F I N A N C E P O L I C I E S U P D AT E Q 1 2 0 1 3
• Accounts Reconciliation
• Financial Statements
Close Process
• Manual Journal Entries
AGENDA
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ACCOUNT RECONCILITATION POLICY
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FINANCIAL STATEMENTS CLOSE PROCESS
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MANUAL JOURNAL ENTRY POLICY
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
ACCOUNT
RECONCILITION
POLICY
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
The following are key updates made to
the accounts reconciliation policy:
• Regional controllers are
responsible for the financial
statements of their region and
must design and implement
procedures to review the financial
statements to ensure accuracy;
• Quarterly checklist of all balance
sheet accounts reconciliation must
be reviewed and signed by the
local and regional controller and
uploaded to SharePoint with the
reconciliations file;
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
Example of quarterly checklist
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
• Each local controller must review
the quarterly flux analysis and
identify and investigate all unusual
and unexpected amounts and
fluctuations;
• Account reconciliations must be
reviewed by a supervisor/manager
who did not prepare the
reconciliation. Regional controllers
are no longer required to review all
the account reconciliations with
balances over $750K.
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
Why the updates?:
• We want to remind all local and
regional controllers, you are
responsible all the numbers in your
trial balance. It is your responsibility
to understand and ensure you and your
team have done enough review to
ensure the accuracy of the financial
statements.
• It is now a requirement that local
controllers review and sign the
quarterly checklist of account
reconciliations, as this is another
crucial step in the review process and
help you identify your potential risks.
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
• We have changed the requirement that controllers must review all
reconciliations over a threshold, but rather allow you to decide the level
of review of your accounts. However, we now require local and regional
controllers to review the quarterly checklist of all balance sheet
reconciliation to make sure you have adequate review(s) by the
appropriate member(s) of your team.
• In addition, we require that the local and regional controller state what
procedures you have performed, if any. We expect you to review
material and non-routine balances.
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
Other Areas of Emphasis:
•
We had many instances in prior years where it wasn’t clear who is
responsible and who is doing reconciliations of certain balances. This is
not acceptable. Regional teams own the trail balance. You must reach
out to the corporate team and confirm they are doing the
reconciliation. In addition, you are required to get a basic
understanding of what the balance is and how it interacts with the rest
of your trial balance.
Example: acquisition defer revenue adjustments, these are calculated
at corporate. However, the subsequent amortization is based on the
consumption pattern which is local operations. Changes in the
consumption pattern has to be communicated to corporate so they
change the amortization which affects your numbers.
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
Other Areas of Emphasis
(continued):
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•
All reconciliations must be
reviewed before submitting to
corporate as per the close
schedule and have evidence of
review and all supporting
documentation.
•
Proper evidence of the review
are i) Signature on the
reconciliation or ii) Email
stating the approver and that the
reconciliation been approved.
A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
Other Areas of Emphasis (continued):
•
BS reconciliation is not a download of Oracle journals posted in the
account for the period
• If there is a sub-ledger then it is a reconciliation of GL to
the sub-ledger, which we can go to the sub-ledger to get
what the balance sheet amount is made up of, such as AR
listing.
• If there is no –sub-ledger, then the reconciliation must
include a listing of the amounts that make up the balance
sheet amounts. Having the number of journals that make
up the balance is also not enough, for material amounts,
there must be enough details in the reconciliation to allow
the reviewer to conclude whether the accounting is
correct, e.g. is the amount still recoverable or should it be
expensed already, is it in the correct GL account.
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
Other Areas of Emphasis (continued):
•
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Procedures for preparing and reviewing
a reconciliation should be documented in
the reconciliation. This allows new staff
to do a better job and reduce the chance of
something not been done right. In
addition, if there were issues identify in the
review of a reconciliation, the cause of the
issue should be documented so it won’t
happen again. For example, balance from
last period that should be reversed in the
next period should be documented or
manual deferral of revenue should have
reminders to check that the COGS
associated with the order is been accounted
for correctly.
A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
Other Areas of Emphasis (continued):
•
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Your team members doing the
reconciliation has to understand what
they are doing and what they should be
looking for. If your team is small and
you do not have enough time, please
let the Global Finance Process team
know and we can help train your
staff. We have seen cases where staff
just makes sure the amounts agree to
GL and that is it. Example, bank
reconciliation, GL amount agrees to
bank statement so it is done. However,
the bank statements says this is a
Restricted Cash account.
A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
•
General format (per the company’s policy) - cash, AP, accrued expenses, other
assets and liabilities.
•
Specific reconciliations which require more details - AR, Inventory, warranty
reserve, deferred revenues &COGS, tax accounts.
•
Rollforward and waterfall- fixed assets, assets held for rentals, prepaid
expenses, intangibles, goodwill, deferred revenues.
