1. Financial Statement Analysis Cases

Carrefour Group

Carrefour Group (FRA), the top retailer in Europe (second worldwide), recently had 108.629 billion in sales. It has more than 495,000 employees worldwide, with operations in 31 countries. It is the seventh largest employer worldwide, with 15,430 stores. Carrefour provided the following information in a recent annual report related to its property and equipment.

Carrefour Group

(in millions)

Notes to the Financial Statements (in part)

(3) Tangible fixed assets

In accordance with IAS 16 Tangible Fixed Assets, land, buildings, equipment, fixtures and fittings are valued at their cost price at acquisition, or at production cost less depreciation and loss in value. The cost of borrowing is not included in the acquisition price of fixed assets. Tangible fixed assets in progress are posted at cost less any identified loss in value. Depreciation of these assets begins when the assets are ready for use. Tangible fixed assets are depreciated on a straight-line basis according to the following average useful lives:

• Construction:
  • Buildings 40 years
  • Grounds 10 years
  • Car parks 6-and-two-thirds years
• Equipment, fixtures, fittings and installations 6-and-two-thirds years to 8 years
• Other fixed assets 4 to 10 years

Note 8: Depreciation, amortization and provisions

	Current Year	Prior Year	Change
Depreciation of tangible fixed assets	1,623	1,484	9.4%

Note 15: Tangible fixed assets

	Current Year	Prior Year
Land	2,913	2,934
Buildings	9,838	9,628
Equipment, fixtures, fittings and installations	14,006	13,219
Other fixed assets	1,159	1,148
Fixed assets in progress	769	790
Leased land, buildings, fixtures	1,717	1,720
Gross tangible fixed assets	30,402	29,439
Accumulated Depreciation	(15,333)	(14,486)
Impairment	(260)	(202)
Net tangible fixed assets	14,809	14,751

Cash Provided by Operations

(euros in millions)	Current Year	Prior Year
Cash provided by operations	4,887	3,912
Capital expenditures	2,918	3,069
Cash provided by operations as a percent of capital expenditures	167%	127%

Instructions

a. What method of depreciation does Carrefour use?

b. Does depreciation and amortization expense cause cash flow from operations to increase? Explain.

c. What do the schedule of cash flow measures indicate?