1、PetroChina Requirements and design of FMIS modifications FMIS enhancement project,December 1999,Contents,1. Business requirements 3 2. Gap analysis 10 3. Overall approach and design principles 13 4. Business process overview 15 5. Overview of system changes 18 6. New data files and associated proces
2、ses 24 7. System processes for consolidation and reporting 29 Appendix A - Report formats 32,2,System Design for FMIS Modification,3,Business requirements,Chapter 1,4,To be able to do an IPO, PetroChina need to be able to produce certain key financial reports,To produce these reports, some changes t
3、o FMIS needs to be implemented.,Business requirement overview,The FMIS system need to be able to produce the following reports: Annual consolidation reports as required by China Finance Ministry based on the PRC GAAP for joint-stock company. Quarterly consolidation of reports of the overall ListCo b
4、ased on the IAS is required for publicly listed companies. Disclosure items are also required by IAS and PRC GAAP for joint-stock company. Some other information is required to support annual auditing.All the above reports (except the audit information) will need to be produced along the new PetroCh
5、ina organization structure as described in the following page. The above reporting requirements are detailed in the next pages.,5,PetroChina,Level 1 PetroChina,Level 2 Specialized Co/Business Group,Level 3 Segment,Level 4 Type,E&P,.,.,.,Level 5 Business Units,.,.,Gas & Pipeline,Downstream,Oil&Gas E&
6、P,Natural gas (inc. gas pipeline),Refining & Marketing,Petrochemicals & marketing,Others,Refining,PetroChina reporting structure,Marketing,R&D,China oil,HQ Beijing,E&P HuaBei,G&P HuaBei,Refinery HuaBei,Level 6 Operations Units,Level 7 Suboperations Units,Oil field #1,Oil field #2,Oil field #3,Distri
7、ct 1,District 2,District 3,6,PRC GAAP consolidation report requires the following data:,Business requirements for PRC consolidation,Individual PRC GAAP reports of all entity involved in consolidation. Balance sheet ( PRC GAAP) Income statement Cash flow statement Internal transactions reports Intern
8、al transaction list Internal product sales or purchase report Internal rendering of service report or internal service purchase report Internal long-term equity investment report, capital structure report Internal payable or receivables Required information for internal transactions Counterpart, tra
9、nsaction type, period, beginning balance, credit amount, debit amount, ending balance,7,There are two types of changes that need to be made to comply with IAS,Business requirements for IAS consolidation,PRC consolidated financial statements with specific details Individual PRC reports listed earlier
10、 Ledger report Transactions with different accounting treatment in IAS and PRC GAAP Development costs - E depreciation amount based on un-reevaluated amount by unit of production method or straight line method ( depend on assets class ) Deferred business initial cost ( pre-operation expenditures ) B
11、eginning balance, ending balance Monthly revaluation of non-current monetary assets & liabilities ( foreign currency item) Historical value ( calculated by exchange rate of occurring date ), reevaluated value of long-term loan( foreign currency), long-term deposit( foreign currency), other long-term
12、 monetary assets or liabilities.,8,IAS and PRC GAAP requires the following items for disclosure purpose:,Business requirements for disclosure purposes,Aging report of accounts receivable ( PRC GAAP ) Long-term equity investment ( PRC GAAP ) Investee, stock type, share number of stock, share percenta
13、ge, amount, remarks Long-term bond investment ( PRC GAAP ) Bond type, par value, rate, purchased amount, due date, interest of this year, accumulated interest, remarks Other non-equity long-term investment ( PRC GAAP ) Debtor, principal, rate, due date, interest income of current period, accumulated
14、 interest, remarks Long-term loan ( PRC GAAP ) Loaner, amount, due date, rate, term (If foreign loan) Foreign currency amount, RMB amount by exchange rate of balance sheet date Bonds payable ( PRC GAAP ) Bond name, par value, issued date, issued amount, due date, interest expense of current year, ac
15、cumulated interest Related party transactions ( PRC GAAP Expenses not deductible for tax purposes,Movement of allowance for doubtful accounts Balance at beginning of period, Provision, Deductions, Balance at end of period Movements in allowance for diminution in value of inventories Balance at begin
16、ning of period; Provision; Deductions; Balance at end of period Movement report of PPE Ending balance Loans Analysis Report Directors remuneration report Salaries, allowances and other benefits Contribution to retirement benefit scheme,9,FMIS also need to produce certain information that is required
17、 to facilitate annual audit.,Business requirements for annual audit,The required information for accounts receivable, long-term equity investment, long-term non-equity investment has been listed in disclosure requirement. The only remaining items for annual audit are listed below: Short-term investm
