Revenue recognition

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Food Packaging Europe

FOOD EUROPE (Packaging rules)

Revenue recognition_V2.doc

FINANCE Author : M.Lababidi Update: .

Revenue recognition

Issued : 18/09/2007 Updated :

The purpose of this procedure is to remind and precise management and accounting rules related to revenue recognition and Bills and Hold transactions within Food Europe plants. As soon as published, this proceduremust be immediately implemented. You can also refer to AGAM, section 18.

1 – Revenue recognition criteria and accounting treatment
Revenue recognition criteria: Revenue generally is realized, or realizable and earned, only when all of the following criteria are met: • Persuasive evidence of an arrangement exists (final sales agreement signed by both parties, sales orders accepted by bothparties…) • Delivery has occurred or services have been provided: o Delivery is generally not considered to have occurred unless the customer has taken title and assumed the risks and rewards of ownership. In accordance with Alcan’s policy, this would typically occur when the requirements of the shipping terms have been met. o You can download a copy of common worldwide shipping terms used and theirdefinitions to assist in determining under which circumstances the risks and rewards of ownership have passed to the buyer in Agam, section 18. • Alcan’s price to the buyer is fixed or determinable • Collectibility is reasonably assured. Identification of sales to be restated: At the end of each month, specific procedure must be implemented to identify all sales that do not meet the abovecriteria. This analysis can be carried out by destination depending of the average route and by Incoterms type. For export/overseas shipments, sales analysis scope will be larger than for regional sales where the analysis can be restricted to the last 2 days of sales, pending on the average route. Warning: a systematic restatement of the “x” last days of the month sales, whatever is the incoterms, isnot acceptable. Incoterms must be taken into account in the analysis at least for each quarter-end.

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Edition du 18/09/07/14:09

Food Packaging Europe

FOOD EUROPE (Packaging rules)

Revenue recognition_V2.doc

FINANCE Author : M.Lababidi Update: . Accounting treatment:

Revenue recognitionIssued : 18/09/2007 Updated :

To restate sales that do not meet the above requirements, the posting scheme is: • Eliminate the revenues from sales booked in the month • Eliminate the good issued in deduction of costs. o On that specific point, the determination of the value of good issued to restate can not be statistic. It must be article by article o For each line of sale restated determine thevalue that must be reintegrated into stocks => quantity * unit stock valuation for each article. • Restate the corresponding receivables in deduction of the total receivables • Reintegrate into stocks the good issued related to restated sales, as stocks in transit NB: Sales, inventory, receivables are impacted. It is not allowed to restate only the margin out of the P&L. These journal entriesmust be : • Booked on separate / identified accounts, in both P&L and B/S • Reversed systematically at the beginning of the following month. Example: On a month, the site A booked 1000 K$ of sales and good issued are 900 K$. At month end, in regards of sales recognition rules, it has been identified that 50 K$ must be restated from the sales, and the stock value related to these sales is 30 K$.Balance sheet Customers 1000 Customers - SAB 101 restatment 50 Inventories Initial Stks: 500 90 Inventories - SAB 101 restatment 30 Total FG Inventories reported in HFM = 440 Total Trade A/R reported in HFM = 950 P&L

Sales Sales SAB 101 restatement Total sales of the period

1000 -50 950

Good issued Good issued - SAB 101 restatement Total Good issued of the period Result

-90 30 -60 890...
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