COMPANY BACKGROUND AND STRUCTURE
1.1 Background of French Connection
French Connection is known as dealer and wholesaler of own in-house dress and accessories design. The founder, Stephen Marks, has come with French Connection U.K. acronym (FCUK) which is now famous worldwide. Since the late 1990s it has broadened its brand name on items from prepping items made by Boot till watches via Timex. French Connection is holding number two constitution which makes the young situated FCUK and the high-end Nicole Farhi brand, focusing on established, princely, still mold cognizant patronage. FCUK and Nicole Farhi are backed with organization possessed retail systems, amounting almost 100 store in United Kingdom, the United Nation, and Canada. French Connection paid attention particularly on North American and Japanese markets for present growth at the beginning of new century. French Connection anticipated that will open upwards of 300 stores in United States during the early years of the century. The organization is additionally uniting with Japanese accomplice to speculate into Japanese show window and started a lead store at Tokyo in 2001. At UK, the organization uncovered their biggest store, on Capital of the United Kingdom’s Oxford Street, oblation 14,000 lame feet of offering space. Wholesale records for somewhat more than a large portion of the organization's Â£193 million in 2001 income. French Connection organization has been exchanged and listed on London Stock Exchange ever since 1986.
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1.2 What is French Connection?
French Connection is a brand that works in commercial orientated manner and as center offering a design forward reach of value point of competitive monetary value. French Connection plan several of different items for manpower also ladies from clothing to outer-wear, cool wear, suits, denim and also accessories. Our designing groups are situated in London and we orchestrate the items to be fabricated at Europe and Asia’s master post
1.3 What it does?
French Connection Group outlines, prepares and appropriates marked design clothes for men and ladies to more than 50 nations far and wide.
To make decently outlined, stylish clothes that engaged a wide market
To create expanded shareholder esteem through the offer of style items and the enlargement of our brands into other lucrative market through permitting
The organization’s prime objective is to make peculiarity in a gathered commercial center of attention through concentrate on scheme. It’s brand's tone lies in adjusting new, energizing view along with reliable quality also moderateness and in a grammatical construction "quick form" we are glad for our loyalty to the inventive process
1.7 French Connection worldwide operation
We abstract, transform and disseminate marked design attire for both men and ladies at our clientele locations in London, Hong Kong, Paris, New York, Toronto and Swansea. French Connection run trade storage in the UK, Canada, Ireland, Europe and US and likewise work e-business organizations in the regions. The items are to retail merchant working in inordinateness of 30 nations as far and wide as possible and have authorized accomplices working French Connection saves crosswise over Asia, Australia and the Middle East.
1.8 Brands by French Connection
1.8 List of Chairman and Director’s
Directors of French Connection
1.9 Overall business review
For the year end January 31st 2013 the budgetary execution of the Group reflected a continuance of the poor exchanging encountered in UK/Europe trade network from the autumn of 2011 alongside a decrease in capacities through UK/Europe wholesale network. Then again, the North America locale accomplished great development in wholesale volumes and a powerful execution in retail, yet the decrease in volumes and subsequent decrease in terrible net revenues in UK/Europe had a huge impact on the Group result. The Group caused a misfortune before tariff, goodwill debilitation also the expense of store terminations of £ (7.2) million. This contrasted with a benefit before expense of £4.6 million in the past year. In the wake of considering an impedance of goodwill and the expense of transfer of failing to meet expectations stores, the aggregate misfortune before duty was £ (10.5) million (2012: benefit of £5.0 million).
Always on Time
Marked to Standard
Aggregate Group working overheads were marginally lower than a year ago, however included charges emerging from the retail survey and stake impedances identifying with failing to meet expectations stores. The underlying expenses declined by 1.3% notwithstanding extra financing in the e-business channel.
The net pay gained from our licensees was £6.5 million in the year. This spoke to a decrease of £2.0 million contrasted with a year ago, to a great extent as a consequence of the end of the permit to supply item to the Sears retail chains in the US. For the new-year we have concurred various new licenses which will give development.
Net account pay in the former year profited from a one-off £0.8 million credit emerging from trade picks up on the reimbursement of intra-aggregation financing. The net salary in the year to 31 January 2013 of £0.2 million speaks to investment pay on money stores held and outside coin trade picks up.