18、ent Investment type, investee, security type, par value, historical cost, rate, due date, interest receivable or dividends receivable, premium /discount and its amortisation Notes receivable Notes type, par value, rate, drawer, due date Other receivable Debtor, amount, post due days Assets revaluati
19、on Assets class, book value before revaluation, book value after revaluation Short-term loan Loaner, amount, rate, due date Notes payable Owner, par value, rate, due date,10,Gap analysis,Chapter 2,11,Changes in financial reporting process,PetroChina needs to implement a large scale change in its fin
20、ancial reporting process.,Current,Consolidation is done by the auditors using spreadsheets and manual data collection and manipulation FMIS report is not compliant with PRC accounting standard for joint-stock company. IAS report is produced by the auditors using manual method Reporting is done for t
21、he whole CNPC with the current org structure Use current chart of accounts,Future,Consolidation will be done by PetroChina accountants as part of the regular accounting process using FMIS FMIS report will be compliant with PRC accounting standard for joint-stock company. AS report is produced by Pet
22、rochina accountants using FMIS Reporting structure for PetroChina will be separated from the old CNPC. New org structure will be put in place New chart of accounts will be in effect,12,Systems issues,The following systems issues are identified as critical to the ability for PetroChina to be able to
23、do consolidation and produce the required reports,REQUIREMENT Reconciliation of transactions that occurs across different accounting entities. Some detailed information need to be passed up the corporate reporting structure.,SYSTEM ISSUE This is difficult to do with the current FMIS since FMIS treat
24、s each accounting entity as independent from other accounting entities. This is not possible in the current FMIS since FMIS only transfer reports, not detailed information.,CONSOLIDATION PROCESS,REQUIREMENT IAS report have some different grouping of accounts compared to PRC reports In the interim, C
25、NPC requires reporting based on locations in addition to the “normal” reporting procedure along segment Disclosure items need to be produced and rolled up,SYSTEM ISSUE Current FMIS aggregates report up the hierarchy and it is not possible to see or reconstruct the individual accounts, therefore it i
26、s not possible to regroup accounts at higher level. Currently FMIS reporting hierarchy follows a strict tree pattern with one entity reporting to only one parent. Current FMIS can not produce this data nor roll it up,REPORTING PROCESS,13,Overall approach and design principles,Chapter 3,14,Design pri
27、nciples / goals,The design has to be implementable prior to the IPO Modified FMIS must be able to produce all required reports with minimal manual work Avoid major changes in business process Avoid major changes in FMIS which needs long development time and/or high risk of destabilizing FMIS Margina
28、l changes to FMIS is preferred to marginal change in business process Changes in business process or FMIS should have minimal dependency on short-term improvement to IT infrastructure. Due to current limitations in telecommunication, the amount of data that needs to be transferred should be minimize
29、d. To ease transition, the modified FMIS need to have data compatibility with current FMIS,The following principles have been followed in creating the design for the new system:,15,Business process overview,Chapter 4,16,Location Level 5,Segment Level 3,HQ Corp Level 1,Lgr,Lgr,Lgr+,Lgr+,IAS,IAS,PRC,S
30、egment A,Segment B,Elim,Elim,PRC,Elim IAS,Elim IAS,Elim,IAS,Lgr+,Lgr+,IAS,IAS,Elim IAS,Elim,IAS,IAS,Different segment, different location,Same segment, different location,Same segment, same location,Different segment, same location,Data flow diagram of rollup process,PRC,PRC,Lgr,Lgr,Notes: Lgr+ = le
31、dger report plus some otherspecial reports.,17,Roll up and consolidation process chart,1.1 Enter transactions for Level 6 HO,1.5 Enter same- segment, same-location elimination entries,1.4 Import reports from level 6 HO ledgers,1.2 Create reports for Level 6 HO ledgers,1.3 Receive reports& import dat
32、a from level 7 (district),1.8 Produce IAS adjustment file (IAS file),1.7 Produce BU segment PRC report,1.6 DetermineIAS adjustments,1.9 Send PRC BU segment report and IAS file to Beijing Business group Finance,2.1 Receive PRC report from BU Location segments,2.2 Enter different-segment same-location
33、 elimination entries,2.4 Send different-segment, same-location elimination file to Beijing H.Q.,2.3 Produce Location PRC report,3.1 Receive BU segment PRC report and IAS file,1.10 Send PRC report to Location HO finance,3.2 Enter same-segment, different-locations elimination entries,3.3 Produce bus.
