A. Physical inventory - Definitions

This document provides a step-by-step guide for physical inventories that allows us to verify the existence and ownership of inventories

This procedure applies to all companies included in the consolidation under full integration. It is recommendation for "joint operation", joint venture and where Solvay is considered as "associate" and to all warehouses within and out of production sites.

For each new acquisitions the integration management office will determine when that procedure becomes compulsory.

The procedure deals with the inventory count of all materials from a site where the inventory is taking place.

The procedure deals with the inventory count associated with BFC heading STOT-A300 inventories.

The procedure is effective from the publication date

Red lines

A physical inventory count of inventories and work-in-progress is performed on an at least once by reference period in accordance with the Solvay Group's accounting standards. Reference period starts on December 1st and ends on November 30th of the following year.

The Solvay Group admits the use of cycle count or "full" physical inventory.
All types of stock items are counted at least once a year.
Any adjustment of the inventory valuation related to an inventory count is communicated to a Controller (plant, function or business). A controller must validate and ensure proper accounting record.
A count of items representing 100% of the value of prior end inventory should be done as of November 30th , each year, to respect hard close calendar.
For plant using sample count for spare parts / industrial spare parts, it will be accepted in 2016 and reassessed for 2017.

Any inventory location is under the responsability of a Physical Inventory Manager (role) and supervised by Finance Responsible Assigned (role)

Physical Inventory Manager (PIM) GBU supply chain director is accountable for designation of PIM	Plans physical inventory counts following Group rules Prepares a site inventory procedure in respect of segregation of duties Organizes the physical inventory counts including consigned inventory at customers location Justifies any significant discrepancies and report to Finance Responsible Assigned (FRA)
Finance Responsible Assigned (FRA) GCCO is accountable for designation of FRA	Role assigned to a controller accountable for internal control Validates the annual schedule in accordance with group rules regarding inventory coverage Validates a site inventory procedure, in particular regarding respect of segregation of duties Validates the inventory discrepancies analyzed by the inventory manager and ensures proper accounting Prepares inventory memorandum and records it in the accounting documentation (reconciliation system where applicable)
Inventory count team	Perfoms an accurate count in accordance with the safety rules and must be familiar with the specific counting procedures
GBU costing control owner (GCCO) Is appointed by Finance Director	Role assigned to a Business or Industrial Controller who validates : Adjustment above threshold Exceptions to 100% count role

==> Responsibilities can be adapted for each plant according to the segregation of duties, but any modification should be written in a procedure

Segregation of duties (SOD) reduces risk of error and fraud so that no single individual can adversely affect the accuracy and integrity of the count.
Segregation is based on separation of the three following process

Business process : Purchase/ Procurement, Shipment, Consumption in production
Physical custody of assets process: counting, recording of movements
Accounting process: invoice validation, adjustment resulting from inventory count

Respect for SOD rules means that:

Personal involved in one process should not also have responsibilities in either of the other two processes.
No one should be in a position of self validation, cumulating execution and supervision.

Page tree

A. Physical inventory - Definitions