Report on the accounting-related internal control system and the risk management system pursuant to Sec. 289 (4) and 315 (4) HGB
The system of internal control and risk management of HUGO BOSS, as applied to the (Group) financial reporting process and the financial statements closing process, aims to accurately reflect all business transactions in the accounting records. This should ensure the reliability of the financial reporting and make sure that all accounting-related activities comply with laws and guidelines. All assets and liabilities should be recorded accurately in the consolidated financial statements with regard to recognition, disclosure and valuation, which should enable a reliable statement to be made on the Group’s net assets, financial position and results of operations. As well as adherence to legal regulations and the Company’s internal guidelines, the use of efficient IT systems, a clear definition of responsibilities, and suitable training and development for employees in the finance department form the basis of a proper, consistent and efficient financial reporting process.
Using efficient IT systems
Controls across all business units require reliable information to be available and provided on time. The reporting systems of HUGO BOSS are therefore of great importance. The use of a uniform, SAP-based ERP system across the Group is intended to ensure high levels of control quality.
The aim of the Group-wide SAP Security Policy is to prevent unauthorized access to data and to ensure the integrity, availability and authenticity of data of relevance to financial reporting at all times. It also contains requirements for controls designed to ensure a properly functioning central finance department. System-enabled controls and workflow-based processes that impose the dual-control principle, a suitable separation of functions, and internal approval procedures supplement the IT security of the accounting-related processes. This includes invoice verification and approval, sourcing processes or SAP authorization management carried out by the central IT department.
Clear definition of responsibilities
As part of the standardized reporting, the Group companies prepare IFRS financial statements on a monthly basis and submit these to the central finance department together with further key performance indicators and explanations. The central finance department is also responsible for specifying and monitoring compliance with reporting obligations and deadlines. Automated and standardized reporting formats are in place for the vast majority of reporting topics. The finance department is responsible for the maintenance of all the master data for the chart of accounts applicable throughout the Group as well as the continuous review of all reporting formats with respect to their compliance with the latest applicable international financial reporting requirements. When preparing the consolidated financial statements, the finance department also pursues the objective of showing all business transactions in the Group in a uniform manner.
The central finance department is also responsible for developing uniform guidelines and instructions for accounting and tax-related processes and keeping them up to date. This mainly encompasses the preparation and revision of a bad debt allowance policy, an investment guideline, the IFRS accounting manual and binding intercompany reconciliation requirements.
All Group companies are legally independent entities. Apart from the managing directors, who are responsible for business operations in the respective market, the finance managers are responsible for all topics of relevance to the Company’s financial reporting or tax situation. The finance manager is also responsible for the continuous monitoring of the most important key performance indicators as well as the monthly reporting of financial KPIs to the central finance department and the preparation of a multi-year plan for the respective market. In his capacity as technical supervisor of all finance managers, the Chief Financial Officer of HUGO BOSS AG is authorized to issue directives on, and is thus responsible for, the Group-wide financial management and financial reporting processes.
On a quarterly basis, the finance managers and managing directors of the Group companies confirm compliance in writing with the defined principles on a quarterly basis and the execution of management controls with regard to the accounting process. Reports also have to be submitted regarding the appropriateness of controls for ensuring data integrity and data protection as well as in the event of fraud or serious infringements of the internal control system.
Material accounting and valuation topics and the impact of the new or changed IFRS standards and interpretations are discussed with the Group auditors in regular meetings held at least on a quarterly basis.
The internal audit department is part of the system of internal control and in its oversight function reviews compliance with and the effectiveness of the defined controls with regard to the accounting process. The annual audit plan is coordinated with the Managing Board and the Audit Committee of the Supervisory Board. This is where the areas of focus are defined. Additional ad hoc audits can also be performed at any time. All audit reports are submitted directly to the Chief Financial Officer and, on request, to the Managing Board as a whole. The internal audit department also reports regularly to the Audit Committee of the Supervisory Board.
Training and development of employees
Training sessions are organized at regular intervals for employees involved in the accounting process. Updates on accounting-related topics are also communicated across the Group via the “Accounting Newsletter”. The finance managers also meet at regular intervals with managers in the central finance department for the “Finance Manager Meeting”. Training is also held for finance employees of the entire Group on a regular basis under the auspices of the “Financial College” in current developments in international financial reporting and any topics relevant for preparing the annual financial statements.
