Transcript Final Results 2001 / 2002

PaperlinX Policy & Procedure Update
November 2012
Agenda
•
Project background & status
•
Policy distribution
•
Responsibilities, feedback and next steps
•
Significant policy changes
•
Major policy changes
•
Questions
•
Appendix – minor policy changes
2
Project background
• All PPX policies have been revised except:
- Treasury policies: deferred and will be issued by 31 December 2012
- HR policies: review and consolidation commenced
• Policy set has reduced from 93 to 58 policies
• Changes made:
- Alignment with AIFRS and IAS
- Removal of Australian specific references
- Removal of paper manufacturing requirements
- Authority limits lowered to reflect current PPX risk profile & size
- Adoption of Internal Audit recommendations
- IT policies rationalised and less specific
3
Project background
• Reviewed by:
- Corporate
- Regional CFOs, Senior Managers & Internal Audit for major policies e.g.
credit management
- Regional IT Heads for IT policies
- CFO
• Approved by Audit Committee Chairman and for significant changes
also the Board
• Policies effective 1 July 2012 with compliance by 31 December 2012
4
Policy distribution
• Ceased maintaining hardcopy policy manuals
• Policies reside on the PPX Extranet:
- www.ppxextranet.com
- click on “Policy and Procedure” tab
• Regions encouraged to provide direct links to Extranet rather than
manage separate policy repositories
• Policy ownership resides with Wayne Johnston, Deputy CFO and EGM
Corporate Services
5
Responsibilities and next steps
• Feedback sought from Regions and OpCos to ensure policies work and
can be implemented
• Some policy refinement is expected
• Regions & OpCos:
- Update policy repositories or link to PPX Extranet
- Establish process to review and implement changes
- Revise Region and OpCo policies as appropriate
- Raise policy implementation issues and propose refinements to Corporate
• Internal Audit and other compliance functions will take pragmatic
approach to audits conducted before 31 December 2012
6
Significant policy changes
1. Delegation of Authorities (new)
2. Purchasing (new)
3. Project management (new)
4. Appointment of subsidiary company directors
5. Prevention and reporting of improper conduct
You must review these policies
7
1.12 DoA cont’d
• New policy which encapsulates DoA’s into one document via matrix
• Defines (1) responsibility explicitly retained by the Board, (2) DoA to
specified leadership roles and (3) establishes the types and maximum
limits that may be approved by individuals
• New delegations have been added
• Many delegations have reduced to reflect PPX’s current risk profile and
be practical and appropriate for the business
• Treasury delegations have been revised
• The DoA policy is the master and overrides any inconsistencies in the
underlying policies
• DoA policy to be reviewed annually
8
1.12 Delegation of authorities (DoA)
• Dividing a commitment or transaction into two or more parts to evade a
limit of authority is prohibited
• Regions / Corporate Departments must:
- Revise their own policies and procedures with respect to DoA’s in line with
this policy
- Delegations must be explicitly captured in writing (matrix format) and
distinguish those authorities which a direct report cannot sub-delegate
- Approved by Regional Vice President/CEO and Regional CFOs
- Implicit in any DoA is the delegating manager accepts accountability for any
decisions made within that level
9
1.12 DoA – significant increase in Board control
• Revised DoA discourages certain practices
• Now a small Board who aim to respond quickly to requests
for approvals
• The Board do not want to unreasonably slow down approval
processes
• Board will consider recommendations at scheduled Board
meetings or use circular resolutions in between meetings
10
1.12 DoA – significant increase in Board control
•
Clarification that all approval levels are exclusive of GST / VAT / sales tax
•
Engagement of consultants – changed to reflect :
–
–
–
•
Board to approve all unbudgeted consultants >$10k
Board to approve all consultant-based projects (budgeted or unbudgeted) >$75k
Board to approve any rehiring of ex-employees as consultants
Authorised company spokesperson – changed to reflect:
–
–
Communication with ASX, market, financial stakeholders – Chairman, CEO, CFO and EGM
Corporate Services (and Company Secretary re shareholders, ASX, ASIC for legal / statutory /
regulatory matters)
Trade press – CEO, CFO, Regional VPs, local Opco MDs and their delegates (subject to briefing re
Continuing Obligations)
•
Engagement of legal services for potential litigation exposure – changed to reflect
Board approval of all over $50k. CEO and CFO only approve <$50k
•
For “Eligible executives” - Trading of company securities during approved trading
window – requires joint CEO and Company Secretary approval
11
1.12 DoA – significant increase in Board control
•
Opening bank accounts – all new bank accounts require CFO approval
•
Cash commitments and equipment leases – changed to reflect:
–
–
Budgeted: Approvals by Board >$1m, CEO <$1m, CFO <$500k, Regional VP <$200k
Unbudgeted: Approval by Board for all > $20k, CEO/CFO/Regional VP <$20k
•
Property lease renewals and replacements – all to be approved by the Board
•
Projects – changed to reflect:
–
–
–
High risk or Medium risk or Low risk >$1m require CEO approval
Low risk > $200k requires Regional VP or Regional GM approval (note – Europe will be CEO in
practice following departure of Marcus Gillioen)
Projects <$200k are not captured under this policy
•
Global rebate programs – CEO to have overall responsibility
•
Extension of employee notice periods – Board to approve all
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DoA: OpCo company spokesperson
Must be or be authorised by OpCo GM to be a spokesperson to the trade press.