Please contact consolidations team if you
are not familiar with the correct recon
format to be used
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
FINANCIAL
STATEMENTS CLOSE
PROCESS
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F I N A N C I A L S TAT E M E N T S C L O S E P R O C E S S
The Balance Sheet and Income Statement
Monitoring policy and Financial Statement
Close Process Policies have been combined
into one.
The key changes in the final Financial
Statements Close Process policy are as
follows:
• The global accounts owner and the consolidated group will no longer be
required to review account reconciliations of all accounts with balances
greater than $200,000. However, global accounts owners are still
responsible for reviewing their respective accounts for reasonableness
and ensure it is not materially misstated. The global account owner’s
plan procedures have to be reviewed and approved by the SVP
Corporate Controller.
• Corporate will no longer be required to review all journal entries booked
against inventory accounts for reasonableness.
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F I N A N C I A L S TAT E M E N T S C L O S E P R O C E S S
What to consider when doing the flux:
• Although the policy states that you must provide explanations on
variances for accounts with balances over $200K and variance of 10%
and $100K. This is the MINIMUM requirement. The key to a flux isn’t
just about variances. You have to understand the numbers and form an
expectation of what the balance should be then look at the variance to
ensure it’s inline with your expectation.
Example: an order was deferred in Q1
because of a delay in acceptance hence a
manual defer revenue and COGS entry
was recorded. Next quarter the acceptance
was received, however, the defer revenue
balance sheet flux shows no movement at
all. This is incorrect and the deferred
revenue and COGS should have been
released once the acceptance received.
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F I N A N C I A L S TAT E M E N T S C L O S E P R O C E S S
What to consider when doing the flux (continued) :
• We ask you (the controller) to review the flux since you are responsible of
your trial balance and have your fingers on the pulse of the operations to
know about key events and to be able to set the right expectations of what
balances should be and detect any large variances or lack of variance.
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F I N A N C I A L S TAT E M E N T S C L O S E P R O C E S S
What to consider when doing the flux (continued):
• For the P&L flux, we encourage you to not just compare prior period
numbers to current period but also compare your current results to
your budget since your forecast has better seasonality and headcount
fluctuations built in.
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A C C O U N T S R E C O N C I L I AT I O N P O L I C Y
MANUAL JOURNAL
ENTRY POLICY
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MANUAL J OURNAL ENTRY POLICY
The key changes in the Manual Journal Entry Policy are increases in the
approval threshold associated with the manual journal entry authority matrix:
• Local controllers increased from $100K to $250K;
• Regional controllers increased from $500K to $750K;
• Assistant corporate controller / International controller / VP of
Supply Chain increased from $1 million to $2 million;
• SVP Corporate controller increased from over $1 million to over $2
million.
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MANUAL J OURNAL ENTRY POLICY
What is a manual journal entry?
Manual journal entry is an entry where the journal been posted
does not come from the Oracle system. The numbers come from a
spreadsheet calculation, a Business Object report or other reports outside
of the financial system (Oracle).
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MANUAL J OURNAL ENTRY POLICY
Why do we need to have approval?
Numbers coming from a non-Oracle source have many possibilities of
errors, some key ones include:
• Spreadsheets – wrong formula used in a cell or the numbers been
used in the spreadsheet were transfer incorrectly from another source
or the person picked up the number from the wrong cell;
• BO reports – a standard BO report was used but GL accounts
changes but the BO report was not so the report is now incomplete or
the period for the report was entered incorrectly when running the
report or the report was incomplete;
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MANUAL J OURNAL ENTRY POLICY
Why do we need to have approval?
(continued)
• Information transfer mistakes –
wrong numbers;
• The GL accounting codes been
used may be entered into Oracle
as per the source document, but
the GL account code chosen was
inappropriate in the first place;
The point is every time, there is a manual journal entry, there is a
chance of mistake and the probability of error is not as low as you
think. Therefore, every manual journal needs to be reviewed and
approved.
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MANUAL J OURNAL ENTRY POLICY
Manual journal entry review
The 1st reviewer is the detail reviewer. It is your responsibility to
check the numbers including re-calculation and checking every source
data and ensure the GL accounts to be used are appropriate. If an error
was noted, the control failed at the 1st level reviewer, you did not
conduct a proper review.
Evidence of review and approval is either a manual signature or an email
approval.
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MANUAL J OURNAL ENTRY POLICY
Non-Oracle entities
• The approval process is the same, if you are a non-Oracle entity, every
single journal that is not automated, is a manual journal entry. Every time
there is a manual input to transfer a number there is a potential for error, it
needs to be reviewed and approved.
• The VFI policy on required additional approval for manual journal entry
is clear, you must follow it. There are no exceptions.
• If the regional controller is not at the same location, you email the journal
with support and ask them to review and approve, an email approval is in
compliance with the policy.
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