Carrefour S.A. is a French multinational retailer headquartered near Paris. Second only to Walmart in terms of worldwide retail sales, the company operates in Europe, Central and South America, China, and the middle east. Unlike Walmart, most Carrefour stores are smaller than a typical supermarket. Carrefour means "crossroads" and "public square" in French. The company uses IFRS for its financial reports and reports the following details about its investments in associates, which are accounted for using the equity method:

Required

a. Carrefour holds between \(20 \%\) and \(50 \%\) ownership of all its investments in associates. Carrefour uses the equity method to account for these investments. Why?

b. What amount does Carrefour report on its balance sheet for investments in associates at December 31,2012 ? Is this a fair value or not?

c. For the fiscal period ended December 31, 2012, were Carrefour's associates profitable, in the aggregate?

d. How do changes in the market value of the associates' stock affect the "Investment in associates" balance sheet account for Carrefour?

e. How does use of the equity method impact Carrefour's ROE and its RNOA components (net operating asset turnover and net operating profit margin) as compared with the assets and liabilities and the sales and expenses that would be recorded with consolidation?

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(in millions) At December 31, 2010. Translation adjustment.. Equity in net income.. Dividends received.. Other.... At December 31, 2011. Translation adjustment. Equity in net income.. Dividends received. Other.... At December 31, 2012. 256 (2) 64 (26) (13) 280 (2) 72 (27) 61 384