February 29, 2024

DealBook: Credit Agricole Hit by $3.7 Billion Charge on Earnings

Paris, the 01 february 2013

Crédit Agricole S.A. records a goodwill impairment charge in its financial statements for the fourth quarter of 2012 to be published on 20 February 2013, with no impact on its solvency or liquidity

These measures do not involve any cash outflows and do not affect the strength of the Group

As part of the process of preparing its consolidated financial statements, Crédit Agricole S.A. has carried out impairment tests on the goodwill carried on its balance sheet. In accordance with IFRS standards, these tests are based on the comparison between the amounts of goodwill on Crédit Agricole S.A.’s books and the values in use of the relevant assets. The calculation of value in use is based on discounted cash flows.

These accounting charges primarily reflect the impact of tighter regulatory requirements, hence the reduction of the value in use of the relevant entities. They also reflect the present macro-economic and financial environment in the relevant countries and business lines.

The net impairment charge, Group share, recognised in the consolidated financial statements for the fourth quarter of 2012 amounts to 2,676 million euros, broken down as follows:

  • Corporate and Investment Banking                                           466 million euros
  • Brokerage (Newedge)                                                             366 million euros
  • Consumer finance                                                                  923 million euros
  • International retail and banking                                                921 million euros
    of which retail banking in Italy                                                 852 million euros

In addition, the value of the bank’s 20.2% interest in BES has been written down by 267 million euros.

These impairment charges have a negative impact of the same amount on Crédit Agricole S.A.’s net income Group share for the fourth quarter of 2012, but do not affect either its solvency or its liquidity as goodwill is already fully deducted in the calculation of solvency ratios. They do not affect Crédit Agricole S.A.’s cash position, as related disbursements were made at the time of the acquisition of the relevant companies.

Furthermore, Crédit Agricole S.A. announces that other non-operating items affect its financial statements for the fourth quarter of 2012. First, a negative impact on revenues of about 850 million euros has been recognised on the revaluation of its own debt due to the improvement of funding conditions during the quarter. Secondly, a tax expense of around 130 million euros has been recognised in relation to the exceptional 7% tax on the capitalisation reserve of the Group’s insurance companies.

Lastly, as announced in its press release of 25 January 2013, Crédit Agricole S.A. reiterates that the impairment of the carrying value of SAS Rue La Boétie shares in the consolidated financial statements of the Regional Banks has an impact of some 160 million euros on their contribution to Crédit Agricole S.A.’s consolidated income.

Article source: http://dealbook.nytimes.com/2013/02/01/credit-agricole-hit-by-3-7-billion-charge-on-earnings/?partner=rss&emc=rss

Conversations: At Pizzerias, an Owner Learned the Importance of Accounting

A second-generation pizza entrepreneur — his father owned a pizzeria in Carpentersville, Ill. — Mr. Sarillo, 50, opened his first Nick’s Pizza Pub in Crystal Lake, Ill., in 1995 and his second in 2005 in Elgin, a nearby suburb of Chicago. Annual revenues rose to $7 million in 2007.

But while he was sharp on culture, Mr. Sarillo acknowledges he was naïve about numbers. He overborrowed and overbuilt when times were good, then almost lost his business when the economy turned. Only an impassioned online plea to his customers saved Nick’s.

“Barring some sort of miracle, we are going to run out of cash to pay our vendors and team members over the next couple of weeks and will have to close,” he wrote in a September 2011 e-mail sent to customers and later posted on the company Web site. The following conversation has been edited and condensed.

Q. What was your father’s pizza joint like?

A. It was good when my dad was there to tell people what to do. He was a good guy, but he didn’t coach much. He just said, “Get this done now.” When he wasn’t around, it was slack. He always taught me you can never have more than one restaurant because no one cares. Other entrepreneurs were telling me the same thing. But I realized that was because of the culture they created in their businesses. That’s where I said I’ll do something different.

Q. You describe your management style as trust and track. What does that mean?

A. Especially with a younger generation like we have at this restaurant, they’re going to be more motivated and more productive if the managers are more like coaches. Instead of being told what to do, they want to be supported and coached. This trust-and-track model is about giving the team the tools they need, telling them the result we need and trusting them to get there in their own way. At the same time, you have to track the results.

Q. Tell me about your community involvement.

A. As in many companies, I used to write checks and donate — because I’m a good guy and I care. But there wasn’t much awareness in the employees or community about why I was doing that. Then we came up with our fund-raising system. Instead of an advertising budget like most companies — say 3 percent of sales — we have zero dollars in our advertising budget and give back 5 percent of our net sales to our community through fund-raising. We do that by allowing organizations, the ones I used to write checks to, to come in and use our building to raise money.

Q. And then you started having problems in the Elgin restaurant? A. When I built my first restaurant in Crystal Lake, it was only 150 seats and about 3,500 square feet. I could have done the same thing in Elgin. But like many entrepreneurs, I have that eternal optimism. The Elgin restaurant is just over 9,000 square feet, with 350 seats. It was a $5 million project with property and building. I overbuilt the restaurant based on the projections that there would be 80,000 people moving into housing development projects there. None of the developments got built.

Q. What happened?

A. Unemployment got really high in our areas, over 10 percent. So the families didn’t have money to go out. Sales dropped a little in 2009 and 2010. We did some great promotions where we were giving back, a couple days a week with half-price pizzas for people out of work. Those kinds of things helped us maintain a healthy level of sales to get by. We weren’t building any cash, but we were making it.