Spokespersons must be brief on continuous disclosure i.e. what can and cannot be
said. Refer to policy 1.08 Continuous disclosure and investor relations.

What you can say
What you cannot say
Local products and service offerings
Profits, forecasts, budgets
Local initiatives
Confidential matters
Local marketing activities
Restructuring projects
Local industry
Another Region or PPX Group
comments
13
6.02 Purchasing
• New policy which dovetails with the Conflict of Interest Policy
• Sets minimum requirements for quoting and tendering based upon the
size and complexity of the project or transaction being contemplated:
- Written scope, specifications and requirements
- Uniformity of treatment for tendering parties
- Commercially sensitive information, including bid prices and terms must be
treated confidentially
- Staff shall avoid situations where private interests conflict, or might
reasonably / potential to conflict with their Company duties
- Staff must not accept from suppliers gifts, gratuities, entertainment or other
forms of personal favour, other than those of a token kind
• DoA Policy cascades authorities down within PPX to all personnel
involved in committing to external purchasing commitments
14
6.04 Project management
•
New policy which establishes base level guidance in relation to administering
projects and conducting project risk assessments with risk management plans
•
Assists with distinguishing projects from capital expenditure
•
Projects captured under this policy based on cost, size, complexity and risk.
The risk profile and spend dictates the approval required by the DoA Policy
•
A project governance framework must exist with the following 5 elements:
–
–
–
–
–
A project control structure
5 project phases
4 approval gates in accordance with the DoA
5 standard documents to support proceeding past each approval gate – templates
provided
Progress reporting and monitoring during the implementation phase
•
Authority to sign major contracts or make commitments with key stakeholders
only comes after approval of Phase 3 Project Establishment
•
Projects include warehouse upgrades / consolidations, major IT projects and
large business reorganisation projects
15
1.09 Appointment of subsidiary company directors
• All appointments, changes or nominations for appointment of directors
and company secretaries must now be approved by the PPX CEO and
CFO and confirmed by the PPX Board
• Reduces maximum number of directors from 8 to 5 unless there are
other extenuating circumstances
• Prior written approval is required if directors feel they need independent
legal advice at the company’s expense
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1.03 Prevention and reporting of improper conduct
•
Consolidation of Prevention & Reporting of Fraud Policy and Reporting of
Improper Conduct Policy
•
Mandatory reporting of fraud: where there is sufficient evidence of criminal or
unlawful activities, management must:
-
Report the matter to the relevant local authorities subject to any local extenuating
circumstances. Where extenuating circumstances exist, management must report
the nature of these circumstances to the PPX CFO who will then notify the Audit
Committee Chair
-
Report the matter to the Audit Committee Chair where the value exceeds A$20k in
local currency equivalent.
•
Management must not independently commence investigations, interview
employees or gather evidence without first discussing the matter with the EGM
Corporate Services/Legal Counsel
•
Confidential reporting of improper conduct is available through “Speak Up”
program via independent anonymous multilingual website
www.paperlinxspeakup.deloitte.com.au or email [email protected]
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Major policy changes
3.01 Tax risk
4.03 Employee benefits
4.04 Intercompany transactions
4.10 Onerous contract
6.01 Credit management
6.03 Property leases
7 IT policy suite
You must review these policies
18
3.01 Tax risk
•
Matrix established for allocating tax responsibilities between the Melbourne
statutory office, UK head office, Regional CFOs, Regional Tax Managers and
OpCo Finance Directors
•
An annual assessment of the recoverability of any net tax asset is performed
and the carrying value is adjusted in line with the Valuation of Non-Current
Assets Policy
19
4.03 Employee benefits
• Policy has been re-written
• Detailed table outlining the rules for P&L and balance sheet disclosure
and calculation of employee benefits in general ledgers
• Key changes to mapping of employee benefit liabilities in Hyperion
-
All company provided cars are to be remapped as personnel costs
-
Pension liabilities are to be remapped from “Non current payable – deficit on DBP” to
“Non current provision – pensions”
-
Vacation day accruals are to be remapped from “Current creditors and accrual –
vacation days” to “Current provision – annual leave / holiday pay / vacation days”
-
The “Current provision – other” and “Current creditors and accrual – employee
benefits” are no longer to be used for employee benefits with balances to be
remapped to specific employee provisions or creditor / accrual accounts
-
Further guidance will be provided by the PPX Group Reporting Manager
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4.04 Intercompany transactions
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Non-current funding: Any long term loan that is documented as not repayable in the
next 12 months and/or not repayable in the foreseeable future. Internal loans accounted
for as Net Investment Hedges must be treated as non-current
-
Loan establishment: Refer to Group Funding / Treasury Overview policies for
requirements ie documentation, interest rate setting, hedging and approvals.
