Danone // 2020 Universal Registration Document

Overview of activities, risk factors 2.7 Control environment DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 36 The Consolidation, Reporting&Standards Department is responsible for the actual consolidation of the reports and consolidation pac- kages, the elimination and consolidation entries, and the following key control stages: • validation, throughout the year, of the main accounting options adopted by the subsidiaries and corporate functions and simu- lation of complex transactions in the consolidation software; • in-depth review of certain subsidiaries’ monthly reports at the end of May and November (known as the hard-close procedures) based on the specific risks and transactions identified for prepa- ring the interim and annual consolidated financial statements, respectively; • (i) preparatory meetings with the financial staff of the main subsidiaries and the Cluster Business Services covering them based on the specific transactions and risks identified; and (ii) presentations to the Audit Committee (specific transactions during the period, the main accounting options concerning the closing and the potential significant changes introduced by developments of the International Financial Reporting Standards) (see section 6.1 Governance bodies ); • during closings: analysis and validation of the most significant line items of the consolidated financial statements (intangible assets, taxes, equity, provisions, liabilities, etc.). The control activities are therefore conducted at all of the Company’s hierarchical and functional levels and include a variety of actions such as approving and authorizing, verifying and reconciling, asses- sing operational performances, ensuring the protection of assets and monitoring the segregation of duties. The audits conducted independently by the Internal Audit Department provide appropriate validation. In particular, the internal audits conducted at the Category Business Units and Cluster Business Services are aimed primarily at verifying the quality of the accounting and financial information. Lastly, detailed audits are conducted on the key control procedures in the preparation of financial information (particularly published disclosures) at the subsidiaries and at Danone’s headquarters and on their effective application. These activities, which are intended to control the accounting and financial information provided by the consolidated subsidiaries, as well as the internal control procedures used to prepare the consolidated financial statements, are adequate to provide reliable accounting and financial information. Management of risks related to the preparation and processing of financial and accounting information When these risks are identified, Danone monitors and manages them as follows: • the Reporting Entities’ Finance Departments ensure that the action plans established subsequent to internal and/or external audits and work on key controls have been carried out correctly, and improvement of the process related to preparing and pro- cessing financial information is one of the responsibilities of each Reporting Entity’s finance director and each function manager; • the risks identified in the results obtained from the annual assessment of internal control (DANgo) and internal audits are subject to specific monitoring; • in addition, the main identified risks are monitored during the strategic planning and performancemonitoring processes, during the regular meetings mainly attended by the finance functions (and during the meetings of the Risks Executive Committee and the Executive Committee); • the internal control system is adapted on the basis of the risks identified. Financial and accounting information production systems SAP/Themis integrated information system The management and optimization of information flows for the financial functions as well as the purchasing, industrial, quality, supply chain and sales functions, both within the subsidiaries and between them, is performed primarily through the SAP/Themis integrated information system. This application is steadily being rolled out at the subsidiaries. As of December 31, 2020, the activities supported by Themis accounted for 85% of Danone consolidated sales. The roll-out of Themis will continue in 2021, particularly with the completion of the integration of theWhiteWave group companies. Consolidation and reporting software Monthly financial reports and, more generally, the financial infor- mation used to manage and control the activities of the operating units are produced by a unified information system (SAP/Business Objects Financial Consolidation). This system is also used to pro- duce the interim and annual consolidated financial statements. The procedures related to the security, use and development of new features of this consolidation system are documented.