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Euro Disney - Case Study

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Identify the key accounting policies (step 1) and primary areas of

accounting flexibility (step 2) for Euro Disney
Key accounting policies

Euro Disney Associés has opted for financial lease. The firm leases the

Disneyland Park from Euro Disneyland S.N.C. EDL Hotels S.C.A., which is owned for 99,99% by Euro Disney Associés, leases the hotels from a specialpurpose financing company.

The special-purpose financing companies are fully consolidated in Euro

Disney’s financial statements. The substance of the relationship between the group and these financing companies is such that they are effectively controlled by the group.
Areas of accounting flexibility

The personnel is transferable between the park and the hotels and

vice versa. This way, the company copes with the fact that 90% of the employees have a permanent contract.

Euro Disney can defer the payments of interest, royalties and

management fees that it has to pay to The Walt Disney company, when the actual performance is less than the contractually agreed benchmark.

The debt covenants limit the amount of new debt capital that Euro

Disney can attract to $50 million.


What incentives may influence managing reporting strategy (step 3)?

The CEO of the Gérant, Philippe Gas, could obtain a discretionary

annual bonus based on the individual performance relative to the objectives of the company. Moreover, he also obtains discretionary grants of the company’s stock options, The Walt Disney Company’s stock options and The
Walt Disney Company’s restricted stock.

In 2005, Euro Disney obtained waivers for certain debt covenants from

The Walt Disney Company.

In 2008, the firm did not recognize any asset write-offs which

influences the net income positively.


What disclosures would you consider an essential part of the...

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