Transition to IFRS - . Background to the adoption of IFRS Calendar Managing the transition to IFRS at Carrefour How IFRS differs to French GAAP and to US GAAP

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<ul><li><p>1</p><p>Carrefour GroupCarrefour GroupTransition to IFRSTransition to IFRS</p><p>16th 16th DecemberDecember 20042004</p></li><li><p>2</p><p>AgendaAgenda</p><p>1.1. Background to the adoption of IFRS Background to the adoption of IFRS </p><p>2.2. How IFRS will impact Carrefour and the food retail How IFRS will impact Carrefour and the food retail sectorsector</p></li><li><p>3</p><p>Background to the adoption of IFRSBackground to the adoption of IFRS</p><p>CalendarCalendar</p><p>Managing the transition to IFRS at CarrefourManaging the transition to IFRS at Carrefour</p><p>How IFRS differsHow IFRS differsto French GAAPto French GAAP</p><p>and to US GAAPand to US GAAP</p><p> and the consequencesand the consequences</p></li><li><p>4</p><p>Calendar</p><p>30 June 2004 30 June 2005</p><p>The first publication of Carrefour accounts under IFRS will be for the six months to 30th June 2005 (with pro forma accounts for the same period to 30th June 2004)</p></li><li><p>5</p><p>Calendar</p><p>September 2004 : publication of accounts for the six months to 30th June 2004- French GAAP- comparable accounts to 30th June 2003 and 2002</p><p>March 2005 publication of accounts for the year to 31st December 2004- French GAAP- comparable accounts to 31st December 2003 and 2002</p><p>The current situation:</p><p>The situation from 2005:</p><p>September 2005 : publication of accounts for the six months to 30th June 2005- only under IFRS- pro forma comparable accounts to 30th June 2004</p><p>March 2006 publication of accounts for the year to 31st December 2005-only under IFRS- pro forma comparable accounts to 31st Dec.2004</p></li><li><p>6</p><p>Managing the transition to IFRS</p><p>Putting a team in place</p><p>Carrefour Group formed in 2002 a steering committee responsible for managing the transition to IFRS. This committee, reporting to the CFO, was given the following responsibilities: </p><p>organising the collection of information ;adapting internal reporting ;</p><p>adapting methods of consolidation ;reconfiguring the process of consolidation ;actively following the publication of new standards / interpretations of the </p><p>IASB.</p><p>A group project leader was appointed from within the consolidation team.</p><p>Project leaders were appointed in each country under the responsibility of their local FD. </p></li><li><p>7</p><p>Managing the transition to IFRS</p><p>Calendar</p><p>Creation of working groups at subsidiary level</p><p>Communication to the financial markets</p><p>Identification of accounting differencesFirst simulations</p><p>Validation of accounting options</p><p>Creation of a steering committeeCalendar established</p><p>20042003 2005</p><p>Publication under IFRS</p><p>Comprehensive simulations</p><p>Validation with organisation and systems</p><p>2002</p></li><li><p>8</p><p>Managing the transition to IFRS</p><p>Training</p><p>For senior directors</p><p>The members of the Audit committee as well as the Supervisory Board are aware of the issues associated with the transition to IFRS. </p><p>Presentations have been given to the different regional Executive Committees.</p><p>For the accounting and finance teams</p><p>Training was given to more than 200 people between April and September 2003 in partnership with an outside consultant. </p><p>Training on the complete package of IFRS changes was given in March/April 2004.</p><p>For the rest of the company</p><p>Our property, merchandising and human resources teams have also been made aware of the issues associated with the transition to IFRS. </p></li><li><p>9</p><p>Managing the transition to IFRS</p><p>Adaptation of tools / systems</p><p>Development of a new consolidation process, and a user guide</p><p>Definition of group policies</p><p>Development of a new tool to help subsidiaries review property agreements. </p><p>Adaptation software by our Treasury department</p><p>Adaptation of our reporting tools </p></li><li><p>10</p><p>The main principles adopted</p><p>The opening financial statements reported under IFRS will begin from the 1st January 2004.