A Major FMCG Giant.
Business Requirement :
The conglomerate company which has an Integrated food unit as part of their FMCG Division undertook a project of constructing an automated warehouse for its final produce with automated storage and retrieval enablement. We were engaged by the entity to perform the support functions and ensure the compliances to their Project finance frameworks in place. The support functions include the following:
Ensuring controls and documentation of Procurement Process.
Pre-audit of payments.
Ensuring controls and documentation over Scrap Disposal.
Bill Passing and periodic vendor Balance confirmation.
Periodical Physical verification of assets.
Identification of Assets and its components including parent – Child relationship.
Compilation of Fixed Assets Register.
Periodical Dashboards and Insights on the above.
Identified Process Challenges :
Understanding of the existing compliance Frameworks at the entity level,Review of LSTK projects and its agreement to identify the scope of work and deliverables to identify the assets Acceptance and GRN for the materials upon receipt, Certification of Invoices at the project site, Timely confirmation of Balances and Guarantees to be on live at all times, Identification of Direct cost and Indirect Cost (Enablers) for the Project, Identification of the Capitalization Trigger Points, Componentization of Assets in line with the principles of IFRS, Physical verification and tagging of assets
Approach and Solution Design :
Understand the existing framework in place and identifying the relevant clauses or areas to which the compliances to be ensured, Detailed review of the Turnkey contracts and BOQ entered by the Entity and identified the possible assets emanating from the contract by having discussions with the user and identified the direct costs, indirect costs and apportion able costs, Follow-up the Project technical team to inspect and provide the certificate of acceptance & further with Receipts function for timely GRN basis the certificate of acceptance, Implementation of Bill certification checklist in line with the framework and SOPs to ensure the compliances and developed tracker for bills passed, kept aside for rectification and issue for payments, Regular follow-up with the vendors on obtaining the confirmation of balances from the vendors Implementation of tracker for the bank guarantees, determination of cut-off date to ensure the timely follow-up for renewal, Determined the accounting treatment and ensured capitalization is as per the principles of IFRS for certain specific scenarios mentioned as under: Insurance Spares, Borrowing Costs, Pre-Operative Expenses, Pre-Operative Revenue, Exploration and Feasibility Costs, Established the parent child relationship for the assets identified and ensured the assets are considered for componentization, Performed physical verification of assets and obtained user sign offs to ensure ownership for the assets is established.
Business Benefit and Result :
Adherences to the internal frameworks and relevant Statutory compliances.
Timely circulation of Dashboards and insights to the projects to maintain continuous improvement in terms of acceptance and GR.
Development of SOPs, trackers and checklist which can be implemented in similar projects undertaken by the Entity at various locations.
Delivered a comprehensive FAR (Excel) being in line with the requirements of IFRS.
Ensured the FAR developed in excel is uploaded into SAP by defining the Depreciation Key , Useful Life and other mandatory fields as required.
Delivered a physical verification report to the entity upon every instance of verification.