selling, IT, merchandise and design ) was tightly controlled, falling marginally as a per centum of gross revenues, funding farther investing in countries including digital.”

2.8 Financial hazard direction ( pg142 )

“Other than derived functions, the Group’s chief fiscal instruments consist hard currency and short-run sedimentations, external adoptions, trade and other receivables, and trade and other payables originating straight from operations. The Group’s activities expose it to a assortment of fiscal hazards: market hazards ( including foreign exchange hazard, portion monetary value hazard and involvement rate hazard ) , recognition hazard, liquidness hazard and capital hazard. Risk direction is carried out by Group Treasury to cut down fiscal hazard and to guarantee sufficient liquidness is available to run into foreseeable demands and to put in hard currency assets safely and productively. This is done in close co-operation with the Group’s runing units. Group Treasury does non run as a net income Centre and transacts merely in relation to the underlying concern demands. The policies of the Group exchequer section are reviewed and approved by the Board of Directors. The Group uses derivative instruments to fudge certain hazard exposures. Management is responsible for set uping and maintaining.”

Question 3

Management Accounting is a procedure of designation, readying, measure and command of information used by direction to be after and command within an entity to utilize accurate information and answerability.Management accounting besides allow the readying of studies for non – direction groups such as stockholders, revenue enhancement governments. However for managerial accounting, it is about economic and fiscal information for directors and other internal users ( Weygandth, Kimmel, and Kieso 2012 ) . However these, direction accounting maps are showing, analyzing and construing informations.


3. 1


Controlling is a series of stairss taken in order to maintain company s activities on path. It is a period where the directors steadfastly decides that the planned ends are met. If the aim of the planned end is non been met so the directors have the authorization to revise the steps and reform the aims in order to guarantee the operation on a regular basis to acquire back on path. Associating back to 2. 1, Burberry group have decided to command the disbursals every bit good as the stock list were managed good in order to heighten the efficiency of the company.

3.2 Solving job

Solving job can be in footings of fiscal or non-financial jobs. However in order for any signifier of job there must be logical logical thinking. ( Weetman, 2003 ) The information are used to work out the job throughout the cost which assures the operation would be successful. Associating back to 2. 3 where the licences of the beauty and aroma with Interparfum has been terminated for an exchange payment of ? 181.2 m which was a topographic point rate at that period of ?142. 2 m because incurred from the rise of the assets which was ?70.3 m and disbursals of ?71.3 m which was working from April 1. 2013. However the lone manner of work outing a job is by selling the aromas under retail and jobbers than licences as the Burberry can do net income from it. In order for the intangible assets to be still in the market, there was a brief tally through of the value in usage, based on prognosis and besides working capital every bit good as operating border.

3. 3

Decision Making

Decision doing defines as a choice among utility class of action. It is a cardinal to direction of a company and determinations are usually about people, merchandises or long and short term investing. It is when a determination is made when there is given more than one options given for the targeted aims. It plays an of import function of the planning and commanding procedure. The purpose of determination devising is that to take to outdo pick for the action. Harmonizing to 2. 3, the Burberry s income statement has been affected by foreign currency, hence a determination was made that the group would convey a policy of fudging foreign currency by affecting into forward foreign contracts in order to cut down the exposure of currency fluctuation. So the group decide to pull off the exposure by the utilizing foreign exchange contracts.


Decision Making

Making a right determination is a really indispensable for a concern. However to do determination, the troughs needs information and this information are usually based from public presentation study and budgets. Management accounting has techniques to assist in doing short or long term determination. In the instance of 2.4, the job was that Burberry was exposed to employers national insurance liability due to the portion base schemes hence the right determination in order to cut down the exposure of the insurance liability due to the project of the portion monetary values, the lone pick is by supplying a policy of equity barters which has portion options and award. But the group still monitors the exposure of to the fluctuation sing about the insurance liability. If there is an addition or lessening of the portion monetary value, illustration 50.0p which means it would be addition or lessening in net income after which could be ? 1.2m.

3. 5


It involves controls as a tool to do certain that operation operates harmonizing to the programs made and the aims are being achieved. Once a determination is made in a direction so it is a place to do control. It is a position of result to see the program and to maintain path of the aims so that doesn’t get derived from the program. Harmonizing to 2. 5, is that fiscal coverage is being controlled by direction. This control is design for consistence of fiscal coverage and the readying of fiscal statements for external coverage intents.


Hazard Management

A hazard direction map is to do certain the hazard were managed decently. It was the duty of the individual in charge to look out for the specific hazard. Directors required to cut down the hazard so that to originate a safe direction. Harmonizing 2.7, direction utilizations different and alone combination in asses the hazard that has been found. The Burberry board s uses effectual information to find the hazard enthusiasm in order to revise the operation and do a proper determination.



It is a map where the steps and control public presentation by utilizing properly tools such as control rations or budgetary control to achieve aims and ends which would be on path. As for 2.7, Burberry has controlled the maps such as IT, selling section this due to increase in operating disbursals and over 94 m for the net new infinite. The group is puting in different country which includes the digital.


Hazard Management

Risk direction means that placing, helping and economic control of the possible hazard for the assets and capacity of the earning in a concern. The direction has to compose a study of hazard to the boards and besides plan a scheme for the hazard. Harmonizing to 2. 8, Burberry has fiscal as such hard currency, external adoption and many more.However this managed by Group’s Treasury who investigated that the group has been non merely known for one hazard but many hazards such as: portion monetary value, recognition and liquidness hazards. So therefore the direction managed to cut down the fiscal hazards and to vouch a satisfactory liquidness available so that it is proper to put in hard currency assets firmly and productively. This is usually done in secret and the Group Treasury is to O.K. and travel through by the Burberry s Directors.


In a nutshell direction accounting is first-hand accounting maps that where based on the determination that was made and the it is about associating the maps to the determination in order to do right determination and command the public presentation steps. These maps were used in order to assist Burberry s directors to do right determinations, to put up a concern strategic in order to gain net income by commanding the concern unwanted disbursals and besides to vouch a better productive public presentation. However as Burberry is one of the taking concern in British Fashion industries therefore it relies back on the maps in order to increase its efficiency and productiveness of public presentation.



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