</p><p>Most of the IFRS standards will be applied retrospectively (as if they have always been applied). </p><p>The impact of restating the accounts using IFRS will be accounted for in the opening financial statements from the 1st January 2004.</p></li><li><p>11</p><p>Differences between French and US GAAP</p><p>Only French companies</p><p>StaticLegal</p><p>FR GAAPEconomicConceptual</p><p>EconomicConceptual Clear lines , cook book </p><p>Since 1973Rewritten in 1999</p><p>Since the 1930s</p><p>All quoted European companies and their subsidiaries worldwide from 2005</p><p>All US companies, their subsidiaries worldwide, and a number of non-US companies </p><p>IFRSUS GAAP</p><p>Approach</p><p>History</p><p>Application</p><p>Over time, there will be a convergence between US and IFRS standards</p></li><li><p>12</p><p>Consequences</p><p>Adopting IFRS standards makes comparisons between European corporateseasier. </p><p>However, flexibility in interpreting the new standards means that there will be a divergence of approach with regard to certain issues (for example, revaluation of assets, segment reporting). </p><p>The simultaneous adoption of the new standards by all European corporates has encouraged exchanges of information between companies. </p></li><li><p>13</p><p>The impact on financials</p><p>We will see three kinds of changes when comparing IFRS with the standards currently used:</p><p>Valuation : The calculation of financial data will differ occasionally</p><p>Presentation : The accounts of the group will be presented differently</p><p>Information : The level of disclosure will evolve</p><p>=&gt; We will now review all of the changes</p></li><li><p>14</p><p>Review of IFRS standardsReview of IFRS standards</p><p>List of the standards which are applicable to CarrefourList of the standards which are applicable to Carrefour</p><p>Presentation of the principal standards which are likely to Presentation of the principal standards which are likely to impact companies operating in the food retail sectorimpact companies operating in the food retail sector</p></li><li><p>15</p><p>List of applicable standards</p><p>Standard which may impact financial statements of a food retail group</p></li><li><p>16</p><p>List of applicable standards</p><p>Standard which may impact financial statements of a food retail group</p></li><li><p>17</p><p>List of applicable standards</p><p>Standard which may impact financial statements of a food retail group</p></li><li><p>18</p><p>IAS 27 : Business combination</p><p>Principle</p><p>Different subsidiaries must be fully consolidated where there is a controlling interest.</p><p>What Carrefour has decided</p><p>Within Carrefour, financial subsidiaries as well as insurance companies which are controlled by the group have been until now consolidated by the equity method.In the future, these companies will be fully consolidated.</p><p>In order to give meaning to the financial statements :We will show on the balance sheet, on a separate line, the debt which has been integrated.Within the profit and loss account, the sales of these companies will be presented in Other revenues .</p></li><li><p>19</p><p>IAS 1 : Presentation of the financial statements</p><p>Principle</p><p>No requirement for standard presentation of the balance sheet and the profit and loss account.</p><p>Cancellation of the concept of extraordinary income. </p><p>Choice of presentation of profit and loss account by nature or by purpose . </p><p>What Carrefour has decided</p><p>The presentation of the balance sheet remains the same.</p><p>New presentation of the profit and loss account (see following page).