Journal Entry & Reporting
“To-Be” Process Design
September 13, 2001
Agenda
Agenda 1
• Meeting Objectives
Agenda 2
• Key Design Assumptions
Agenda 3
• Process/Sub-processes Design:
• Master Data Maintenance
• Capture Financial Transactions
• Month-end/Year-end Closing
• Financial Reporting
Agenda 4
• Key Design Issues/Concerns
• Next Steps
Page 2
Meeting Objectives
•
•
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To present and discuss the subsidiaries’ Journal Entry and
Reporting “To-Be” Processes
To identify additional activities/scenarios that needs to be
addressed
To address design issues that may impact next stages of
FMS project implementation
Page 3
Key Design Assumptions
•
•
•
•
•
•
•
•
Subsidiaries will use a single Chart of Accounts
Financial and Cost Accounting of the subsidiaries will be
centralized as well as maintenance of G/L Master Data
Processing of financial transactions will be consistent with ABSCBN parent whenever applicable
All inter-company transactions except Airtime Revenue will be
booked and treated arms-length
Powerbundle Distribution System will be replaced by Customer
Management System 2
Film Rights Monitoring System will be rolled-out to CPI
No foreign currency accounts will be maintained by the
subsidiaries
Payroll is manual
Page 4
Journal Entry and Reporting
Process
SUB-PROCESSES:
Master Data
Maintenance
Capture Financial
Transactions
Month-end/ Yearend Closing
Financial Reporting
OBJECTIVES:
• Ensure proper and consistent recording of financial transactions across subsidiaries.
• Provide timely and relevant reports showing financial position of the subsidiaries as well as addressing statutory
requirements.
Page 5
Journal Entry and Reporting
Process
JER Sub-Processes
Objectives
JER 1.0 Master Data Maintenance
• To maintain single Chart of Accounts
• To ensure consistent application and treatment of GL
accounts
JER 2.0 Capture Financial Transactions
• To ensure proper capture of transactions consistent with
ABS-CBN parent
• To minimize # of manual journal entries/adjustments done
by the subsidiaries
JER 3.0 Month-end/Year-end Closing
• To reduce month-end activities and spread-out GL
processing throughout the month
• To decrease manual processes
JER 4.0 Financial Reporting
• To simplify financial reporting and decrease manual
processes
Page 6
JER 1.0
Master Data Maintenance
JER SUB-PROCESSES:
Master Data
Maintenance
Capture Financial
Transactions
Month-end/ Yearend Closing
Financial Reporting
KEY PERFORMANCE INDICATORS (KPIs):
• Turnaround time from update notification to activating change in GL master data (including notification).
– As - is: 1 hour
– To – be: 1 hour
Page 7
JER 1.0
Master Data Maintenance
ACTIVITIES:
Maintain GL
Master Data
Maintain Primary
and Secondary Cost
Elements
Maintain Financial
Statement Versions
DESIGN HIGHLIGHTS:
• Single Chart of Accounts for ABS-CBN parent and subsidiaries
• Restriction of GL accounts per company code to the accounts being used by each
subsidiary
• On-line GL Master Data Maintenance request and approval
• New GL accounts are to be created for Studio23 and CPI :
GL Accounts
Account Nature
Company
Bank Accounts:
- Main Bank
- Deposit Clearing
- Payment Clearing
- Suspense Clearing
To capture balances of bank accounts. A set of 4 GL
each bank account maintained by the subsidiaries. (Cash
Category)
S23,
CPI
Page 8
JER 1.1
Maintain GL Accounts
General Procedure :
Fill-out On-line
Request Form
Type of Requests :
- Add GL account
- Update GL account
- Block GL account
- Delete GL account
Review/Approve
Request
Approved ?
YES
Forward request to
Accounting Staff
Encode changes in
GL Master Data
Responsibility of
Finance Accounting
Staff
Responsibility of
Finance Accounting
Manager
NO
Notify requestor
of disapproval
Reason/
justification for
denial must be
indicated
Page 9
JER 2.0
Capture Financial Transactions
JER SUB-PROCESSES:
Master Data
Maintenance
Capture Financial
Transactions
Financial Reporting
Month-end/ Yearend Closing
KEY PERFORMANCE INDICATORS
(KPIs):
AS-IS
TO-BE
S23 & AMCARA
CPI
ANC
S23 & AMCARA
CPI
ANC
# of manual of journal entries per month
120
40
55
50
50
50
# of manual repostings per month
3
3
3
3
3
3
Page 10
JER 2.0
Capture Financial Transactions
ACTIVITIES:
Create Journal
Adjustments
Upload Journal
Entries from Legacy
Systems
Integrate with
other SAP
Modules/
Components
DESIGN HIGHLIGHTS:
• Capture transactions at source
•
Sub-ledgers to be owned by unit who owns the transactions
•
Fewer transactions requiring controller’s approval
•
Use of text field to capture transaction details instead of maintaining sub-ledgers
•
Minimize journal entries by interfacing from external systems, using upload GL
program for voluminous transactions, using SAP templates, variants and recurring
entries
Page 11
JER 2.0
Capture Financial Transactions
DESIGN HIGHLIGHTS (continued) :
•
The following journal entries will no longer be done manually :
Journal Entry Description
To-Be Process
Accruals :
- revenue
- employee bonuses
- utilities (water, electricity & janitorial
services)
- automated interface
- to be set-up as recurring entries
- do -
Amortization :
- film rights
- pre-operating expenses
- automated interface
- to be set-up as recurring entries
Depreciation
- automated c/o Asset Accounting
Charges from ABS-CBN
- to be handled by multi-company set-up
Booking of Ex-deal consumptions/availments
-c/o Accounts Payable,
Accounts Receivables
Program cost allocation
- automated c/o Cost Accounting
Bank Reconciliation Adjustments
- automated c/o Financial Accounting
Page 12
JER 2.1
Create Journal Adjustments
General procedures for requesting manual journal adjustments will be the same as
ABS-CBN parent :
Fill-out On-line
Request Form
Required Information:
- Amount
- Debit and Credit Accounts
- Purpose/rationale
Review/Approve
Request
Responsibility of :
- Dept/Div Head
- Finance Accounting
Manager
Note:
- Request form will be obtained via Lotus Notes
- "Parking" facility in SAP will not be used in approval
process
- Acctg. staff will indicate SAP doc number in request
form
- All request forms will be kept on file for reference
- Any A/R & A/P requests for adjustments will be
forwarded to A/R & A/P staff for booking
Requires 2nd
Level Approval?
NO
YES
Forward to
Controller
Forward request
to Accounting Staff
Encode journal
entries
Responsibility of
Finance Accounting
Staff
YES
Notify requestor of
disapproval
Approved ?
NO
Transactions requiring 2nd
Level Approval:
- Major Accruals
- Write-offs
- Consolidation Entries
- Income tax related
entries
- Adjustments resulting
from reconciliation and
analysis
Reason/justification
for denial must be
indicated
Page 13
JER 2.1
Create Journal Adjustments
•
Key transactions to be captured thru journal entries :
G/L Accounts
Subsidiaries
S23
AMCARA
ANC
CPI
A. Profit and Loss Accounts
Revenue Deductions :
Co-Producer’s Share
(Includes co-production expenses)
Agency Commission
Production Costs :
Talent Fees
Dubbing Charges
Salaries and Employee Benefits – Production :
Operating Expenses :
Salaries and Employee Benefits
Other Income and Expenses :
Interest Income :
(For CPI, this will include realized interest income from the decoder units sold to
cable operators through “lease-to-own” agreement.)
B. Balance Sheet Accounts
Cash & Cash Equivalents :
Gift Certificates
(The issuer and the control number of gift certificates will be indicated in the text field
instead of maintaining sub-ledgers.)
Short-term Investments :
Commercial Papers Purchased
Marketable Securities
Other Short-Term Investments
Prepaid Expenses :
Prepaid Insurance, Taxes and Licenses
Prepaid Interest, Deferred Production Cost
Prepaid Rent, Other Expenses
Other Assets and Deferred Charges :
Pre-operating Expenses
Deposits and Bonds
Goodwill
Trademarks and Copyrights
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Page 14
JER 2.2
Upload Journal Entries
•
Main interfaces to SAP are as follows :
Legacy Systems
Interface Frequency
To-be Captured Transactions
Film Rights Monitoring System (FRMS)
Weekly
- Film Rights Amortization
- Expired rights
Amounts to be booked based on each subsidiary’s guidelines
and procedures.
Integrated Traffic System (ITS)
Daily
- Airtime Revenue (including block time)
- Government revenue to be recognized for ANC and CPI.
Revenue is recognized upon airing regardless if billed or not,
as provided by ITS.
Customer Management System 2 (CMS2) Monthly
- Cable Affiliate Subscription Fees
Revenue recognized monthly upon subscription.
Page 15
JER 2.3
Integration
•
Apart from manual journal entries and automated interfaces, most of the financial transactions will be automatically posted by the other
SAP Modules and FI Module Components:
Account Categories
Transactions
Source
Cost of Sales and Services
- Channel Carriage Cost
Accounts Payable
Production Costs
- Wire Services
- News Service Fees
- Set Requirements
- Equipment, Facilities and Manpower Charges
- Prizes
- Catering and Food Expenses
- Transportation and Travel
- Presscon and Launching Expenses
- Rent and Utilities
- Communications Expense
- Supplies Expense
- Printing and Reproduction Expenses
- Advertising and Promotions
- Representation and Entertainment
- Training, Seminars, Workshops & Conferences
- Insurance
- Freight and Delivery Expenses
- Service Fees
- Other Program Expenses
Accounts Payable or
Materials Management
- Transactions under this category are booked as incurred by
Accounts Payable
Page 16
JER 2.3
Integration
(continued):
Account Categories
Transactions
Source
General and Administrative Expenses
-Under Fixed Assets, depreciation expense are
automatically computed through depreciation runs and
are likewise automatically posted to the General Ledger;
- Most of the transactions captured through Accounts
Payable are already set-up as recurring entries that are
automatically booked monthly
- Depreciation (Various Fixed Assets)
- Amortization of Pre-operating Expenses
- Normal Operating Expense (Rent, Utilities, Supplies, Insurance,etc)
- Printing and Reproduction Expense
- Dues and Subscriptions
- Advertising and Promotions
- Representation and Entertainment
- Training, Seminars, Workshops & Conferences
- Transportation and Travel
- Legal and Professional Fees
- Research and Survey Expense
- Freight and Delivery Expenses
- Service Fees
- Taxes, Licenses and Fees
- Catering and Food Expenses
- Amortization of Goodwill
- Provision for Doubtful Accounts
Fixed Assets
Accounts Payable
- Gain on Disposal of Fixed Assets
- Bank and Other Service Charges
Fixed Assets
Finance - Bank
Other Income and Expenses
General Ledger
Accounts Receivable
Page 17
JER 2.3
Integration
(continued):
Account Categories
Transactions
Source
Cash and Cash Equivalents
- Cash on Hand
- Revolving Fund
Sales and Distribution or Accounts
Receivable
Accounts Payable
- Bank Accounts (BPI, Union Bank, Equitable PCI)
- Program Fund
Finance - Bank
Accounts Payable
Accounts Receivable
- Accounts Receivable - Trade
- Accounts Receivable - Non-trade
Accounts Receivable
Advances to Officers and Employees
- Advances Against Salaries
- Advances – Car Loans
- Advances Subject to Liquidation
Accounts Receivable
Materials and Supplies Inventory
- Materials and Supplies Inventory
- Materials and Supplies Inventory – In-transit
- Allowance for Inventory Losses and Obsolescence
Materials Management
Program Rights
- Film Rights – Foreign
- Film Rights – Local
- Music Rights
Accounts Payable
- Revolving Fund and Program Fund SL
will not be maintained. Instead,
employees will be set up as vendor to
track petty cash fund usage;
- Bank reconciliation will be automatic while adjustments
will be processed by GL
- Payroll will maintain employee
subsidiary ledgers that will track
advances and deductions;
- Advances Subject to Liquidation SL will
not be maintained. Instead, employees
will be set up as Vendors in A/P
- This shall be set-up by Accounts Payable based on the
contract.
Page 18
JER 2.3
Integration
(continued):
Account Categories
Transactions
Source
Due to/from
- Due to/from Parent
- Due to/from Affiliated Companies
- Inter-Company Clearing
Accounts Payable / Accounts Receivable
Property and Equipment
(Various accounts)
Fixed Assets
Accumulated Depreciation
(Various accounts)
Fixed Assets
Accounts Payable
- Accounts Payable - Trade
- Accounts Payable – Non- Trade
Accounts Payable
Accrued Expenses
- Accrued Salaries and Wages
- Accrued 13th Month Pay, Bonuses and Allowances
- Accrued Sales Commissions
- Accrued Marketing Expenses
- Accrued Rent
- Accrued Taxes and Licenses
- Accrued Production Services Fee
Accounts Payable
Income and Other Taxes Payable
- Income Tax Payable
- Output Tax Payable
- Withholding Taxes Payable (Compensation, Expanded, Final)
- Fringe Benefit Payable
Accounts Payable
Due to Film Suppliers
- Due to Film Suppliers – Current Portion
- Due to Film Suppliers – Non-current Portion
Accounts Payable
(Transactions that fall under this
category is identified as one of the
design issues to be discussed later)
- A separate account is set-up for each
Property and Equipment except Land
(Details to be discussed in Month-End/Year-end Closing)
- Each film supplier will be set up as
vendor in A/P
Page 19
Month-end/Year-end Closing
Sub-process
JER SUB-PROCESSES:
Master Data
Maintenance
Capture Financial
Transactions
Month-end/ Yearend Closing
Financial Reporting
KEY PERFORMANCE INDICATORS (KPIs):
• Turnaround time required for closing the books. (Closing does not include consolidation of parent and subsidiary
financial statements,)
– As - is: 10 days
– To – be: 5 days
Page 20
JER 3.0
Month-end/Year-end Closing
Accrual/
Deferral of
Revenue/
Expenses
Reconciliation
of GL and SL
balances
Review of
Clearing
Accounts
Applicable to yearend closing only
Generate
Trial
Balance/
Schedules
Consolidate
and Generate
Consolidated
Financial
Statements
Open/Close
Posting
Period
CarryForward
Balances
Applicable to ABS-CBN
Financial Reporting sub-process
Page 21
JER 3.1
Accrual/Deferral
Accrual/
Deferral of
Revenue/
Expenses
Reconciliation
of GL and SL
balances
Review of
Clearing
Accounts
Applicable to yearend closing only
Generate
Trial
Balance/
Schedules
Consolidate
and Generate
Consolidated
Financial
Statements
Open/Close
Posting
Period
CarryForward
Balances
Applicable to ABS-CBN
Financial Reporting sub-process
Page 22
JER 3.0
Month-end/Year-end Closing
DESIGN HIGHLIGHTS:
•
•
•
Remove as part of the manual process the reconciliation of GL and SL
balances of A/R, A/P and Fixed Assets
Remove as part of the manual process the reconciliation of Due to/Due
from Accounts for company codes in SAP
Spread-out processing of transactions:
– Amortization of prepayments for Insurance, Taxes, Rent will be set-up up-front
by Accounts Payable via recurring entries.
– Accruals/deferrals that are based on budget need not be done at month-end
•
•
Centralized control for opening/closing posting periods.
Auto-reversal of accruals/deferrals to avoid double charging
Page 23
JER 3.1
Accrual/Deferral
ACCRUALS:
Transaction
Operating
Expenses
Production
Expenses
Directors
Compensation
Comment
Accrual of operating
expenses will be done by
A/P and will be based
on actual expenditures
incurred (if known) or
prior period
expenditures.
For those programs that
have already been aired
and not yet liquidated,
advances will be
accrued.
Accrual of director’s
compensation will be
manually done by
Financial Accounting.
Accruals will be based
on budget figures.
S23
ANC
AMCARA
CPI
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Page 24
JER 3.1
Accrual/Deferral
ACCRUALS (continued):
Transaction
Employee Bonuses
Unbilled invoices
Comment
Accrual of employee
bonuses will be
manually done by
Financial Accounting.
Accruals will be based
on budget figures.
SAP will interface with
ITS and
CMS on a daily basis,.
As such, timing
difference on the
recognition of revenue
will still be expected and
thus, needs to be
accrued at month-end.
Revenue accrual will be
performed by A/R.
S23
ANC
AMCARA
CPI
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JER 3.1
Accrual/Deferral
DEFERRALS:
Transaction
Prepayment
Amortization
Pre-production
Expense
Comment
Amortization of prepaid interest will
be handled by Financial Accounting
at month-end.
Amortization of prepayments for
insurance, taxes, and rent will be setup up-front by A/P via recurring
entries. When Financial Accounting
executes recurring entries at month
end, the recurring entries set up by
A/P will also be included in the
processing.
Currently, Studio 23 and CPI do not
use this account because station
produced shows are aired
immediately. However, in the event
that there will be programs that will
not be shown immediately, liquidated
expenses should be set up as preproduction expense at month-end and
reversed immediately the next month
for reporting purposes.
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S23
ANC
AMCARA
CPI
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Page 26
JER 3.2
Reconciliation of GL & SL
Accrual/
Deferral of
Revenue/
Expenses
Reconciliation
of GL and SL
balances
Review of
Clearing
Accounts
Applicable to yearend closing only
Generate
Trial
Balance/
Schedules
Consolidate
and Generate
Consolidated
Financial
Statements
Open/Close
Posting
Period
CarryForward
Balances
Applicable to ABS-CBN
Financial Reporting sub-process
Page 27
JER 3.2
Reconciliation of GL & SL
Reconciliation will have to be done for the following accounts:
Transaction
Bank
Reconciliation
Advances to
Officers and
Employees
- Salaries
- Car Loan
- Talents
Program Rights
Film Rights –
Foreign/Local
Due to/Due from
Affiliates (by
subsidiary)
Comment
This will still require
reconciliation with the
balances per bank.
Bank reconciliation will
be performed by
Financial Accounting
In SAP, only GL
balances will be
maintained for these
accounts. Employee SL
balances for each of
these accounts will be
available in Payroll
In SAP, only GL
balances will be
maintained for these
accounts. Program
rights SL balances for
each of these accounts
will be kept in Film
Rights Monitoring
System
(If not in SAP) This will
still require
reconciliation with the
respective subsidiaries.
S23
ANC
AMCARA
CPI
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Page 28
JER 3.3
Review of Clearing Accounts
Accrual/
Deferral of
Revenue/
Expenses
Reconciliation
of GL and SL
balances
Review of
Clearing
Accounts
Applicable to yearend closing only
Generate
Trial
Balance/
Schedules
Consolidate
and Generate
Consolidated
Financial
Statements
Open/Close
Posting
Period
CarryForward
Balances
Applicable to ABS-CBN
Financial Reporting sub-process
Page 29
JER 3.3
Review of Clearing Accounts
The following clearing accounts will have to be set-up in the system and have to be reviewed at monthend to ensure that the account has a zero balance.
GL Account
GR/IR Clearing Account
Bank Reconciliation Clearing
Accounts
 Bank – Deposit Clearing
 Bank Clearing - Payment Clearing
 Bank – Suspense Clearing
Inter-Company Clearing Account
Comment
Used as clearing account when goods are
received and when goods are invoiced. This
should zero out when goods have been received
and invoiced in SAP.
These reconciliation accounts are set-up for each
bank account subject to reconciliation.
Inter-Company transactions will be initially
posted to this account and closed to the Due
to/Due from accounts upon reconciliation. Refer
to Capture Financial Transaction Sub-process
for details on usage of this account.
Page 30
JER 3.4
Generate Trial Balance/Schedules
Accrual/
Deferral of
Revenue/
Expenses
Reconciliation
of GL and SL
balances
Review of
Clearing
Accounts
Applicable to yearend closing only
Generate
Trial
Balance/
Schedules
Consolidate
and Generate
Consolidated
Financial
Statements
Open/Close
Posting
Period
CarryForward
Balances
Applicable to ABS-CBN
Financial Reporting sub-process
Page 31
JER 3.4
Generate Trial Balance/Schedules
The following reports will be generated to facilitate review of interim Financial Statements:
 Trial balance
 Expense Schedules
Use standard BS/PL report
Use standard SAP
Users will process the adjustment in GL, A/R or A/P of the concerned period.
