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EWPCC Seminar "Financial analysis and business economics"

The EWPCC continues in its efforts to organise small-scale, interactive seminars, enabling a lively exchange between SE board-level employee representatives. Following a first experience focusing on the issue of confidentiality in March 2011, a second training session was organised from 7 to 9 March 2012. Board members from 10 different European Companies and 4 different EU Member States came to the training centre of Unite the Union in Esher, near London, to improve their understanding of the financial data they receive and the logic of the business economics that underlies this data.

One of the most complicated and important responsibilities faced by workers’ representatives on administrative or supervisory boards is to critically assess the financial data provided to them by their company. Indeed, only a thorough understanding of this data will enable them to gain a clear view of the corporate strategies and to consider employee-friendly alternatives. With expert assistance from the French consultant Syndex, a programme was developed to help the board members with this mission.

A brief overview was given of the different financial statements that ensure a true and fair disclosure of the company’s situation, such as the profit-and-loss account, the balance sheet and the cash-flow statement. A closer look was taken at the definitions of ‘fair value’ and ‘anticipation’ and at the way in which these elements have been included in the International Financial Reporting Standards (IFRS). Participants received practical tips on where to find the most relevant information in the financial records and how to decode the corporate financial communications. It soon became clear that, even though the various statements have to be presented in a stringently regulated manner, many of the figures are based on assumptions, so that differing conceptions can generate very different results. Other subjects treated included ‘goodwill’, ‘depreciation’, ‘Cost Generating Units’, ‘impairment tests’ and many more. The final session focused on the many ratios – such as the Return on Capital Employed or the Earnings Per Share – used by companies in their annual reports.

In order to facilitate understanding of the rather technical presentations, numerous actual examples from real financial statements of multinational groups were used. In addition, a selection of balance sheets and profit-and-loss accounts of the European Companies represented in the seminar was made available to participants, allowing them to immediately apply what they had learned to their own company’s statements.

While the evaluation of the seminar was extremely positive, it was clear too that it could be regarded as having provided no more than a preliminary introduction to a highly complicated and technical matter. Several participants requested a follow-up seminar that would allow more time for practical exercises and enable them to build on the basic knowledge they had now acquired. To be continued !

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