-
Documentation: onus is on the recharger to ensure appropriate documentation exists to
support recharges. Documentation needs to be sufficient to support a tax deduction.
-
All intercompany interest income / expense to be separately disclosed on a gross basis in
the general ledger and Hyperion. Intercompany partners separately disclosed in Hyperion.
-
Overseas intercompany balances:
-
Trading balances eg sale of goods, expense recharges, internal interest: settled within the
prescribed timeframes unless commercial reason for not doing so and approved by the PPX CFO.
-
Funding balance: Must be interest bearing on an arm’s length methodology with written
agreement. Regional Tax Manager to ensure appropriate interest rate is charged
-
Loans designated as Net Investment Hedges in accordance with IAS 39, then FX gains and
losses are transferred to the FX translation reserve (net of tax, if applicable) ie no P&L impact.
This entry is a consolidation entry which should be posted in a parent / adjustment entity above
the OpCo and should only posted by Regional Finance teams or PPX Corporate.
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4.10 Onerous contract
•
Policy has largely been re-written
•
Where the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under the contract
•
The unavoidable costs under a contract reflect the least net cost of exiting from
the contract, which is the lower of the cost of fulfilling it and any compensation
or penalties arising from failure to fulfil it.
•
Includes IT support contracts, outsourcing contracts, utility contracts, vehicle
leases, unfavourable customer sales agreement or unfavourable supplier
agreement.
•
Specific rules exist to assessing and accounting for onerous warehouse leases
•
If the net costs exceed 12 months then the provision needs to be split:
–
–
Current provision: represent the likely net costs to occur within the next 12 months
Non-current provision: net present value of the likely net costs which exceed 12 months. Provision
is to be unwound as an interest expense in the P&L over the remaining life of the contract.
22
6.01 Credit management
•
Reviewed by Regional CFOs, senior managers and Internal Audit
•
Adoption of Internal Audit recommendations previously agreed by OpCos / Regions
•
European Credit Management Wheel
–
Set of regional policies to support and guide their OpCos on credit management. Assists OpCos
with managing the key credit management dynamics including decision making and reporting.
–
OpCos can use the forms relevant to their Credit Limit Review process. Regional CFOs must
ensure these forms meet ALL requirements of this policy and it forms
•
Credit worthiness review - A minimum of 1 trade reference check, but preferably 3
must be obtained. These accounts must be closely monitored for the first 6 months
because it is a poor reflection on any customer who only has 1 trade reference
•
Guarantees - Personal guarantees should be part of all credit applications and
obtained where we can
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6.01 Credit management cont’d
•
Credit limit definition (amendments in red). The aggregate of:
–
–
–
–
–
–
•
amounts already charged on account
value of sales orders accepted
value of indent “ex mill” sales orders placed on a customer’s behalf but not yet invoiced. This can
exclude amounts greater than 30 days where the product is NOT customer specific AND the
orders can still be cancelled with the mills.
despatches “ex stock” not yet invoiced
customer stock held on consignment at the customers site but not yet invoiced. This excludes
consignment stock held in OpCo warehouses unless the stock cannot be re-sold ie customer
specific products.
But excludes sales tax where sales tax can be recovered in the event of customer failure
Trading terms (amendments in red):
–
–
Standard trading terms represent the standard time period that OpCo’s normally expects customer
payments within. Customer actual trading terms represent the time period for payment
specifically agreed between the OpCo and a customer. Trading terms need to be included on the
credit application and credit confirmation forms.
In some jurisdictions it is industry practice to provide a “grace period” in addition to trading terms.
