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1、PetroChinaRequirements and design of FMIS modificationsFMIS enhancement project,December 1999,Contents,1.Business requirements32.Gap analysis103.Overall approach and design principles134.Business process overview155.Overview of system changes186.New data files and associated processes247.System proc
2、esses for consolidation and reporting29Appendix A-Report formats32,2,System Design for FMIS Modification,3,Business requirements,Chapter 1,4,To be able to do an IPO,PetroChina need to be able to produce certain key financial reports,To produce these reports,some changes to FMIS needs to be implement
3、ed.,Business requirement overview,The FMIS system need to be able to produce the following reports:Annual consolidation reports as required by China Finance Ministry based on the PRC GAAP for joint-stock company.Quarterly consolidation of reports of the overall ListCo based on the IAS is required fo
4、r publicly listed companies.Disclosure items are also required by IAS and PRC GAAP for joint-stock company.Some other information is required to support annual auditing.All the above reports(except the audit information)will need to be produced along the new PetroChina organization structure as desc
5、ribed in the following page.The above reporting requirements are detailed in the next pages.,5,PetroChina,Level 1PetroChina,Level 2SpecializedCo/Business Group,Level 3Segment,Level 4Type,E&P,.,.,.,Level 5BusinessUnits,.,.,Gas&Pipeline,Downstream,Oil&GasE&P,Natural gas(inc.gas pipeline),Refining&Mark
6、eting,Petrochemicals&marketing,Others,Refining,PetroChina reporting structure,Marketing,R&D,China oil,HQBeijing,E&PHuaBei,G&PHuaBei,RefineryHuaBei,Level 6OperationsUnits,Level 7SuboperationsUnits,Oil field#1,Oil field#2,Oil field#3,District 1,District 2,District 3,6,PRC GAAP consolidation report req
7、uires the following data:,Business requirements for PRC consolidation,Individual PRC GAAP reports of all entity involved in consolidation.Balance sheet(PRC GAAP)Income statementCash flow statementInternal transactions reportsInternal transaction listInternal product sales or purchase reportInternal
8、rendering of service report or internal service purchase reportInternal long-term equity investment report,capital structure reportInternal payable or receivablesRequired information for internal transactionsCounterpart,transaction type,period,beginning balance,credit amount,debit amount,ending bala
9、nce,7,There are two types of changes that need to be made to comply with IAS,Business requirements for IAS consolidation,PRC consolidated financial statements with specific detailsIndividual PRC reports listed earlierLedger reportTransactions with different accounting treatment in IAS and PRC GAAPDe
10、velopment costs-E depreciation amount based on un-reevaluated amount by unit of production method or straight line method(depend on assets class)Deferred business initial cost(pre-operation expenditures)Beginning balance,ending balanceMonthly revaluation of non-current monetary assets&liabilities(fo
11、reign currency item)Historical value(calculated by exchange rate of occurring date),reevaluated value of long-term loan(foreign currency),long-term deposit(foreign currency),other long-term monetary assets or liabilities.,8,IAS and PRC GAAP requires the following items for disclosure purpose:,Busine
12、ss requirements for disclosure purposes,Aging report of accounts receivable(PRC GAAP)Long-term equity investment(PRC GAAP)Investee,stock type,share number of stock,share percentage,amount,remarksLong-term bond investment(PRC GAAP)Bond type,par value,rate,purchased amount,due date,interest of this ye
13、ar,accumulated interest,remarksOther non-equity long-term investment(PRC GAAP)Debtor,principal,rate,due date,interest income of current period,accumulated interest,remarksLong-term loan(PRC GAAP)Loaner,amount,due date,rate,term(If foreign loan)Foreign currency amount,RMB amount by exchange rate of b
14、alance sheet dateBonds payable(PRC GAAP)Bond name,par value,issued date,issued amount,due date,interest expense of current year,accumulated interestRelated party transactions(PRC GAAP Expenses not deductible for tax purposes,Movement of allowance for doubtful accountsBalance at beginning of period,P
15、rovision,Deductions,Balance at end of period Movements in allowance for diminution in value of inventoriesBalance at beginning of period;Provision;Deductions;Balance at end of periodMovement report of PPE Ending balanceLoans Analysis ReportDirectors remuneration reportSalaries,allowances and other b
16、enefitsContribution to retirement benefit scheme,9,FMIS also need to produce certain information that is required to facilitate annual audit.,Business requirements for annual audit,The required information for accounts receivable,long-term equity investment,long-term non-equity investment has been l
17、isted in disclosure requirement.The only remaining items for annual audit are listed below:Short-term investmentInvestment type,investee,security type,par value,historical cost,rate,due date,interest receivable or dividends receivable,premium/discount and its amortisationNotes receivableNotes type,p