- MANAGEMENT ACCOUNTING DECISION OF FRENCH CONNECTION
2.1 Management Decision
Decision making is the method of distinguishing and choosing a path of action to solve a certain difficulty. In Management, decision making involves the assortment of a way of action from surrounded by two or more probable alternatives in order to pull in a solution for a given dilemma.
“The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group monitors its cash position on a regular basis through the use of regularly updated cash flow forecasts, and believes that it has sufficient and appropriate net funds and facilities available.” (French Connection Annual Report, 2013- page 45)
“The Group does not use interest rate financial instruments. The Group regularly monitors and reacts accordingly to any exposure to fluctuations in interest rates and the impact on its monetary assets and liabilities.” (French Connection Annual Report, 2013- page 45)
“The Group is exposed to foreign currency risks on sales, purchases and cash holdings that are denominated in a currency other than Sterling. The currency giving rise to this risk is primarily the Hong Kong Dollar. The Group’s policy is to reduce the risk associated with purchases denominated in foreign currencies, by using forward fixed rate currency purchase contracts up to a maximum of one year forward, taking into account any forecast foreign currency cash flows. In respect of other monetary assets and liabilities held in currencies other than the Hong Kong Dollar, the Group ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances. The Group’s policy is not to hedge the translational exposure that arises on consolidation of the statement of income at overseas subsidiaries.” (French Connection Annual Report, 2013- page 45)
Decision 4 (capital management – page 48)
“The Group manages its capital with the objective that all entities within the Group continue as going concerns. The Group is not subject to any externally imposed capital management. The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. To achieve this the Board of Directors monitors the balance sheet, the working capital, the cash flows and the level of dividends paid to shareholders. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.” (French Connection Annual Report, 2013- page 48)
Decision 6 (pension costs – page 49)
“The Group operates a Group defined contribution scheme and contributes towards a number of personal pension plans. The assets of these schemes are held separately from those of the Group in independently administered funds. The pension cost charge for the year was £0.5 million (2012: £0.4 million). At 31 January 2013 and 31 January 2012 there were no outstanding amounts payable to the scheme.” (French Connection Annual Report, 2013- page 49)
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Decision 7 (accounting estimates judgment – page 49)
“Impairment – the Group is required to test, at least annually, whether goodwill has suffered any impairment. The Group also reviews the carrying value of property, plant and equipment where events or changes in circumstances indicate any potential impairment. The Directors have used five year forecast models and an appropriate pre-tax weighted average cost of capital in its goodwill and fixed asset impairment calculations. Growth assumptions are based on Directors’ knowledge and historical experience. The discount rate used is based on the weighted average cost of capital applicable to the individual assets concerned.” (French Connection Annual Report, 2013- page 49)
“Inventory valuation – the Directors have used their knowledge and experience of the fashion industry in determining the level and rates of provisioning required to calculate the appropriate inventory carrying values.” (French Connection Annual Report, 2013- page 49)
“Discontinued operations – the Directors have applied judgment in determining which entities to classify and present as discontinued, taking into account the criteria and guidance set out in IFRS and also with consideration of the size and contribution of the entities. This includes an assessment of how best to present the results for the Group to aid the reader to understand the contribution from those businesses that are being closed and disposed and those that are retained as continuing core businesses.” (French Connection Annual Report, 2013- page 49)
- MODERN MANAGEMENT ACCOUNTING FUNCTION’S
3.1 Modern management accounting
Management accounting is mainly about preparing and providing financial and statistical information to business managers from time to time so that they can make daily and short-term managerial decisions. Many has given different definition of management accounting as that, Atkinson believes that it’s “A value including constant change procedure of arranging, outlining, measuring and working non-financial and money related data system that aides management movement, and makes the social qualities important to accomplish an organization's key, strategic and operating targets.”
3.2 Functions of modern management accounting function
Modern management accounting holds crucial role in an organizations. The importance of it is more essential compared to back then. The function of modern management accounting is as follows;
3.2.1 Making decision
Decision making means the methodology of coordinate the advancement, further goal, execution arrangement and rule to make answerable for accomplishing the last target. Decide the operation of administration as well as the primary work of each level of administration workers. Case in point, decision making incorporate performance assessment, set plan and arranging which require administration bookkeepers corporate with directors to satisfy the entire undertaking.
