Michelin: Management Accounting Executive Summary and Report Analysis

This report provides an executive summary and detailed analysis of Michelin's management accounting practices, focusing on its adherence to the PWC framework. The report examines various aspects of Michelin's operations, including its business model, governance structure, risk management strategies, remuneration policies, and financial performance. It assesses the company's disclosures across different segments, such as financial assets, physical assets, customer relations, people and culture, innovation, brand and intangibles, supply chain, operational performance, and economic, social, and environmental considerations. The analysis highlights the accessibility and comprehensiveness of Michelin's reporting, identifying both strengths and potential pitfalls. The report concludes with an evaluation of Michelin's performance information, emphasizing its commitment to stakeholders and its customer-centric approach. The report also provides insights into the company's strategic goals and its commitment to sustainability and social responsibility. Overall, the report provides a comprehensive overview of Michelin's accounting and business practices, offering valuable insights into its financial health and operational effectiveness.

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Management accounting

Michelin
Executive summary
In the current scenario, time-integrated reporting has become crucial and it primarily
necessitates a significant deviation from all traditional methods so that effectiveness of the
same can be enhanced. However, the same is a very complicated task because various
reporting patterns were catered to with due passage of time but were discarded owing to some
errors. Further, wealth maximization is the supreme objective of the present systems of
reporting with computation of value creation and reflection of the overall organization.
Nevertheless, Michelin has been selected for this report and its annual report has been
accounted for based on the framework of PWC. Moreover, all major points associated to the
company’s disclosures are also accounted owing to its framework. Overall, both the quality
and quantity segments of the company are accounted for assessing the disclosure standards
that can be undertaken in the year 2016. Besides, the company’s performance, external
drivers, links, etc are provided through a different segment of IT framework.
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Contents
Value framework of PWC......................................................................................................................3
1) Elements forming part of PWC framework....................................................................................4
2) Business model..............................................................................................................................5
3) Governance...................................................................................................................................6
4) Management of risks.....................................................................................................................8
5) Remuneration policy....................................................................................................................10
6) Financial assets............................................................................................................................10
7) Physical assets.............................................................................................................................11
8) Customers....................................................................................................................................12
9) People and culture.......................................................................................................................13
10) Innovation................................................................................................................................14
11) Brand and intangibles..............................................................................................................16
12) Supply chain and processes.....................................................................................................17
13) Operational performance........................................................................................................19
14) Economic performance............................................................................................................20
15) Social........................................................................................................................................21
16) Environmental.........................................................................................................................23
17) Segment...................................................................................................................................24
References...........................................................................................................................................27
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Value framework of PWC
Accessibility:
The company has appropriately highlighted seventeen different frameworks of PWC. Further,
it is clearly visible that several topics and their descriptions have been offered in addition
with graphs that can simplify the work of reflecting standards of the company and it also
enhances transparency. Nevertheless, the company’s annual reports and other significant
details can also be easily attained. Overall, these can be illustrated by the reporting system
standard that also comprises of all information.
Comprehensiveness:
Based on the company’s annual reports, it can be described that the same is of adequate
quality that can have a positive influence on its utilization on the part of stakeholders.
Further, if the company intends to upgrade their transparency and its faith, then it can
facilitate in leading a comparison procedure wherein it can distinguish and compare the
actual budget and prepared budget. Moreover, this can assist an organization to verify on
their flaws and the reasons for such variations. Further, it is advisable to operate another
process of comparison in terms of the company’s outcomes throughout the years that can
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assist it in recognizing the disturbances in variations, thereby facilitating in eradicating them.
Overall, the company’s objectives are listed in two different segments that comprise of both
short-term and long-term objectives to attain them.
Pitfalls
Few major pitfalls that have been reflected with the assistance of this discussion are as
follows:
It is notable that exaggerated disclosure can be destructive for the company as it offers ample
knowledge about the workings and systems that can function as a boon to the rival
organizations as they can influence the effectiveness of company’s graph. Further, the
company’s structure, procedures implemented together with its plans and policies can decide
the standard of all represented reports. In addition, if there is utilization of any kind of
immoral means to produce inefficient statements, then it can influence the public’s decision-
making process. Nonetheless, all the facts depicted in the company’s annual reports are not
oriented towards long-term and frequently alter that can be extremely misguiding in nature.
1) Elements forming part of PWC framework
1. Objectives and strategy
Extensiveness and accessibility
The primary strategic goal of Michelin is to enhance its services’ value by putting all its
customers at the topmost priority. Further, the company’s commitment and focus towards
growth building on a long-term basis can allow it to remain competitive in the market.
