History Of Coca Cola And Pepsico Accounting Essay

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Here, the broad problem issue directly is related to the IFRS 8 requirements about the segment's reporting of entities and this research covers the important segment of the market FMCG known as fast moving consumer's goods which will be analyzed using IFRS8. The FMCG has prime importance in today life as the daily life necessities belongs to this sector. So the performance management analysis of two companies that cover FMCG criteria will be worthwhile not only with the customer's point of view but also with the investment point of view…discussing more about the FMCG, firstly it is important to know about the requirements of IFRS8 about operating segments of the enterprise. So here is a brief introduction regarding requirements on IFRS8:

IFRS 8 requires:

Disclosing the information for the activities of the business in terms of financial aspects of its segments

Disclosing of information about the environment, product, services etc. in which the entity prospers, etc.

So, the work which is going to be carried on is to compare the differences in performance management of the FMCG (fast moving consumer goods) segments. The evaluation of its products, services and goals for the set objectives and its relevant efficiency regarding those set goals.

IFRS 8 also:

Requires information about segments of an entity in relation to the income you get from your products and services, the countries in which it operates, as well as customers, regardless of the problem that this information can be used by management for decision-making.

• Require an entity to provide an assessment of the liabilities and particular items of income and expenses when such measures are planned regularly by the operating decision maker

• Requires the company to provide descriptive information about the way the operating segments were determined

• Relevant products and services provided by the segments of the company

• Possible differences between the measurements used in reporting segment information and those used in the financial statements

• Changes in the measurement of segment performance from period to period

So this is the problem area in which the research is to be carried on.

A bird's eye view of FMCG

Fast Moving Consumer Goods (FMCG) or (CPG) are products that are sold quickly at relatively low cost. Examples include non-durable goods such as soft drinks, toiletries and food. Even if the absolute profit made ​​on FMCG products is relatively small, but they are usually sold in large quantities, so, the cumulative profit of such products can be substantial. Procter & Gamble and Unilever are the two largest management companies of consumer goods worldwide, having the quality products also in Pakistan.


Basically, "The objective of IFRS 8 is to disclose relevant information about the company's segments that enables users of its financial statements to evaluate the nature and financial effects of the business segment wise and the economic environment in which it operates"

So, the main objective of this research is to define the company's performance management by using the IFRS 8 requirement criteria for operating segment in context of performance by the provided data of various segments of the two different companies according to their respective segments with relevancy.

It will provide not only the information about a company segment operating capabilities and a deep performance analysis but also the differential analysis of two companies and comparative base for their performance and efficiency providing the information that which is doing well regarding achieving its objectives and goals. It also provides:

• Better understanding of the functioning of the enterprise;

• Better assessment of the risks and returns of the company, and

• More informed decisions about the enterprise as a whole


For those who do not know.... Dabur in India started to produce what is now known as consumer goods, fast moving (FMCG) industry. It 'been about 115 years ago, long before Hindustan Lever (HLL) materialized on the scene, Dabur that could reach the depth products of HLL i.e. Hindustan Lever (HLL), however, it is a completely different story. Not surprisingly, our curiosity refuses to go beyond HLL.

Although multinational companies (MNC ") were allowed to operate in India, HLL had only the production base at the time of India's independence. Secondly for the global MNC, the domestic market was too small to worry about. Colgate and Nestle were there, but they were mainly in the starting business. In 1960s, many MNC were building their productive base of the country, and have a clear concept about fast moving consumer goods on the market.

In 1978, it was then that the new government assigned various categories of products for the small sector. The MNC's then were asked to choose between cutting its stake to 40 percent, or to forget India. IBM and Coca-Cola chose the latter and leave the India. Unilever just decided to be there and to keep on with HLL after all. Unilever had to manage to keep 51 percent of foreign participation in the fulfillment of the government requirements that were about minimum10 percent of the export turnover and 60 per cent of the import turnover of the priority areas.

Things began to change, however, after the post-reforms in the nineties. The doors opened and new things rushed in. MNC's with saturating markets of small scale, were eagerly looking for to rush in before other scale markets such as small scale and medium scale enterprises, categories in the categories were created in products such as hair oil and skin care, and many new product categories were created.

Today, the FMCG industry is widely spread around the globe providing the products for the optimum satisfaction of their consumers with their best effort. The FMCG industry is leading now in the market with a plenty of goods and products produced for the customers and these industries have also provided a good opportunity for the employment factor of the society. So, regarding FMCG, it is important to have a check on different leading FMCG companies regarding their performance of the segments generally, and especially regarding the investment point of view.


