Reebok 2014 Annual Report Download - page 164

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2014
Risk and Opportunity Report
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adidas Group
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2014 Annual Report
Group Management Report – Financial Review
Description of the main features of the internal control and risk management
system relating to the consolidated financial reporting process pursuant to
§ 315 section 2 no. 5 German Commercial Code (Handelsgesetzbuch – HGB)
The internal control and risk management system relating to the consolidated financial reporting
process of the adidas Group represents a process embedded within the Group-wide corporate
governance system. It aims at providing reasonable assurance regarding the reliability of the
Group’s external financial reporting by ensuring Group-wide compliance with statutory provisions, in
particular the International Financial Reporting Standards (IFRS) and internal consolidated financial
reporting policies (Group Finance Manual). We regard the internal control and risk management
system as a process based on the principle of segregation of duties, encompassing various
sub-processes in the areas of Accounting, Controlling, Taxes, Treasury, Planning, Reporting and
Legal, focusing on the identification, assessment, treatment, monitoring and reporting of financial
reporting risks. Clearly defined responsibilities are assigned to each distinct sub-process in the
various areas. In a first step, the internal control and risk management system serves to identify and
assess as well as to limit and control risks identified in the consolidated financial reporting process
which might result in our consolidated financial statements not being in conformity with internal
and external regulations.
Internal Control over Financial Reporting (ICoFR) serves to provide reasonable assurance regarding
the reliability of reporting and compliance with applicable laws and regulations despite identified
financial reporting risks. To monitor the effectiveness of ICoFR, the Group Internal Audit department
and the Group Policies & Internal Controls department regularly review accounting-related
processes. Additionally, as part of the year-end audit, the external auditor selects and examines
internal controls, including the IT systems, to assess their effectiveness. The Audit Committee of the
adidas AG Supervisory Board also monitors the effectiveness of ICoFR. However, due to limitations
of ICoFR, even with appropriate and functional systems absolute certainty about the effectiveness
of ICoFR cannot be guaranteed.
All Group companies are required to comply with consolidated financial reporting policies (Group
Finance Manual), which are available to all employees involved in the financial reporting process
through the Group-wide intranet. We update the Group Finance Manual on a regular basis,
dependent on regulatory changes and internal developments. Changes to the Group Finance Manual
are promptly communicated to all Group companies. Clear policies serve to limit employees’ scope
of discretion with regard to recognition and valuation of assets and liabilities, thus reducing the risk
of inconsistent accounting practices within the Group. We aim to ensure compliance with the Group
Finance Manual through continuous adherence to the four-eyes principle in accounting-related
processes. In addition, the local manager responsible for the accounting process within the Group
companies and the respective local Managing Director confirm adherence to the Group Finance
Manual and International Financial Reporting Standards in a signed representation letter, which is
provided to Group Accounting on a quarterly basis.