Moreover, the company is also committed towards helping to address societal issues by
putting its respect values into prior practice. In addition, Michelin also intends to attain
revenue growth from its effective operations whilst increasing its operational effectiveness.
Lastly, establishing and promoting healthier communities is also focused by the company so
that its goals can be attained.
Comprehensiveness
Michelin is entirely focused towards maximizing its attempts so that it can become a socially
responsible organization in the entire industry. Thus, it has endeavoured to put all its
customers at topmost place so that sustainability can be properly attained. Nevertheless, it can
be observed from the company’s business goal that it not only intends to acquire a
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competitive position through financial goals in the market but it also focuses on non-financial
aspects like framing healthier societies.
Conclusion
It can be stated from the previously mentioned evaluation that the performance information
of Michelin is effective in nature as its diversified and coordinated team is underpinned by
the culture of its high performance that assists it to address all commitments towards the
stakeholders.
2) Business model
Accessibility and extensiveness
It can be seen from the business model of Michelin that it has focused on a robust business
model that has allowed it to reflect accurate financial outcomes that is altogether associated
with high cash flows and generate value for stakeholders. For such purpose, Michelin
concentrates on HRM by taking steps to encourage its team in procuring best opportunities so
that effective results can be provided to the societies, customers, and the shareholders. Thus,
the company’s business model has an adequate balance as it caters to offer a powerful team
balance, thereby resulting in facilitating better customer solutions. Moreover, a disciplinary
measure has been followed by the company and therefore, it has been efficient in its
approach.
Comprehensiveness
Michelin has been entirely committed towards making generational or extravagant
investments in various sustainable business areas, as it can increase the feasibility of its future
developments together with providing ample returns to its investors. Nonetheless, in relation
to this, the company has endeavoured in putting all its customers in the topmost priority and
even all its workforce has been motivated in a way that can make its affairs beneficial and
friendly to the society and the stakeholders as well. Thus, the primary responsibility of
Michelin lies in possessing a determined and strong team in addition with customer
satisfaction.
Conclusion and strength
It can be observed from the previously mentioned discussion that the company’s business
model has been customer oriented in nature, thereby facilitating in attainment of lifetime
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industry-leading profits so that competitive advantage can be easily achieved. Nevertheless,
possessing a motivated and strong workforce can assist the company in establishing fresher
growth opportunities that can cater to the requirements of the entire society and stakeholders
on a whole.
3) Governance
Extensiveness and accessibility
In the present scenario, corporate governance is the requirement of the hour as it assists in
offering an effective balance to the organization in relation to management and morality.
Further, it assures that the organization is strictly determined to account for the stakeholders’
benefits on a whole. Moreover, the company’s governance policy has allowed it to depict a
powerful commitment towards moral and sound approaches in corporate governance
principles and in relation to the same, it continuously monitors such affairs so that enhanced
standards can be easily obtained, thereby facilitating in achievement of integrity,
transparency, and morality. Therefore, for all these reasons, Michelin has been attaining mass
recognition in maintaining effective reporting and corporate governance approaches.
Comprehensiveness
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Since Michelin has undertaken a proactive measure to maintain enhanced standards of
corporate governance, it can easily cater to its long-term goals. Nevertheless, upgradation of
effective matters associated to corporate governance each year also assists the team members
to stay encouraged so that board diversity, risk issues, and requirements of stakeholders are
properly addressed with the help of proactive strategies of communication. Overall, the
continuous upgradation plays a key role in assisting the company establish a powerful
position in the entire industry so that it can outperform all its competitors.
Conclusion and strength
It can be seen from the previously mentioned discussion that the company’s corporate
governance approaches are designed in a proper way as it has clearly focused on enhanced
transparency, maximized disclosures, and morality on a whole. Furthermore, these efficacies
can assist the company in facilitating enhanced transparency and integrity amongst the entire
group of stakeholders and the community on a whole. Therefore, based on the factor of
governance, it can be seen that Michelin has been in a powerful position when it comes to the
same.
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4) Management of risks
Extensiveness and accessibility
It can be seen from the company’s annual report that it has provided proper information about
various kinds of risks prevailing within its affairs. Further, all potential or material risks are
also disclosed by the company in a paragraph wise that sheds light on the fact how effectively
it has endeavoured in managing the risks. Moreover, for such purpose, a culture of efficient
risk governance is also established within the company that allows it to recognize material
risks with the help of proper systems. Nevertheless, control and risk mitigation are the
requirement of the hour because it can play a key role in eradicating all risks that emerges in
its path. Overall, it is also notable that the company has a powerful risk control management
that allows it to sustain in the industry.