Whenever the comparison is made, it gives some values and decision bases for the researcher. Here, the comparison among the different relevant segments will brighten the concept of the reader of the research about the operational performance of the company with the relevant segments with more relevancy and comprehensively. The operating segments are to disclose the information according to IFRS 8 and hence the information is provided for better choice of company's products and for investors, to invest in. The performance analysis and comparison enable the reader to distinguish the companies according to their efficiencies and working regarding their separate segments. Moreover it helps:

For an enterprise "through the eyes of management", thereby increasing the user's capability to predict and understand the actions or reactions of management that can significantly affect the prospects of the entity's future cash flows

Elimination of the confusion caused by different interpretations of what constitutes up to an industry segment

The Consistency with components of an entity elsewhere, namely the entity's annual report, MD & A and press releases on its website.

The information is provided by this is easier to understand

Comparison of the segments is the most realistic way to define the company that is doing a better job in terms of performance and

Comparatively, more information on the segments of the companies, and the other, etc.





An assessment of an employee, process, equipment or other factor to gauge progress toward predetermined goals.


For the under discussion research, the assessment of the organization operations with respect to its separate segments is going to be carried on in order to know the performance management of the companies separately and comparatively.


How do you assess the performance management in different countries is what to be said in the context of review. In the sense, the application of IFRS 8 in different countries can vary depending on the scenario of the rules and regulations, terms and conditions of that particular country. As in Spanish companies, the results show that the operating segments are primarily based on business lines, geographic areas but are associated with greater dissimilarities. Under IFRS 8, a small portion of the sample companies are single segment and a significant number do not meet the mandatory rules as a whole and not separately disclose most of the requirements and information in accordance with IFRS 8. The size and profitability are, respectively, the positive and negative factors associated with higher disclosure practices.

Almost 79% of Spanish listed companies' operating segments are based on business lines. Because of this fact, the information entities are mainly based on geographical areas. However, when the segments are based on the geographic segmentation then a set of segments is described individually, usually because the disclosure from country to country varies. A small proportion of companies (7, 6%) showed no segment information and some said they were a single business segment.

The Financial Reporting Group Review (FRRP) has expressed concern about the application of IFRS 8 Operating Segments and asked a number of UK companies to provide more information. In operating decision maker Decision of the United Kingdom has been identified as the executive directors and the executive director's review about the Group's internal reporting in order to assess performance and allocate resources is given. Operating segments are UK and international presented in a manner consistent with the internal communication managers.

The United Kingdom is made up of the retail sector in the United Kingdom and the British operations of the franchise. The International segment consists of Marks & Spencer owned businesses in the Republic of Ireland, Europe and Asia, with international franchise operations. The executive directors assess the performance of operating segments on the basis of an assessment of profit from operations. This criterion excludes the impact of special elements of the operating segments, as well as the gains or losses on asset sales. Central costs are all classified as UK costs and presented in operating income in the United Kingdom. Administrators also monitor revenue within the segments. To increase transparency, the Group has decided to include a description of additional voluntary analyzing revenue within the reportable segments.


Before the start of the information age in the 20th century, companies sometimes bothered to collect hard data from non-automated sources. Since it did not have the computing resources to properly analyze the data, often make business decisions based primarily on intuition.

As businesses started automating more and more systems, more and more data were available. However, the collection remains often difficult because of the lack of infrastructure facilities for the transfer of data or because of the incompatibility between systems. Reports on data collected sometimes took months to generate. These reports enable their long-term strategic decisions. However, the short-term tactical decisions often continued to rely on intuition.

In 1989 Howard Dresdner, a research analyst at Gartner, popularized "business intelligence" (BI) as a general term to describe a set of concepts and methods to improve business decision making by using fact-based systems support, performance management is based on a foundation of BI, but collaborate with the planning and control cycle of the company - with the entrepreneurial skills of planning, consolidation and modeling.

Increasing standards, automation and technologies have resulted in large amounts of data that are available. Data storage technologies are allowed for the construction of tanks for storing of data. Improved tools and enterprise application integration have increased the capacity of timely collection of data. Advance reporting technologies have allowed faster generation of new reports analyzing the data. As of 2010, business intelligence has become the art of shifting through large amounts of data, extracting useful information and converts that information into actionable knowledge.


Basically there are two different concepts regarding the performance management of the company. Actually, the performance of the company depends upon the employee's hard work, the right objectives and goals and the right direction to move on. So, regarding the research purpose the following two theories seem to be more relevant for a company performance development. These are mentioned here:

the goal-setting theory and

Expectancy theory

1. Goal setting theory was proposed by Edwin Locke in 1968. This theory suggests that the individual targets set by an employee plays an important role in motivating him to get better performance and the performance as a whole is the companies' performance. This is because, the employees continue to follow their goals and if these goals are not achieved; they improve performance or modify the objectives and goals and make them more realistic. So, in each case, the goal is improved and this is what the management wants.

2. Expectancy theory had been proposed by Victor Vroom in 1964. This theory is based on the hypothesis that individuals adjust their behavior in the organization on the basis of anticipated satisfaction of valued goals set by them. The individuals modify their behavior in such a way which is most likely to lead them to attain these goals. This theory underlies the concept of performance management as "it is believed that performance is influenced by the expectations concerning future events". There are also other theories in context of a proper management of a company that help to increase performance.


Different methodologies are used for the performance management of a company. The performance appraisal of a company describes the strengths of its management regarding its operations. Some methods that are used by researchers are

Rank based

In this method, a company performance is compared with others who do the same job and have been ranked as the like companies. This method is very useful to select the best performance and it also compares the best comparable firms. Its main disadvantage is that it can trigger the rivalry between companies, which could compromise the entire marketplace.

Objective based

This method is known as Management by Objectives (MBO). Specific goals and objectives set by the employer after arguing with employees. Company's performance shall be that either the set goals by the directors and top management have been obtained or not, if yes then to which extent, they meet the set objective, if not, then to which extent they are diverted. When there is a specific set of objectives, then to work on and to check the results is easy. This method often helps to achieve higher levels of company performance.

Performance ratios

Performance ratios are used to describe the operational performance of an enterprise. These relationships are derived from items in a financial statement. For the financial comparison one variable is divided by another. These ratios illustrate the relationship between two financial variables. A financial report is an important tool for companies of small businesses and managers to measure progress towards the achievement of specific objectives. Some of the important performance ratios that a company would like to discuss:

Liquidity ratios

Liquidity ratio describes the current company's ability to meet short-term obligations. These indicate the measure of the availability of cash in an organization.

Current ratio = Current assets / Current liabilities

Current assets include assets that can be converted into cash within a year. This ratio measures the company short-term solvency.

Current Ratio = Current Liabilities- active stock / current assets

Also known as the Acid Test ratio

Cash Ratio = Cash + marketable securities / current liabilities

This ratio shows the need of some quick cash to meet short-term obligations.

Asset Turnover Ratios

The following ratios tell how efficiently assets of a firm are used to generate sales.

• Receivables Turnover=Annual Credit Sales/Accounts Receivables

• Debtor Collection Period=365/Debtors Turnover

• Inventory Turnover =Cost of Goods Sold/Average Inventory

• Inventory Turnover Period= 365/Inventory Turnover

Financial Leverage Ratios

These ratios are used to describe the long-term financial position of a company.

Debt Ratio= Total Debt /Capital Employed

This ratio tells the long-term solvency of a company and gives an idea of interest bearing debt.

Debt-Equity Ratio=Total Debt/Net Worth

This calculates the sharing of lenders for each rupee of the owner's contribution.

Profitability Ratios

Gross Profit Margin= G.P/Sales

Net Profit Margin=PAT/Sales

Return on Equity=PAT/Net worth

Performance check ratios are meaningful when used to examine the trend, industry standard and rival comparison group. They help to analyze business operations and the understanding of the securities market. Current operations can be compared with previous results by applying trend analysis. Industrial relations can be compared to the relationship of the company to know where the company is located in their respective fields. Analysis of the relationship is a process to identify the strengths and weaknesses of a company. It helps to determine the financial position of a company.





As it has already been mentioned in detail that the follow research is going to be carried for comparison and analysis purposes of performance management of two companies for the performance requirements of IFRS 8, moreover, for the better information about the companies individually as well as collectively. This segment reporting session will provide the information about the performance especially, and overall scenario that how the company is doing against its rivals and with what strengths!

It is all about the purpose of the study.


Data collection method is to use the internet from statistical data or obtaining the hard copy of annual accounts of the companies. Data is to be taken from the primary sources. For this research, the data has been taken from the annual reports of the Coca Cola and PepsiCo companies as secondary data. The obtained data then will be used to calculate the ratios for the performance and management analysis purposes. So, the primary resources have been used as data collection resources.


The technique to be used is Quantitative technique. The data which is to be taken is quantitative data as well as interpretations of the outcomes of segments that would be analyzed for research purposes.