This can be related to decision 3, French Connection made a crucial decision of implementing fixed currency rate on the contracts purchased in order to reduce risk related to purchases. In decision 8, the group made decision on which entities is to be classified and presented as the discounted operations by looking into the measures and guidance mentioned in IFRS concerning the entities’ size and contribution
3.2.2 Directing attention
Directing attention helps the managers to overcome obligation and gain profit for the company. This solely depends on strategic management which links it with the contenders or competitors. The dependent factors of competition are the price, quality and services the product offers. Thus management accountants are to come up with strategies to reduce cost, shorten the product life cycle, and increase management accounting information’s technology.
In decision 5, it can be seen that the group directed their attention by introducing a contribution scheme that helped to contribute to personal pension plans. The scheme’s resources are held differently from the independently managed funds.
3.2.3 Keeping the score
The primary objective of keeping the score is to resolve quantitative problem which requires fair allocation of sources.
In decision 6, the group analyzed carrying value of property, equipment and plant when there is possible indication of impairment. Directors keep score by calculating goodwill and fixed assets impairment based on five year forecast model and pre-tax weighted average cost of capital.
3.2.4 Controlling the process
This is the most crucial role of management. With controlling process the managers are able to study the measure and alter the work to have a regular operation.
French Connection performed the controlling role in their organization as well. Relating to decision 1, The Group controlled cash liquidity in the company to cover the liabilities when it’s due, without putting the company’s reputation on stake and acquiring loss. As in decision 3, the net exposure is balanced at adequate stage, through buying and selling the foreign currencies at spot rates. Moreover, in decision 7, director’s knowledge and skill in industry of fashion helped them to determine and control the provisioning level and rates that is required to calculate inventory carrying value. The above decision shows the implementation of controlling process.
This is a vital role for any business organization performed after controlling process in order to ensure smooth routine process and target can be achieved efficiently.
Decision 1 taken by French Connection shows that company’s cash is monitored from time to time on a consistent basis using the predicted cash flow statement. In decision 2, the group consequently monitored and responded to relevant instabilities when it comes to interest rates and also including the effects it gives on monitorial asset and liabilities. As in decision 4, it is portrayed by the action of monitoring balance sheet, working capital, cash flow and amount of dividend paid to stakeholders. They tend to ensure equal higher return that can be achieved by higher level of borrowing.
3.2.6 Solving problems
Solving problem can be for financial and non-financial problems. Logical reasoning is the key point to every problem. Problem can be solved at the costing and product processing stage which aims for a successful operation.
Can be related to decision 8 taken by French Connection, The Group have solved problem of helping the readers to be able to read the group’s results clearly by doing an assessment based on the presentation of the results. The readers will be able to understand contribution from the businesses that are being closed and disposed and also which are retaining their core businesses.
Budgeting is the process of planning the company’s expenditure accurately. The basis of the budget can be on either accrual or cash depending on the company’s choice.
In decision 4, the company performed budgeting as it aims to sustain solid capital base to ensure consistent investors, creditors and future growth of business.
It is a crucial function of management accounting and tends to be most effective when considering the preparation of budgets and forecasts.
This can be seen in decision 4, whereby before the company performed budgeting they managed capital with their objective which is all the Group will continue on as going concern. This shows efficiency in planning.
Accountability is emphasized through the effective measurement of performance. This is performed by setting goals and targets for business units and its departments as management accounting assigns roles for managers to achieve company’s targets.
Accountability is an overall function and can be applied to mostly all of the decision as all the decision taken has a main purpose which is to achieve goals and targets which have been set by the company and organization. All directors and managers have roles that have been assigned for and their effective performance guarantees the company reaching their targets.
- CONCLUSION AND RECOMMENDATION
The above has been an examination of French Connection as a company in the United Kingdom’s apparel industry while focusing majorly on the application of the modern management accounting function of the company. This began with a brief look at the company’s after which I preceded on a management decisions made by French Connection.
The nature of the United Kingdom’s Apparel industry as a highly competitive one was made explicit during the course of this study. It was also noted that French Connection does not make use of online shops to reach its customers but uses retail shops which definitely must have affected its revenue over the years since online shopping is one of the major ways that companies within this industry gain competitive advantage. It is therefore recommended that French Connection should online business to be implemented in its business strategy.
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French Connection Group PLC Annual Report Year 2013
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FRENCH CONNECTION GROUP PLC