18、ar value,rate,drawer,due dateOther receivableDebtor,amount,post due daysAssets revaluationAssets class,book value before revaluation,book value after revaluationShort-term loanLoaner,amount,rate,due dateNotes payableOwner,par value,rate,due date,10,Gap analysis,Chapter 2,11,Changes in financial repo
19、rting process,PetroChina needs to implement a large scale change in its financial reporting process.,Current,Consolidation is done by the auditors using spreadsheets and manual data collection and manipulationFMIS report is not compliant with PRC accounting standard for joint-stock company.IAS repor
20、t is produced by the auditors using manual methodReporting is done for the whole CNPC with the current org structureUse current chart of accounts,Future,Consolidation will be done by PetroChina accountants as part of the regular accounting process using FMISFMIS report will be compliant with PRC acc
21、ounting standard for joint-stock company.AS report is produced by Petrochina accountants using FMISReporting structure for PetroChina will be separated from the old CNPC.New org structure will be put in placeNew chart of accounts will be in effect,12,Systems issues,The following systems issues are i
22、dentified as critical to the ability for PetroChina to be able to do consolidation and produce the required reports,REQUIREMENTReconciliation of transactions that occurs across different accounting entities.Some detailed information need to be passed up the corporate reporting structure.,SYSTEM ISSU
23、EThis is difficult to do with the current FMIS since FMIS treats each accounting entity as independent from other accounting entities.This is not possible in the current FMIS since FMIS only transfer reports,not detailed information.,CONSOLIDATION PROCESS,REQUIREMENTIAS report have some different gr
24、ouping of accounts compared to PRC reports In the interim,CNPC requires reporting based on locations in addition to the“normal”reporting procedure along segmentDisclosure items need to be produced and rolled up,SYSTEM ISSUECurrent FMIS aggregates report up the hierarchy and it is not possible to see
25、 or reconstruct the individual accounts,therefore it is not possible to regroup accounts at higher level.Currently FMIS reporting hierarchy follows a strict tree pattern with one entity reporting to only one parent.Current FMIS can not produce this data nor roll it up,REPORTING PROCESS,13,Overall ap
26、proach and design principles,Chapter 3,14,Design principles/goals,The design has to be implementable prior to the IPOModified FMIS must be able to produce all required reports with minimal manual workAvoid major changes in business processAvoid major changes in FMIS which needs long development time
27、 and/or high risk of destabilizing FMISMarginal changes to FMIS is preferred to marginal change in business processChanges in business process or FMIS should have minimal dependency on short-term improvement to IT infrastructure.Due to current limitations in telecommunication,the amount of data that
28、 needs to be transferred should be minimized.To ease transition,the modified FMIS need to have data compatibility with current FMIS,The following principles have been followed in creating the design for the new system:,15,Business process overview,Chapter 4,16,LocationLevel 5,SegmentLevel 3,HQ CorpL
29、evel 1,Lgr,Lgr,Lgr+,Lgr+,IAS,IAS,PRC,Segment A,Segment B,Elim,Elim,PRC,ElimIAS,ElimIAS,Elim,IAS,Lgr+,Lgr+,IAS,IAS,ElimIAS,Elim,IAS,IAS,Different segment,different location,Same segment,different location,Same segment,same location,Different segment,same location,Data flow diagram of rollup process,P
30、RC,PRC,Lgr,Lgr,Notes:Lgr+=ledger report plus some otherspecial reports.,17,Roll up and consolidation process chart,1.1 Enter transactionsfor Level 6 HO,1.5 Enter same-segment,same-locationelimination entries,1.4 Import reportsfrom level 6HO ledgers,1.2 Create reports forLevel 6 HO ledgers,1.3 Receiv
31、e reports&import datafrom level 7(district),1.8 Produce IASadjustment file(IAS file),1.7 Produce BU segmentPRC report,1.6 Determine IAS adjustments,1.9 Send PRC BU segment reportand IAS file to Beijing Business group Finance,2.1 Receive PRC reportfrom BU Location segments,2.2 Enter different-segment
32、same-locationelimination entries,2.4 Send different-segment,same-location eliminationfile to Beijing H.Q.,2.3 Produce Location PRC report,3.1 Receive BU segmentPRC report and IAS file,1.10 Send PRC report to Location HOfinance,3.2 Enter same-segment,different-locationselimination entries,3.3 Produce
33、 bus.group PRC report andIAS adjusted report,4.1 Receive PRCreport and segmentIAS file,4.2 Receive different-segment,same-location elimination files,4.3 Enter different-segment,different-locationelimination entries,4.5 Produce corporatePRC reports andIAS reports,BU Location,Location HOFinance,Segmen