</p><p>The P&amp;L presentation by nature has not changed. </p></li><li><p>20</p><p>IAS 1 : Presentation of the financial statements</p><p>Euro millions June 2005 % ch. June 2004</p><p>Net salesOther revenuesRevenues of ordinary activitiesCost of salesCommercial marginSG&amp;AEBITDADepreciation &amp; provisionsActivity contributionOther income and expensesEBITCost of debtIncome before taxIncome taxNet income of consolidated companiesEquity accounted companiesMinority interestsDiscontinuing activities group shareDiscontinuing activities minority interestsNet result group share </p><p>Revenues from financial service companiesRental incomeOther income (Carrefour Vacances, franchisee rental fees, services) Costs of the loyalty programme which are not financed by suppliers</p><p>Sales through the cash linersand sales made to franchisees through Carrefour warehouses (unchanged definition)</p></li><li><p>21</p><p>IAS 1 : Presentation of the financial statements</p><p>Euro millions June 2005 % ch. June 2004</p><p>Net salesOther revenuesRevenues of ordinary activitiesCost of salesCommercial marginSG&amp;AEBITDADepreciation &amp; provisionsActivity contributionOther income and expensesEBITCost of debtIncome before taxIncome taxNet income of consolidated companiesEquity accounted companiesMinority interestsDiscontinuing activities group shareDiscontinuing activities minority interestsNet result group share </p><p>Including impairment charges, profit on divestments and other non-recurring items</p><p>New figure</p><p>New figure</p></li><li><p>22</p><p>IAS 1 : Presentation of the financial statements</p><p>Euro millions June 2005 % ch. June 2004</p><p>Net salesOther revenuesRevenues of ordinary activitiesCost of salesCommercial marginSG&amp;AEBITDADepreciation &amp; provisionsActivity contributionOther income and expensesEBITCost of debtIncome before taxIncome taxNet income of consolidated companiesEquity accounted companiesMinority interestsDiscontinuing activities group shareDiscontinuing activities minority interestsNet result group share </p><p>Cancellation of extraordinaryitems</p><p>Cancellation of goodwill amortization</p></li><li><p>23</p><p>IAS 2 : Inventories</p><p>Principle</p><p>The valuation of stock on the balance sheet must include all the costs* associated with the cost of buying the product sold (i.e., items accounted for as margin).</p><p>What Carrefour has decided</p><p>The Group has decided to :</p><p>Include all the direct costs in the valuation of stock on the balance sheet (taking into account the cost of distribution up to the point when the product is in the back room of the store, as well as rebates from suppliers).Account for services billed to suppliers as commercial margin, and thus incorporate these invoices in the valuation of the stock. </p><p>* Except for exchange rate losses and gains</p></li><li><p>24</p><p>IAS 2 : Inventories</p><p>Illustration of the impact of the incorporation of the services charged to the suppliers in the valuation of inventories :</p><p>Example :</p><p>Purchasing price = 100</p><p>Rebates / invoice = 10</p><p>Services charged to suppliers = 5</p><p>Selling price = 105</p></li><li><p>25</p><p>IAS 2 : Inventories</p><p>Profit &amp; loss Profit &amp; lossPurchase (100) Purchase (100)Rebates / billbacks 10 Rebates / billbacks 10</p><p>Fees 5COGS (90) COGS (85)</p><p>Variation of stock 90 Variation of stock 85</p><p>Fees 5</p><p>Net income 5 Net income 0</p><p>Net income 5 Net incomeInventories 90 Inventories 85Receivables 15 Suppliers 100 Receivables 15 Suppliers 100</p><p>Total 105 Total 105 Total 100 Total 100</p><p>Balance sheet Balance sheet</p></li><li><p>26</p><p>IAS 2 : Inventories</p><p>Profit &amp; loss Profit &amp; lossPurchase Sales 105 Purchase Sales 105Rebates / billbacks Rebates / billbacks</p><p>FeesCOGS 0 COGS 0</p><p>Variation of stock (90) Variation of stock (85)</p><p>Net income 15 Net income 20</p><p>Net income 15 Net income 20Inventories Retained earnings 5 Inventories Retained earnings 0Receivables 15 Suppliers 100 Receivables 15 Suppliers 100Cash 105 Cash 105</p><p>Total 120 Total 120 Total 120 Total 120</p><p>Balance sheet Balance sheet</p></li><li><p>27</p><p>IAS 2 : Inventories</p><p>Profit &amp; loss Profit &amp; lossPurchase (100) Sales 105 Purchase (100) Sales 105Rebates/Billbacks 10 Rebates/Billbacks 10</p><p>Fees 5COGS (90) COGS (85)Fees 5Variation of stock 0 Variation of stock 0</p><p>Net income 20 Net income 20</p><p>Net income 20 Net income 20Inventories 90 Retained earnings 5 Inventories 85 Retained earnings 0Receivables 30 Suppliers 200 Receivables 30 Suppliers 200Cash 105 Cash 105</p><p>Total 225 Total 225 Total 220 Total 220</p><p>Balance sheet Balance sheet</p></li><li><p>28</p><p>IAS 14 : Sectoral information</p><p>PrincipleIAS 14 recommends that data on the balance sheet and profit and loss account should be given on two levels:</p><p>1st