Cost center - Creation Rules

 

Rule 1

It is not allowed to create a cost center for less than two employees

Rule 2

An employee is assigned to one cost center only

Rule 3

Threshold of minimum amount per year of primary expense.

 

 

 

Cost allocation - Rule

 

Recommendation: minimize the number of CC allocation

  • For Production costs: allocation between organizational CC and another organizational CC
  • For non Production costs: allocation from organizational CC to reporting CC

Exception

  • Utilities
  • Insurance (IAS 19)
  • R&I: allocation from CC to WBS
  • Intercos: from organizational CC to organizational CC other company

General rule:

  • All type of expenses - different than Manufacturing  Costs (Indirect/Direct) and R&I - go directly to BFC (at different reporting cost center) and to only 1 BFC heading.

 

 

Pricing - Rule

 

General rule:

  • “No pricing” rule: allocations between organizational cost center, within the same legal entity (same GBU normally, but could be also between 2 GBUs) should be done at cost.

 

 

Payroll expenses allocation

 

General rule:

  • Payroll expenses shouldn’t be posted to technical cost center if HR/Payroll system is integrated.
  • An employee is assigned to only one cost center

 

 

Reporting assessment - rule

 

General rule: A minimum level of detail is required for assessment to reporting cost center:

  • For gross margin => Cost center reporting at “PIF” Level (see codification below)
  • Below gross margin => Cost center  reporting at “Division” level (see codification below)
  • Below EBIT => Cost center reporting at “Company” level (see codification below)

 

 

Intercos - cycles

 

General rules:


1. For GBU cross charge

  • Change the cycle usage: evolution from actual amounts to planned amount
    • Objective: anticipate the launch of cycles (from D2 to D-1) and reduce problems in D4
  • Create and standard cost center for Cross charge (in order to align to method of CBS)

2. For CBS

  • Create a specific Cost Section (160) for SBS invoicing

 

 

Technical cost center usage

 

Technical Cost Center can be used for the following cases:

  • Use case 1: to centralize primary costs for corporate needs (e.g.: Insurance, IAS 19…)
  • Use case 2: to post costs not directly linked to the organizational structure (e.g.: other non recurring expenses)
  • Use case 3: to collect the result of income miscellaneous (e.g.: sales of scrap…)
  • Use case 4: if the organization cost is not defined in the Cost Section narrative

Reminder: in all cases, the request has to be approved by the Central Costing Expert after approved the request by GBU. 

 

 

Statistical key figures usage

Definition: “Statistical key figures” provide information on non-monetary data such as the number of employees, number of machines, capacity usage, market information…and can be used for internal cost allocations.

Recommendation: minimize the usage of SKF or avoid it (if possible) 

2 conditions are identified to use the “Statistical key figures”

  • Volumes of target CC
  • High frequency (e.g.: every month) of update 

 

Working File 3

Working File 3

All the companies harmonized in Sympa Model after a period of 2-3 months where some adjustment are done; 

Controllers should have access to their WF3. If you do not have; please request it

  • Each year by the end of October you will be requested to review your allocation keys by RCOM. And this will be part of an Internal Control.
  • Review of the roles and transactions access by the users has been done in January-16.

Cycles PF1 - Example

Cycles - codification PF1

Expand to see the last version of the cycle model in Gdrive: