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CHAPTER:
SECTION:
POLICY:
3.0 Accounting
Other Transactions
3.900 Inter-company Transaction Guidelines
Segment Service Fee for Global Business Unit (GBU) Segment Service Fees are costs
incurred for maintaining a Segment Office for the benefit of the Business Units. These costs are
charged to all Segment Business Units reporting to this Segment (GBU) Office. The Segment
Service Fee percentage is determined based on the third party Net Sales of all participating
Business Units using the 3 years average Net Sales translated at the current year Mars Plan &
Consolidation Rates (MPCR rates).
The Segment Office communicates the appropriate service fee percentage during the planning
process, and this amount is used by the Business Units to record their planned Segment Service
Fee expense based on third party Net Sales. The planned amounts are paid each period to the
Segment Offices. The account to be used is under Other Operating Costs in the Service
Fee/Segment Office account (FPPS 37309/FIS F17505_TIC). The periodic invoicing is in the
Segment Offices currency using current year Plan Rates (MPCR) for purposes of calculations
and allocations.
An estimated total year true up will be made in Period 12. The true up is based on Period 11
actuals with an estimate of Period 12 and Period 13 costs. The Period 12 true up is recorded to
Other Non-Operating Costs while the Period 12 and Period 13 costs are recorded to Other
Operating Costs. The Segment Office reconciles the Segment Service Fee collected with actual
Segment Office expenses and updates the allocation using actual year-to-date third party Net
Sales. The over or under collection for each Business Unit is credited or charged based on actual
activity. The true up adjustment is recorded in Other Non-Operating Income and Expense in the
Segment Service Fee True Up Total account (FPPS 17709/38572). The true-up invoicing is
prepared in the Segment Offices currency using actual currency rates for purposes of
calculations and allocations.
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Regional & Expert Centers These centers exist to provide support to Business Units within the
region. An example of these include the Regional Treasury & Benefits Centers. Regional and
Expert Centers will recover all of their costs within the region.
Shared Cost Service Center (SC2) Exists to facilitate the administration of certain global
shared programs. This includes the administration of Cost Sharing Agreements, allocation keys
and processes, periodic billings of the global programs administered, reporting on the global
program activity. All programs administered by SC2 are approved for inclusion in their activity by
their steering committee.
Direct Costs Incurred on behalf of another Business Unit A Business Unit may negotiate
contracts on behalf of another Business Unit(s); however, the invoicing arrangements within
these contracts must be direct to all participating Business Units from the vendor. This is done to
minimize the amount of cross charges between Business Units for shared contracts.
Exceptions to this policy require approval from the Business Units Regional S&F Staff Officers or
the Corporate Financial Controller if a Business Unit does not have an assigned Staff Officer.
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Facilities and equipment costs for Associates based at a site other than where their costs
are absorbed (e.g. Corporate Staff located outside of MVA) The facility costs (only for services
to operate the facility) and equipment costs (only to the extent the equipment is purchased
directly for the benefit of the hosted Associate) incurred by a Business Unit on behalf of another
Business Unit may only be cross-charged to the Associates home office if they meet either of the
following criteria:
The Business Unit has twenty (20) or more Associates from other Business Units based
at its site; or,
The Business Units total facility and equipment costs attributable to the Associates from
other Business Units based at its site are greater than 10% of the total facility and
equipment costs for the respective period.
The exception to this requirement is if both Business Units agree in advance to reimburse the
costs prior to hosting the Associate which must be evidenced in writing. Business Units cannot
cross-charge building depreciation.
All cross charges for these costs must be labelled and included as service revenue. Under no
circumstances should equipment costs be invoiced and labelled/identified as equipment
depreciation expense or cross charged separately as a single line item within the intercompany
invoice. The amount cross charged by the host Business Unit cannot exceed the equipment
depreciation expense recognized by the host Business Unit for the respective period. The
equipment must reside on the fixed asset subledger of the Business Unit originally purchasing the
property from the third party vendor which typically is the host Business Unit. The host Business
Unit does not reverse the equipment depreciation expense for the respective period on the host
Business Units local ledger.
Minimum Invoice Amount To achieve administrative efficiency, and to avoid the transfer of
costs immaterial to both the billing and receiving Business Units, no invoice less than $1,000
USD (or its local currency equivalent) may be cross-charged (except as noted in the paragraph
below). Business Units are encouraged to reject invoices that are less than the $1,000 required
minimum expenditure amount. Additionally, Business Units are required to invoice/cross charge
within 2 periods after receipt of the invoice from the third party vendor. Receiving Business Units
are encouraged to reject invoices with cross-charges that are over 2 periods old. The sending
Business Unit is required to invoice a cost within 2 periods of incurring the cost otherwise the
cross-charge is not considered timely which is inconsistent with the Efficiency Principle and may
provide a hardship to the receiving Business Unit to plan for the costs appropriately. If the costs
are not invoiced within 2 periods, the Business Unit is responsible for those costs and cannot
cross charge for the costs.
Exceptions to the $1,000 threshold must be agreed in advance in writing between the Business
Unit S&F Head or their delegate of both Business Units. Exceptions to the 2 period limit must be
approved in writing by the Business Units Regional S&F Staff Officer or the Corporate Financial
Controller if a Business Unit does not have an assigned Staff Officer.
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Escalation Contact
Resolution Deadlines
Intercompany Specialists
S&F manager
Monday of Week 1
Monday of Week 2
Monday of Week 3
Upon Notification by S&F Head
If a dispute is initiated by the receiving Business Unit; it is the responsibility of the billing Business Unit to
provide the requested support/documentation to resolve the dispute. In all circumstances, the billing
Business Unit has the responsibility of resolving errors/omissions/etc. If an agreement is not reached
before the period is closed, both Business Units involved with the transaction are required to
record the intercompany receivable or payable as initially determined by the sending Business
Unit. The corresponding side of the journal entry (debit or credit) may be recorded in the following
manner based upon the nature of the entry and whether the entry is Inventory related or P&L impacting:
If the dispute is Inventory related, the Business Unit receiving the cross charge must record the
invoice to their balance sheet. The billing Business Unit would not change their P&L
classification.
If the dispute is P&L (Income Statement) related\, the Business Unit receiving the cross charge
may record the invoice to the I/C to X-Charge Next Period account (FPPS 39707/HFM 10411).
The receiving Business Unit will then reclassify the balance with a journal entry the following
period after the dispute has been resolved in accordance with the dispute resolution process
outlined below. The billing Business Unit will not change their P&L classification.
In both scenarios, the Business Units are required to record the intercompany receivable/payable.
3.900.3.3.3 Intercompany Balance Revaluations
Intercompany transactions occurring between Business Units that do not have the same functional
currency are subject to revaluation. In accordance with Chapter 3.0 (Accounting) Policy 3.830
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