I - Cost of Sales: General principles

2. Variable selling expenses

2.1. Definition

This heading includes the variable (direct) expenses involved in the sales process, or payments to intermediaries or other expenses that are directly variable (proportional) to sales.

It includes the following reporting headings:

• "R12600 - Royalties paid according to sales"
• "R12910 - Logistics costs - variable"
• "R12900 - Other variable expenses on sales"

It does not include the "R10600 - Royalties received according to sales", which are part of "Net Sales (published)".

2.2. Royalties paid according to sales (R12600)

Includes all industrial royalties (licensing fees, patents, processes, designs, models) paid based on sales (for the use of production techniques that generate sales).

2.3. Logistics costs - variable (R12910)

• Include
  • Transportation costs
  • Other shipping and handling costs incurred by the Group that are related to Product/Market Sales.
    = Costs incurred the entity making a sale for the transportation of its products from their storage location to the customer.
  • Handling costs that occurred when the transport is not continuous.
  • Demurrage costs, which are, for most cases, invoiced by the carrier together with the transport costs (one single invoice):
    Demurrage costs are:
    • Penalties for exceeding time allowed for taking delivery of a shipment from the shipping or transporting company's warehouse.
    • Penalties assesses against a consignor, consignee, or other such party responsible for delay in loading or unloading of a shipping vessel or for undue detention of the transportation equipment (also called detention charge)
• Exclude the following elements considered fixed:
  • and reported under "R25510 - Logistics costs - non-proportional":
    • Costs of renting transport to carry the products
    • Depreciation costs related to the transport equipment of salable products
  • and reported under "R27900 - miscellaneous production": Transport insurance (Marine Cargo).

2.4. Other variable expenses on sales (R12900)

Relate to:

• Costs of services directly connected to the products sold
• Expenses non-recorded elsewhere borne for the realization of sales
• Other period expenses and income related to sales.

Are taken into account, for example:

• Ecological taxes proportional to quantities sold and fees linked to recycling obligations and based on tons sold.
• Sales taxes, i.e. taxes (other than VAT) on commercial transactions, recoverable by the customer or otherwise and possibly raising the selling price for the latter.
  E.g.: "Taxe organic" in France, calculated at a proportion of sales and paid to the social security system.
• Foreign import duties and taxes proportional to sales. This includes duties and taxes that are proportional to sales.
• Exchange rate differences related to cash flow hedge operations (each subsidiary involved receives monthly from CICC the amounts to be recorded manually under this heading). The related GL accounts in SAP-PF1 are 6559000000 and 7559000000 (Impact exchange rate hedging on turnover).

Are not taken into account:

• and reported under "R33320 - Commercial expenses":
  • Commissions on sales received and paid.
• and reported under "R27900 - miscellaneous production":
  • Cost of destroying by-products resulting from production
    E.g.: Cost of destroying chlorine by-product resulting from the production of caustic lye, charged to cost price for the product.
• Exchange rate differences as well as exchange rate differences on raw materials purchases related to procurements ("R53800 - Foreign operational exchange gains & losses - realized & unrealized"). These differences are automatically generated by SAP.