This grace period then defines the collection of outstanding receivables. Actual trading terms
MUST include any “grace period” provided to customers.
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6.01 Credit management cont’d
•
Average trading terms - Regional CFOs are to maintain a register of OpCo
average trading terms and which needs to be reviewed annually by the PPX CFO
•
Authorisation of credit limits
–
–
•
Required where a customer’s credit limit is increased, or the un-insured portion of the customer’s
credit limit increases following a reduction in / removal of credit insurance cover
Established / reviewed on a consolidated customer basis ie where a customer trades with multiple
OpCos the credit limits must reflect the combined credit limits of all OpCos
Rules for held orders exceeding credit limits or trading terms
–
–
Held orders should be approved to be released in line with the DoA limits for credit limits / trading
terms in this policy. Some DoA limits have been reduced.
DoA limits should be established at OpCos which shows approvals required for orders that are of
a certain value OR for the amount of time that a customer has exceeded their payment terms
•
Regular reviews - In aggregate, customers which represent greater than 60% of an
OpCo’s total sales value must have their credit limits AND payment terms reviewed
at least annually
•
Credit insurance - All new policies need to be approved by the PPX CFO
•
DoA – Regional CFOs and OpCo FDs are to ensure a formal matrix exists for DoA
including approvals for rebates, credit notes, credit limits, credit terms, write-offs,
discounts etc
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6.01 Credit management cont’d
•
Dormant customers - at least annually identify dormant customers (not traded in
the last 12 months) and place these to an inactive status. Before any new orders
are accepted a new credit limit review is to be undertaken and approved
•
Bad debt write-offs - a formal schedule of Region / OpCo approval authorities must
be developed by the Regional CFOs and OpCo FDs for write-offs less than A$250k.
All bad debt write-offs greater than A$250k must be approved by the PPX CFO
•
Debtor reporting - OpCo FDs should advise the PPX CFO of any material issues in
regard to overdue debtors or customers exceeding credit limits which have NOT
been provided for and may result in a A$0.5m or greater charge to profit.
•
Customer masterfile - exception report of key changes is periodically produced and
reviewed by someone independent e.g. FD, Credit Manager
•
Credit notes - must be authorised by the OpCo MD or their delegate with clear
segregation of duties between the raising and approval of credit notes
•
Rebates - must be authorised by the OpCo MD or their delegate, other than Credit
Officer, and be in senior positions independent of daily sales activities
•
Credit Application and Confirmation of Credit Forms have been revised
26
6.03 Property leases
•
New policy which incorporates lease requirements from capex policy
•
Outlines approval levels and documentation required prior to committing to a
property lease – whether a new lease or a renewal of an existing lease
•
Principle is to maintain flexibility on leased property at competitive cost
•
DoA have reduced for the PPX CEO
•
Leases seeking approval must be supported by a business case with minimum
documentation requirements and financial evaluation
•
Technical review required
•
Total expected value of lease payments (including known and quantifiable rental
increases and rental incentives) are to be amortised on a straight line basis over
lease period
•
All leases expiring within the budget period and within the following 12 month
period (irrespective of annual rental value) are to be included for discussion of
strategy in the budget work papers. This does not equate to approval
•
A lease schedule is to be maintained for all property leases
27
7 series - IT policy suite
• 14 new policies replace the previous 41 policies
• Developed by all the Regional IT Heads
• Less procedural and less specific
• Includes some new policies e.g. Green IT
• See your Regional IT Heads for questions on the new
policies
28
Appendix - minor policy changes
29
Minor policy changes
• 1.04 Engagement of consultants
-
DoA limits have changed
• 1.07 Legal services
-
Requirement to seek multiple quotes by external law firms before engaging services
to achieve best value for money and service offering
• 1.11 Legal and professional privilege
-
PPX Legal Department advice should contain the label “Privileged and Confidential”
prominently at the commencement of any document
-
Where litigation is anticipated take care not to refer to legal advice when trying to
obtain advantage over other side
30
Minor policy changes
• 1.04 Material contracts
-
New DoA limits and now distinguishing between core and non-core third parties
-
All material contracts with non-core third parties in excess of 12 months duration, or
involving a purchase or sale commitment or a contingent liability greater than A$250k
(or foreign equivalent) require the review of the EGM Corporate Services.