34、t Finance(Beijing),CorpFinance,3.4 Send business group PRC report andIAS file to corp,4.4 Enter IAS adjustments(corporate level),Level 5,Level 3,Level 1,18,Overview of system changes,Chapter 5,19,Data flow diagram-Transaction system,Some changes are required in the FMIS Transaction system to collect
35、 required data from all accounting entities,Existingfunctionality,TransactionDB,Enter accountingentries to FMIS,ProduceLedger report,T1Special disclosureitems,Ledgerreports file,F2Disclosure&IASsupportingdata file,F1Internal transactiondata file,Newfunctionality,P4Producespecial disclosureitems repo
36、rt,P2Produce internaltransactions data file,P3Enter specialdisclosure&IASsupport data,P1For internal transactions,enter customer/supplier code,20,New or modified functionalities-Transaction system,New data fileF1-Internal transaction data fileF2-Disclosure&IAS supporting data fileNew tablesT1-Specia
37、l disclosure itemsNew system processesP1-Internal transaction data entryP2-Internal transaction file exportP3-Special disclosure items&IAS supporting data entryP4-Special disclosure items&IAS supporting file export,Changes to FMIS Transaction system is summarized in the following list:,21,F3Eliminat
38、ion data file,Data flow diagram-Reporting system,Newfunctionality,LowerlevelReports,Ledgerreportfiles,Aggregation,P7Eliminationprocess,Existingfunctionality,AggregatedReports,ConsolidatedLedgerReport,P16Export/printconsolidatedledger report,T2Elimination,F2Disclosure&IASsupportingdata file,F1Interna
39、l transactiondata file,T4InternalTransaction,P13Exportremaininginternaltransaction,EliminationEntries,Internal transaction&eliminationreports&queries,Analyze info anddetermine requiredelimination,P5Query,view,print,P14Export disclosures&IAS supportingdata,P8Export Eliminationentries,F4IASadjustmente
40、ntry file,F3Elimination data file,Ledgerreportfiles,F2Disclosure&IASsupportingdata file,F1Internal transactiondata file,F4IASadjustmententry file,P12Export IAS adjustment,P15PrintIAS reports,T3IAS adj,IAS adjustmententries,Analyze info anddetermine requiredIAS adjustment,P9Query IAS adjustmentdata,I
41、AS adjustmentinfo reports,Some major changes are required in the FMIS Reporting system,P19Import internaltransaction,P6Enter eliminationentries,P18Import eliminationentries,P17Import IASadjustments,P10Enter IASadjustments,P15PrintPRC reports,P20Import disclosure/IAS support data,T5Consolidationaccou
42、nt pair,22,New or modified functionalities-Reporting system,New data fileF1-Internal transaction data fileF2-Disclosure&IAS supporting data fileF3-Elimination data fileF4-IAS adjustment entry fileNew data tablesT2-Elimination entry tableT3-IAS adjustment entry tableT4-Internal transaction tableT5-Co
43、nsolidation account pair table,The changes to the FMIS Reporting system is shown in the following list:,New system processesP5-Query info for eliminationP6-Enter elimination entriesP7-Elimination processP8-Export eliminationP9-Query info for IAS adjustmentP10-Enter IAS adjustmentsP11-IAS adjustment
44、processP12-Export IAS adjustmentsP13-Export remaining internal transactionsP14-Export disclosure&IAS support dataP15-Print IAS reportP16-Print/Export PRC reportP17-Import IAS adjustmentsP18-Import elimination entriesP19-Import internal transactionsP20-Import disclosure/AIS support data,23,Required n
45、ew/modified reports,PRC report&disclosure requirementPRC Income statement report modificationPRC Balance sheet modificationPRC Cash flow statement modificationInternal transaction reportAging report of accounts receivableLong-term equity investment reportLong-term bond investment reportOther long-te
46、rm investment reportLong-term loan reportBonds payable reportRelated party transaction report,IAS report&disclosure requirementIAS income statement definitionIAS balance sheet definitionIAS cash flow statement definitionStatement of owners equityNote 4 Employee compensation costsNote 5 interest expe
47、nseNote 6 Income before income taxesNote 7 Income taxesNote 8 Cash and cash equivalentsNote 9 Accounts receivableNote 10 InventoriesNote 11 Prepaid expenses and other current assetsNote 12 Property,plant,and equipmentNote 13 InvestmentsNote 14 Intangible and other assetsNote 15 Accounts payable and
48、accrued liabilitiesNote 16 DebtNote 17 Deferred income taxesNote 22,23,24,Auditing required reportsShort-term investment reportNotes receivable reportOther receivable reportShort-term loan reportNotes payable report,In addition to the system changes,the following reports must be developed and produc
49、ed,24,New data files and associated processes,Chapter 6,25,Reporting system,Transaction System,F1-Internal transaction data file and associated processes,P1.Modification to voucher entry in transaction system need to be done.Currently the transaction table has a field to record customer/vendor codet
50、hat is only used for A/R or A/P.The system needs to be modified to make the customer/vendor code applicable for all internal transaction types.The system should make customer/vendor code entry mandatory for all internal transactions.P2.When counterpart codes of all internal transactions have been re
