FA - MDM

VIM

1 | R2R GL
GR / IR
IPGM
Cost Allocation
Forex
Obsolescence
Bad Debts
Warranty
Agenda

Loknath P.
Walkthrough
GL Process Understanding
 Agenda

Process Walkthrough

Warranty Provision

Bad Debts Provision

Cost Allocation

Obsolescence
FA - MDM

Bad Debts
Obsolescence Provision

Warranty
GR / IR

Agenda
IPGM

Forex
VIM

a
Foreign Exchange Revaluation

Run Cost Allocation

IPGM- Inventory Purchased from Group Members

Goods Receipt/Invoice Receipt Reclassification

VIM Accrual-CAPEX & OPEX

Fixed Asset MDM

2 | R2R GL
 Warranty Provision
Purpose:
Warranty Provision, are the provisions covering free repairs or replacements in
the Warranty period.

Provisions for warranty must be made on:

Cost Allocation

Obsolescence
FA - MDM

• General basis: The provision is based on Warranty Sales.

Bad Debts

Warranty
GR / IR

Agenda
IPGM

• Individual basis: An estimate of the warranty costs more than

Forex
VIM

a athe normal provision referred as Serial Errors.

Calculation:
• 12 months Warranty cost booked.
• Warranty sales for the last 12 months (equals turnover)
• Warranty cost percentage
• Warranty sales for the last 18 months (equals turnover)
• Provision for Warranty

3 | R2R GL
 Bad Debts Provision
Purpose:
Bad Debts Provision is calculated for the Invoices overdue for more than 60 Days, Credit
amount are by default always considered as overdue.

Types of Bad Debts provisions:

Cost Allocation

Obsolescence
FA - MDM

Bad Debts
Warranty
• Provision for invoices more than 2 months overdue
GR / IR

Agenda
IPGM

Forex
VIM

 Insurance coverage
a oraother
a similar security measures.
 Refundable VAT refunded which is included in the debt.

• Other provisions for bad debt

 Invoices less than 2 months overdue and invoices not overdue yet.
 This is based on legal actions ,bankruptcy, insolvency etc.

Note: Provisions for bad debts not applicable for Danfoss companies, joint ventures or
associated companies.

4 | R2R GL
 Obsolescence Provision
Purpose:
Obsolescence is the term used to describe that stocks are either difficult or
impossible to consume or sell.
• The provision for obsolete inventory is based on the book value and age of the unsold
inventory.
• The obsolescence provision is calculated on the following inventory:
Cost Allocation

Obsolescence
FA - MDM

Bad Debts
Warranty
GR / IR

Agenda
IPGM

Forex
VIM

a a a a

• The provision is calculated per material number using the

following rules:

5 | R2R GL
 Obsolescence Provision
• Special Treatment for Obsolescence provision
For Entities moved into One ERP between 0 to 24 Months

Cost Allocation

Obsolescence
FA - MDM

Bad Debts
Warranty
GR / IR

Agenda
IPGM

Forex
VIM

a a a a

6 | R2R GL
 Forex Revaluation
Purpose:
Foreign exchange (FX) revaluation is a process that is performed to account for
the impact of changes in exchange rates on financial transactions denominated in foreign
currencies.
Cost Allocation
• This process helps companies accurately reflect the current value of their foreign currency-

Obsolescence
FA - MDM

denominated assets and liabilities in their financial statements.

Bad Debts
Warranty
GR / IR

Agenda
IPGM

Forex
VIM

a aFXarevaluation
• The key reasons for performing a a
1.Accuracy: Reflects accurate values of foreign currency transactions in financial
statements.
2.Risk Management: Helps manage currency risk by assessing the
impact of exchange rate fluctuations.
3.Decision Making: Provides reliable financial data for informed
business decisions.
4.Consolidation: Ensures accurate consolidation of financial data
from different locations.

7 | R2R GL
 Run Cost Allocation
Purpose:
Cost center allocation, allocates the costs posted on common cost centers to
appropriate product lines according to pre-defined allocation key.

• Allocation of cost is used within a company code, during month closing activity, to move costs

Cost Allocation
from one cost center (sender cost center) to one or more cost centers (receiving cost centers).

Obsolescence
FA - MDM

Bad Debts
• Allocation cycles are used to allocate costs between cost centers based on various sender and

Warranty
GR / IR

Agenda
IPGM

Forex
receiver.
VIM

a a a a a a
Allocation Cycles
1.GS Rent
2.GS Facility/Utility
3.GS Logistics

4.Normal Assessment (Shared)

5.Z11 (fixed/depreciation)
6.Z10(fixed/depreciation unarbsorbed)

8 | R2R GL
 Inventory Purchased From Group Members
Purpose:

IPGM is for HFM upload files for Internal Profit Elimination regarding Inventory
Purchased from Group Members (IPGM).

• IPGM is for entities having more than 150 000 EUR in internal

Cost Allocation

Obsolescence
sales.
FA - MDM

Bad Debts
Warranty
GR / IR

Agenda
IPGM

Forex
• The Internal Gross Profit Margin report is calculated based on a
VIM

a a a a a a a
weighted average of the last 3 months sales

Calculation:

• A- Inter Company Purchase Inventory Stock List

• B- Goods In Transit
• C- Obsolescence
• (A+B)-C=Value to be Reported for IPGM

9 | R2R GL
 Goods Receipt / Invoice Receipt
Purpose:

A GR/IR clearing account is a bookkeeping device that can be used when goods
arrive before the invoice is Delivered, or when an invoice arrives before the goods are
delivered.

Cost Allocation

Obsolescence
FA - MDM

Bad Debts
Warranty
GR / IR

Agenda
IPGM

Forex
VIM

The GR/IR clearing account thereby serves as a “Intermediate GL Code" between the inventory
a a a a a a a a
account and the vendor account, minimizing confusion and reducing the risk of accounting
errors.

10 | R2R GL
 Goods Receipt / Invoice Receipt

GR/IR Reclassification

Cost Allocation
Goods Delivered but Invoice received but no

Obsolescence
Scenario
FA - MDM

no Invoice Receipt

Bad Debts
Goods Delivered

Warranty
GR / IR

Agenda
IPGM

Forex
VIM

a a a a a a a a
GR Done it will Impact IR Done it will Impact
Impact Vendor A/C
Inventory A/C

Creation of Liability Creation of Goods in

against vendor
Reclassification Transit

11 | R2R GL
 Vendor Invoice Management- Accrual

Purpose:

For timely and accurate preparation of monthly financials, accruals

made, for the invoices and credit notes received in VIM which is not posted.

Cost Allocation

Obsolescence
FA - MDM

Bad Debts
Warranty
The accrual process involves creating accrual provision for capital expenditures

GR / IR

Agenda
IPGM

Forex
VIM
a a a (Opex).
(Capex) and operational expenditures a a a a a a

• It will impact Profitability and Investment, if invoice provision is not booked.

12 | R2R GL
13 | R2R GL
a
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FA - MDM
VIM
GR / IR
IPGM
Cost Allocation
Forex
Obsolescence
Bad Debts
Warranty
Agenda
14 | R2R GL