-
All material contracts with core third parties:
-
greater than A$2m or ‘take or pay’ contract - approval of the PPX CFO
-
in excess of 12 months duration - approval of the Regional President/CEO
-
involving a purchase or sale commitment or a contingent liability
-
Greater than A$250k requires the approval of the Regional President/CEO
-
Less than A$250k require the approval of the OpCo MD
• 4.01 Management reporting
-
P&L, balance sheet, cash flow aligned with Hyperion accounts
-
Removal of some appendices e.g. KPI reporting, trading expense formats
31
Minor policy changes
• 4.02 Legal entity statutory reporting requirements
-
Regional CFOs are responsible for lodgement of all tax returns within their region
-
Finance Directors / Managers are to ensure that Regional CFOs and Regional Tax
Director / Manager are aware of book to tax reconciliation differences . The Regional
CFO is to promptly report material differences to the PPX CFO and PPX Group
Manager – Global Taxation
-
Audit differences arising in the local statutory accounts are to be accounted for as
follows:
1. where AIFRS is not applicable, the adjustment is only made in the local statutory
accounts
2. where AIFRS is applicable Finance Directors / Managers are NOT to
automatically post audit differences to the AIFRS accounts as they will become
out of sync with the PPX Group audited accounts. Regional CFOs are to
discuss these local audit differences with the PPX CFO and agree an approach
for accounting for the audit differences in the AIFRS accounts. Ideally audit
differences would be identified and addressed before completion of PPX Group
AIFRS accounts ie July and January each year
32
Minor policy changes
• 4.05 Accounts payable
-
Ensure the existence and review of Vendor Master File maintenance reports. This
report should be a sequential list of “before” and “after” field changes
-
Where EFT payments are elected in favour of cheques, then payment release must
be timed to ensure that fund flow are the equivalent of cheques and that cash
availability and creditor days do not suffer
-
Authorised signatories levels per Bank Account and DoA policies
• 4.06 Audit and non-audit services
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Audit fees and non-audit fees need to be accrued in June and December results and
includes fees, overruns and out of pocket expenses
-
All mandates for non-audit services must be approved prior to work being
commissioned or commenced (lower authority limits):
-
up to A$50k (or foreign equivalent) by PPX CFO
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Between $50k - $100k by PPX CFO and advised to Audit Committee Chairman
-
over A$100k by the Audit Committee Chairman and advised to the Board.
33
Minor policy changes
• 4.11 Insurance proceeds
-
Now includes non-current assets, debtor losses, inventory losses, consequential
losses/ business interruption and any other insured risk
-
Recognised as income upon notification from the insurer that the claim has been
accepted and the amount can be reliably measured
-
Costs which are subject to an insurance claim are to be expensed in the P&L
-
Proceeds are to be netted against any asset / inventory write off or treated as
customer payments for debtor claims.
-
Insurance policy deductible / excess is to be netted against the insurance proceeds
• 4.08 Valuation of non-current assets
-
New DoA established for approval of impairments of goodwill and non-current assets
34
Minor policy changes
• 4.12 Revenue recognition
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FX gains / losses on FX contracts related to stock purchases should be reported in
cost of goods sold. All other net FX gains or losses should be reported as financial
income or expense
-
Commission income recognised when our responsibilities with the supplier are fulfilled
i.e. supplier has invoiced the customer or customer has paid for the goods. For
commission sales we have no title to the goods sold and as such are not indent sales
• 4.14 Post employment commitments
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Now focuses on defined benefit plans
-
Updated to reflect the current process to complete the accounting valuation required at
half year and full year accounts ie approach, timing, templates
35
Minor policy changes
• 5.01 Capital expenditure
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DoA changes: approval limits have significantly reduced
-
Quotes must be obtained consistent with the new 6.02 Purchasing Policy
-
Leases removed and now addressed in the new 6.03 Property Lease Policy
-
6.04 Project Management Policy applies where the capex also qualifies as a project
36
Minor policy changes
• 5.02 Capitalised interest and other costs
-
Limit to capitalise interest and related finance charges reduced to A$10m
-
Start-up costs and pre-operating costs are not capitalised unless those costs are
necessary to bring the asset to its working condition
-
Costs cannot be capitalised for training, clearly identifiable inefficiencies and initial
operating losses. These costs are to be expensed as incurred.
-
Salaries can be capitalised for staff that are predominantly dedicated to the project
(minimum 40% of their time i.e. 2 days per week) with clear project roles and defined
accountabilities. Salaries cannot be capitalised for staff who work on the project on an
ad-hoc basis or senior management as their roles should relate more to governance
and oversight responsibilities.
-
The interest rate for determining capitalised interest needs to be based upon a local
borrowing facility in the same jurisdiction of the OpCo / Region and approved by the
Treasury Office.
• 5.03 Low value asset additions
-
Policy now applies at lower threshold A$2,500 or foreign equivalent
37