Comprehensiveness
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The company’s material risks are being disclosed in a paragraph manner that assists in
reflecting adequacy in offering significant details in relation to the same. Further, a multi-step
measure has been adopted to sustain the risks to ensure that daily affairs are not influenced in
a bad way. In addition, the company has ensured that such steps operate efficiently with the
management as it assists in framing and undertaking proper internal controls. Moreover,
through the internal control mechanisms, it can be stated that Michelin has ensured an
effective risk management and hence, the policies are regarded as appropriate on a whole.
Conclusion and strength
The disclosure of risk management and its controls are appropriate in the case of Michelin as
it considers itself liable for sustaining proper risk management leadership and maximized
transparency. Moreover, significant disclosure of material risks can also allow the company’s
workforce in addressing high integrity standards in decisions and business actions. Therefore,
Michelin has effective policies when it comes to risk management approaches. Overall, the
company has ensured that all its risks are avoided as soon as possible.
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5) Remuneration policy
Extensiveness and accessibility
It must be noted that a strong remuneration policy plays a vital role in establishing an
effective interconnection betwixt the shareholders and the company on a whole. Michelin has
also disclosed about its remuneration policies and has highlighted the same through its annual
report. Nevertheless, such policy has not been disclosed in a thorough manner and the
company must ensure that its remuneration aligns with its strategic objectives. Further, the
same must be adequately highlighted. Therefore, in the given situation, the disclosures on the
part of the company cannot be regarded as an efficient one owing to prevalence of lacking
points (Greene, 2018).
Comprehensiveness
The company’s annual report has not been efficient in highlighting its remuneration policies
in details. Further, the major intention of the company’s remuneration policy is to offer
employee incentives that align effectively to its objectives. Moreover, the same must be
reflected in a thorough manner. Nevertheless, the company’s performance summary is also
missing and there is no prevalence of graphical depiction of the same. Further, the
transparency level is also missing in this context and thus, the company must raise its level in
relation to the same. Overall, the company’s remuneration policy is considered as ineffective
in nature.
Conclusion
Based on the company’s remuneration policy and its position in the presence in the annual
report, it can be stated that the company has inappropriate stagnancy when it comes to
disclosure of the same. Further, the disclosure level is very low in this context. Nevertheless,
the company must exert appropriate emphasis in the same for a better outcome.
6) Financial assets
Based on the company’s annual report, it can be stated that it has disclosed significant details
of its financial assets in addition with the nature of risks that these assets may be specific to.
However, accounting for the requirements of the present scenario, it can be commented that
these disclosures are not adequate in nature as information of financial assets are absent from
the company’s annual report and only risks related with such assets are primarily discussed.
Further, the company’s financial assets are of primary relevance and the same is always
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looked after the stakeholders. Overall, probably, the company’s financial assets are the
significant attraction point because it assists in ascertaining the status or position of the entire
organization.
Comprehensiveness
The disclosure of financial instruments is significant in nature because it can affect the
decision-making capability of the users. However, it can be noted that Michelin has
adequately concentrated towards several risks related to its financial assets and thus, it
necessitates additional disclosure approaches so that it can cater to the requirements of end-
users.
Conclusion and strength
It can be seen from the annual report of the company that the quality of disclosures offered by
it is not sufficient and it necessitates further details so that end-users can be assisted in
making better decisions. Nevertheless, by concentrating on the associated risks with the
instruments is a significant strength but the information related to financial assets must
accommodate in the annual report as well.
7) Physical assets
Extensiveness and accessibility
Michelin has provided material information of its physical assets including inventories,
investments, PPE, etc in its annual report. In addition, the company’s accounting policies
related to the assets are also properly discussed that has made it simpler for the end-users to
understand the scope and nature of the financial assets within the entire company. Overall, it
can be observed through the annual report of the company that all requirements in relation to
the same has been adequately met and physical assets have been properly depicted in a
concise way, thereby resulting in understanding and clarity (Subramanyam & Wild, 2014).
Comprehensiveness
It can be seen from the company’s annual report that material information related to its
physical assets have been properly disclosed or offered that includes depreciation and
valuation methods followed to ensure a reflection of true and fair view of the financial
position. Further, both qualitative and quantitative information of the company’s physical
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