Q. When did you realize that you weren’t making it?

A. Sometime in the beginning of 2011 I asked an adviser for some help, and he schooled me on debt-to-asset ratios on my balance sheet and basically gave me what I would call a come-to-Jesus speech.

Q. What exactly had you missed?

A. I wasn’t watching how the liabilities side of my balance sheet was growing. I was incurring more and more debt, and our debt-to-equity ratio was getting way out of whack. A healthy ratio is one to one, but ours was more than three to one. I had millions in debt. I had the $5 million project. And the asset values were decreasing as the property values were going down. That’s the downside of having so much success. I got a little complacent about taking on debt.

Q. Given your balance sheet problems, how were you able to get bank loans?

A. When I first got approved for the bank loans, our sales and everything was climbing and improving, and the values of our properties were real high. The bank probably didn’t look as close as they should have as well. And they gave us a line of credit that they probably shouldn’t have.

Q. By September 2011, things were really bad and you wrote the letter to your customers saying you were about to go broke. How much did it help?

A. I still have that sales report on my wall because it was so amazing. The Elgin restaurant in the first week had an increase of 105 percent and Crystal Lake had an increase of 110 percent. The second week and third week were close to that. They were like 90 percent. And then maybe 85 percent the third week. It was five weeks before sales settled back down again, but not all the way down.

Q. This must have taken a toll on you personally.

A. I’ve never been in this kind of situation. I’ve always made my payments, ever since I was 16 years old. So the responsibility at a personal level weighed heavily on me. So much so that — while I’m very athletic, I work out, I swim a lot — at the end of this, right around Labor Day, my back tightened up. I’d blown two discs in my back. I totally believe that had something to do with the stress I was holding.

Q. Did the letter get you out of the hole?

A. We got current with all our vendors. We made payroll. We paid our mortgage for that month. But also the bank worked with us on our loan. They deferred our principal for one year.

Q. Are you paying the principal now?

A. Yes. We just started.

Q. Can you keep both restaurants open?

A. Yes, we can, as things are now. It’s still not easy.

Q. What does your father say?

A. He’s a proponent of selling the restaurant company and starting over. He thinks I work too hard for not much pay, just to get things turned around. A lot of business owners would claim bankruptcy and get out of this and start over again. He’s concerned about the stress.

Q. Do you still plan to open more Nick’s Pizza Pub stores?

A. Yeah, I would for sure. What we do in our communities and how we run our business is really amazing, and I would love to bring this to other communities. But it’s not going to happen anytime soon.

This article has been revised to reflect the following correction:

Correction: October 25, 2012

An earlier version of this article contained an inaccurate phrase in a quotation from Mr. Sarillo. In answering the question “What exactly had you missed?”, Mr. Sarillo meant to say “our debt-to-equity ratio was getting way out of whack” rather than “debt-to-asset ratio.”

Article source: http://www.nytimes.com/2012/10/25/business/smallbusiness/at-pizzerias-an-owner-learned-the-importance-of-accounting.html?partner=rss&emc=rss

DealBook: AT&T Ends $39 Billion Bid for T-Mobile

ATT said on Monday afternoon that it had withdrawn its $39 billion takeover bid for T-Mobile USA, acknowledging that it could not overcome opposition from the Obama administration to creating the nation’s biggest cellphone service provider.

The company said in a statement that it would continue to invest in wireless spectrum, but could not overcome resistance from both the Justice Department and the Federal Communications Commission. It added that American wireless customers “will be harmed and needed investment will be stifled” by the regulators’ decisions.

ATT had lain the groundwork for its decision in recent weeks, including by withdrawing its proposal for F.C.C. approval and by asking a federal judge to postpone proceedings in a lawsuit filed by the Justice Department. Both regulators have indicated strong opposition to the deal.

ATT said last month that it would take a $4 billion accounting charge this quarter to reflect the potential breakup of the deal.

Article source: http://feeds.nytimes.com/click.phdo?i=f8fa746f2bf01bd55b994033bc4769a7

Accounting Board Considers Measure to Rotate Auditors

Opinion »

Perry and Bush’s Legacy

In Room for Debate, how Perry differs, and whether that could hurt the G.O.P.

Article source: http://feeds.nytimes.com/click.phdo?i=a1854ae88309409101db92bdabe6da46

You’re the Boss: Do You Know Enough About Accounting?

Bart Justice had money in his accounts and didn't realize he was spending more than he was making.Eric Schultz for The New York TimesBart Justice almost lost his document-destruction business.

Today’s Question

What small-business owners think.

In a small-business guide to accounting that we’ve just published, Darren Dahl writes about Bart Justice, who started a document-destruction business, Secure Destruction Service, in 2004. The business, based in Huntsville, Ala., grew from $70,000 in annual revenue its first year to $500,000 four years later. To finance his growth, Mr. Justice kept borrowing money from the bank, not realizing that the more he grew, the more he needed to borrow because his revenue was not covering his expenses. The loans meant he had money in his accounts — but it was borrowed money. “I knew how to print a financial statement from QuickBooks, but I couldn’t tell you what it meant,” he said. It took the intervention of business owners in a peer group Mr. Justice joined to convince him that if he didn’t master his finances he was going to lose his business.

Have you had a similar experience? What’s the most important lesson you’ve learned about accounting?

Article source: http://feeds.nytimes.com/click.phdo?i=6113ef006f774508882c0ec513308682