FIFO calculation

Definition and meaning of FIFO/PEPS

• Integrated FIFO (First In First Out) is a costing methodology for selected raw materials staying several months in the production cycle and included in many finished goods: 
  • Butadiene (Performance Polyamide)
  • Cumene (Performance Polyamide/Fibras)
  • Cyclohexane (Performance Polyamide)
  • Process natural gaz (Performance Polyamide)
  • Ka-oil (Performance Polyamide)
  • Ammonia (Performance Polyamide)
  • Phenol (Coatis, Performance Polyamide, Fibras, Aroma)
  • CeLa (Special Chem)
  • Nd Pr Tb (Special Chem)
• Inventory costing method which assumes that the first items placed in inventory are the first sold. Thus, the inventory at the end of a year consists of the goods most recently placed in inventory.
• FIFO is one method used to determine Cost of Good Sold for a business.
  
  

Calculation of integrated FIFO - Ammonia example

FY08 closing

At legal entity level

1. We calculate January 1st standard cost estimate with consolidated integrated FIFO (see appendix) for: 
   • Roussillon phenol chain (SBU Salicyclic)
   • St Fons phenol chain (SBU Diphenol)
   • Chalampe Butadien, Natural Gas, Ammonia, Cyclohexane, Nitric
   • Paulinia Cumene
   • Onsan Olone
2. We ran a revaluation based on inventory volume on January 1st, 00:00 am
3. We post the resulting revaluation on Dec 31st
   

For consolidation

We have eliminated margin on sales and COS based on Rhodia Operation Jan 1st standard to handle in the same "strike" margin elimination and inventory revaluation on the difference between Vec0 and integrated FIFO.

Integrated FIFO implementation - integrated vs. legal entity FIFO

• We have to ensure compliance/inventory valuation justification at legal entity level.
• Corporate consolidation requirement is to have a worldwide integrated valuation, as well as enterprises, for management reporting purpose. 
• As a consequence, decision is to: 

• Scope remains unchanged from Dec 08.
  
  

Integrated FIFO Macro process