LVMH Group is a French company that specializes in luxury brands in 5 industry segments.
The Wine and Spirits segment includes Hennessy, Chateau d’Yquem, Veuve Clicquot, Moét &
Chandon, Dom Pérignon, and Mercier. The Fashion and Leather Goods segment includes such companies as Louis Vuitton, Fendi, Celine, Givenchy, and Thomas Pink. The Perfumes and Cosmetics segment includes Parfums Christian Dior, Guerlain, Parfums Givenchy, and Kenso. TAG Heuer, Zenith, and Fred are part of its Watches and Jewelry segment. Its final segment, Selective Retailing, contains DFS, Sephora, and Le Bon Marché.
LVMH Group uses IFRS. The purpose of this case is to provide you with an opportunity to use your understanding of U.S. GAAP and IFRS along with logic and intuition to familiarize yourself with some oft he differences between these two sets of standards. The income statement, balance sheet, and statement of changes in equity of LVMH Group follow on the next two pages.

Required:
1. Some of LVMH Group’s terminology and account titles differ from U.S. usage. Under U.S.
GAAP, what would the following LVMH Group balance sheet accounts be called? You may also wish to refer to the statement of changes in equity.

a. Share capital

b. Share premium account

c. Revaluation reserves

d. Group share of net profits

e. Provisions (long term and short term)
2. Explain how the format of the balance sheet differs from that of U.S. balance sheets.
3. Both the income statement and balance sheet contain amounts related to “Investments in associates.’ Explain the nature of these investments and which accounting method is being used to account for them.
4. Refer to the statement of changes in equity. For 2006, the statement shows a decrease to “Cumulative translation adjustment” of € (411) million and an increase to “Revaluation reserves” of €259 million. What are the changes in and cumulative amounts of these accounts called under U.S. GAAP?
5. Based on your review of the balance sheet and the statement of changes in equity, what items might be expected to affect the “Revaluation reserves”? Consider the nature of LVMH Group’s main subsidiaries.
6. Explain whether all of the items identified as affecting LVMH Group's “Revaluation reserves”
in question 5 would be allowed under U.S. GAAP.

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Consolidated Balance Sheet (in millions 2006 2005 2004 Assets Brands and other intangible assets-net 8,227 8,530 7,8381 Goodwill-net 4,537 4.479 4,048 Property, plant and equipment-net 5,173 4,983 4,541 Investments in associates 126 128 115 Non-current available for sale financial assets 504 451 718 Other non-current assets 6581 660 628 Deferred tax 395 306 217 Non-current assets 19,620 19,537 18,105 Inventories and work in progress 4,383 4,134 3,598 Trade accounts receivable 1,461 1,370 1,364 Income taxes Other current assets Cash and cash equivalents Current assets Total assets Liabilities and Equity Share capital 512 317 113 1,587 1.225 1,302 1.2221 1.470 1.035 9,165 8,516 7,412 28,785 28,053 25,517 147 147 147 Share premium account 1,736 1,736 1,736 LVMH treasury shares (1,019) (972) (1,006) Revaluation reserves 917 658 521 Other reserves 7,062 6,158 5,390 Cumulative translation adjustment (119) 292 (200) Group share of net profit 1,879 1,440 1.194 Equity Group share 10,603 9,459 7,782 Minority interests 991 1.025 893 Total equity 11,594 10,484 8,675) Long term borrowings 3,235 3.747 4,188 Provisions 9831 949 8831 Deferred tax 2,862 2.925 2,458 Other non-current liabilities 3,755 3.357 3,237 Non-current liabilities 10,835 10,978 10,766 Short term borrowings 2,100 2.642 2,529 Trade accounts payable 1.899 1,732 1,581 Income taxes 692 373 201 Provisions 255 305 259 Other current liabilities 1,410 1.539 1,506 Current liabilities 6,356 6,591 6,076 Total liabilities and equity 28,785 28,053 25.517