34、group PRC report and IAS adjusted report,4.1 Receive PRC report and segment IAS file,4.2 Receive different-segment, same-location elimination files,4.3 Enter different-segment, different-location elimination entries,4.5 Produce corporate PRC reports and IAS reports,BU Location,Location HO Finance,Se
35、gment Finance (Beijing),Corp Finance,3.4 Send business group PRC report and IAS file to corp,4.4 Enter IAS adjustments (corporate level),Level 5,Level 3,Level 1,18,Overview of system changes,Chapter 5,19,Data flow diagram - Transaction system,Some changes are required in the FMIS Transaction system
36、to collect required data from all accounting entities,Existing functionality,Transaction DB,Enter accounting entries to FMIS,Produce Ledger report,T1 Special disclosure items,Ledger reports file,F2 Disclosure & IAS supporting data file,F1 Internal transaction data file,New functionality,P4 Produce s
37、pecial disclosure items report,P2 Produce internal transactions data file,P3 Enter special disclosure & IAS support data,P1 For internal transactions, enter customer/ supplier code,20,New or modified functionalities - Transaction system,New data file F1 - Internal transaction data file F2 - Disclosu
38、re & IAS supporting data file New tables T1 - Special disclosure items New system processes P1- Internal transaction data entry P2 - Internal transaction file export P3 - Special disclosure items & IAS supporting data entry P4 - Special disclosure items & IAS supporting file export,Changes to FMIS T
39、ransaction system is summarized in the following list:,21,F3 Eliminationdata file,Data flow diagram - Reporting system,New functionality,Lower level Reports,Ledger report files,Aggregation,P7 Elimination process,Existing functionality,Aggregated Reports,Consolidated Ledger Report,P16 Export /print c
40、onsolidated ledger report,T2 Elimination,F2 Disclosure & IAS supporting data file,F1 Internal transaction data file,T4 Internal Transaction,P13 Export remaining internal transaction,Elimination Entries,Internaltransaction & elimination reports &queries,Analyze info and determine required elimination
41、,P5 Query, view, print,P14 Export disclosures & IAS supporting data,P8 Export Elimination entries,F4 IAS adjustment entry file,F3 Eliminationdata file,Ledger report files,F2 Disclosure & IAS supporting data file,F1 Internal transaction data file,F4 IAS adjustment entry file,P12 Export IAS adjustment
42、,P15 Print IAS reports,T3 IAS adj,IAS adjustment entries,Analyze info and determine required IAS adjustment,P9 Query IAS adjustment data,IAS adjustment info reports,Some major changes are required in the FMIS Reporting system,P19 Import internal transaction,P6 Enter elimination entries,P18 Import el
43、imination entries,P17 Import IAS adjustments,P10 Enter IAS adjustments,P15 Print PRC reports,P20 Import disclosure /IAS support data,T5 Consolidation account pair,22,New or modified functionalities - Reporting system,New data file F1 - Internal transaction data file F2 - Disclosure & IAS supporting
44、data file F3 - Elimination data file F4 - IAS adjustment entry fileNew data tables T2 - Elimination entry table T3 - IAS adjustment entry table T4 - Internal transaction table T5 - Consolidation account pair table,The changes to the FMIS Reporting system is shown in the following list:,New system pr
45、ocesses P5 - Query info for elimination P6 - Enter elimination entries P7 - Elimination process P8 - Export elimination P9 - Query info for IAS adjustment P10 - Enter IAS adjustments P11 - IAS adjustment process P12 - Export IAS adjustments P13 - Export remaining internal transactions P14 - Export d
46、isclosure & IAS support data P15 - Print IAS report P16 - Print / Export PRC report P17 - Import IAS adjustments P18 - Import elimination entries P19 - Import internal transactions P20 - Import disclosure / AIS support data,23,Required new / modified reports,PRC report & disclosure requirement PRC I
47、ncome statement report modification PRC Balance sheet modification PRC Cash flow statement modification Internal transaction report Aging report of accounts receivable Long-term equity investment report Long-term bond investment report Other long-term investment report Long-term loan report Bonds pa
48、yable report Related party transaction report,IAS report & disclosure requirement IAS income statement definition IAS balance sheet definition IAS cash flow statement definition Statement of owners equity Note 4 Employee compensation costs Note 5 interest expense Note 6 Income before income taxes No
49、te 7 Income taxes Note 8 Cash and cash equivalents Note 9 Accounts receivable Note 10 Inventories Note 11 Prepaid expenses and other current assets Note 12 Property, plant, and equipment Note 13 Investments Note 14 Intangible and other assets Note 15 Accounts payable and accrued liabilities Note 16 Debt Note 17 Deferred income taxes Note 22, 23, 24,Auditing required reports Short-term investment report Notes receivable report Other receivable report Short-term loan report Notes payable report,In addition to the system changes, the following reports must be developed and produced,