level 2nd level</p><p>Sales </p><p>EBIT </p><p>Net book value of assets </p><p>Depreciation </p><p>Significant non cash expenses </p><p>Net income from companies accounted by the equity method </p><p>Liabilities net book value </p><p>Tangible and intangible assets capex </p><p>Reconciliation with the consolidated financial statement </p></li><li><p>29</p><p>IAS 14 : Sectoral information</p><p>1st level 2nd level</p><p>Sales </p><p>EBIT </p><p>Net book value of assets </p><p>Depreciation </p><p>Significant non cash expenses </p><p>Net income from companies accounted by the equity method </p><p>Liabilities net book value </p><p>Tangible and intangible assets capex </p><p>Reconciliation with the consolidated financial statement </p><p>What Carrefour has decided By activity(Hypers, Supers, HD, Others)</p><p>By geography(France, Europe, America, </p><p>Asia)</p></li><li><p>30</p><p>IAS 16 : Fixed assets</p><p>Principle / possible options </p><p>The residual value of a fixed asset can be recognised at the end of its depreciable life (and thus depreciation is limited to the purchase price minus the residual value). </p><p>A revaluation of fixed assets (by category) is also possible.</p><p>Depreciation can be calculated by each component of a fixed asset where the cost of that component is significant.</p></li><li><p>31</p><p>IAS 16 : Fixed assets</p><p>What Carrefour has decided</p><p>Given that the Group typically retains its assets, the residual value of fixed assets, once depreciated, is nil (fixed assets are thus fully depreciated).</p><p>The Group has opted not to revalue fixed assets (maintaining historical cost). </p><p>The Group has already applied the principle of calculating depreciation by each component of a fixed asset.</p></li><li><p>32</p><p>IAS 16 : Fixed assets</p><p>What Carrefour has decided (more)</p><p>Carrefour Group considers that adopting IFRS standards does not justify a change to the length of time over which assets are depreciated (given that French GAAP is similar to IFRS in requiring that assets be appreciated over their economic life or faster).</p><p>However, within the framework of the creation of Carrefour Property, our pan-European real estate holding company, the group is currently studying the possibility of adjusting the deprecation period for buildings (currently it is 20 years).</p><p>This analysis should be completed in 2005, with any new policy adopted in 2005 and with 2004 accounts restated on a pro forma basis.</p></li><li><p>33</p><p>IAS 17 : Rental agreements</p><p>Principle</p><p>IAS 17 requires that all the rental agreements must be reviewed. If it is apparent from the review of a contract that the most of the risks and rewards linked to the property are transferred to the renter, the contract must be considered as a financial lease (recognised as an asset and as a debt).</p><p>=&gt; The definition of a financial lease is wider than under French GAAP. </p><p>What Carrefour has decided</p><p>More than 2000 contracts reviewed.</p><p>Credit lease contracts have already been restated in the consolidated accounts.</p><p>Since 2001, all new sale &amp; lease-backs contracts conform with IAS 17.</p><p>The impact of applying IAS 17 will be limited.</p></li><li><p>34</p><p>IAS 18 : Revenue recognition</p><p>Principle</p><p>IAS 18 defines sales as the gross inflow of economic benefits arising from the ordinary operating activities of a company.</p><p>For sales to be recognised, most of the property risks and rewards of goods or services must be transferred to the customer.</p><p>What Carrefour has decided</p><p>The composition of sales is unchanged (sales through checkouts and sales made to franchisees through Carrefour warehouses).</p><p>Additional revenues (revenue from financial services, Carrefour Voyages, franchisee income) will be shown in a separate line at the top of the profit and loss account. </p></li><li><p>35</p><p>IAS 19 : Employee benefits</p><p>Principle</p><p>IAS 19 concerns all benefits which might form part of an employees remuneration and requires that all the benefits accruing to employees are calculated on a fair value basis whatever their nature or due date.</p><p>IFRS requires that companies recognise a greater number of employee benefit...</p></li></ul>