Page 32
JER 3.5
Consolidation
Accrual/
Deferral of
Revenue/
Expenses
Reconciliation
of GL and SL
balances
Review of
Clearing
Accounts
Applicable to yearend closing only
Generate
Trial
Balance/
Schedules
Consolidate
and Generate
Consolidated
Financial
Statements
Open/Close
Posting
Period
CarryForward
Balances
Applicable to ABS-CBN
Financial Reporting sub-process
Page 33
JER 3.6
Open/Close Posting Period
Accrual/
Deferral of
Revenue/
Expenses
Generate
Trial
Balance/
Schedules
Reconciliation
of GL and SL
balances
Review of
Clearing
Accounts
Applicable to ABS-CBN
Applicable to yearend closing only
Open/Close
Posting
Period
CarryForward
Balances
Consolidate
and Generate
Consolidated
Financial
Statements
Applicable to ABS-CBN
Financial Reporting sub-process
Page 34
JER 3.6
Open/Close Posting Period
• Financial Accounting unit in ABS-CBN Parent will control closing period in SAP: General Ledger, Customer
Ledger, Vendor Ledger, Inventory Ledger and Asset
• Calendar year will be maintained as the GL posting periods
Posting Period
1-12
13
14
Description
These posting periods correspond to the calendar month. These will
capture the regular monthly transactions.
This posting period will be used to capture adjustments resulting from
investments in subsidiaries.
This posting period will be used to capture External Auditor
adjustments.
Policy on closing of period - All modules will be closed by end of day of the first working day of the new
month. Only one period will be kept open at any time; however during the period closing, the GL module
will be kept open until the 5th working day of the new month (target closing period).
Page 35
JER 3.7
Carry-Forward Balances
Accrual/
Deferral of
Revenue/
Expenses
Reconciliation
of GL and SL
balances
Review of
Clearing
Accounts
Applicable to yearend closing only
Generate
Trial
Balance/
Schedules
Consolidate
and Generate
Consolidated
Financial
Statements
Open/Close
Posting
Period
CarryForward
Balances
Applicable to ABS-CBN
Financial Reporting sub-process
Page 36
JER 4
Financial Reporting
JER SUB-PROCESSES:
Master Data
Maintenance
Capture Financial
Transactions
Month-end/ Yearend Closing
Financial Reporting
KEY PERFORMANCE INDICATORS (KPIs):
• Accuracy of month-end reports
• Reduction in number of ad-hoc requests for management reports
Page 37
JER 4
Financial Reporting
Generate
Financial
Statements
The following basic financial reports will be generated for each company under the ABS-CBN group of
companies:
• Balance Sheet
• Income Statement
• Cash Flow
• Details of Receivables and Payables
• Details of Due to/from Subsidiaries
• Details of Due to/from Affiliates
Page 38
JER 4
Financial Reporting
SAP Generated
• Aging of Accounts Receivable
• Property and Equipment
• Accumulated Depreciation
• Depreciation and Amortization Schedules
Manually Prepared (if applicable)
• Outstanding Claims/Lawsuits
• Details of Bank Loans
• Marketable Securities and Investments
• Accounts Receivable from Directors, Officers, Employees and
other Related Parties
Page 39
Key Design Issues/Concerns
1.
On inter-company transactions :
–
–
–
–
2.
Treatment CPI unique transactions :
–
–
3.
4.
Decision on whether cross-company posting will be allowed
End-date to formalize policy, “No contract, no charge.” for booking intercompany transactions. This should include approval procedures to cover
exceptions, if any.
List of all inter-company transactions between parent-subsidiary and
between subsidiary-subsidiary
Use of inter-company clearing account only for balance sheet transactions
(i.e. sweeping)
Recording/booking of postdated check payments
Booking of sale of decoder units under “lease-to-own” agreement
Roll-out of Film Rights Monitoring System to CPI
Roll-out of Payroll System/PCR to subsidiaries
Page 40
Next Steps
To-Do’s
Responsibility
Target End-Date
Resolve design issues
Process Owners & Delegates
?
Update and finalize design documents
FMS Team
?
Sign-off design documents
Process Owners
?
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