【正文】 S Modification 11 Changes in financial reporting process PetroChina needs to implement a large scale change in its financial reporting process. Current ? Consolidation is done by the auditors using spreadsheets and manual data collection and manipulation ? FMIS report is not pliant with PRC accounting standard for jointstock pany. ? IAS report is produced by the auditors using manual method ? Reporting is done for the whole CNPC with the current 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 pliant with PRC accounting standard for jointstock pany. ? AS report is produced by Petrochina accountants using FMIS ? Reporting structure for PetroChina will be separated from the old CNPC. New structure will be put in place ? New chart of accounts will be in effect System Design for FMIS Modification 12 Systems issues The following systems issues are identified as critical to the ability for PetroChina to be able to 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 treats 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 pared to PRC reports ? In the interim, CNPC 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 is 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 System Design for FMIS Modification 13 Overall approach and design principles Chapter 3 System Design for FMIS Modification 14 Design principles / 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 ? Marginal changes to FMIS is preferred to marginal change in business process ? Changes in business process or FMIS should have minimal dependency on shortterm improvement to IT infrastructure. ? Due to current limitations in telemunication, the amount of data that needs to be transferred should be minimized. ? To ease transition, the modified FMIS need to have data patibility with current FMIS The following principles have been followed in creating the design for the new system: System Design for FMIS Modification 15 Business process overview Chapter 4 System Design for FMIS Modification 16 Location Level 5 Segment Level 3 HQ Corp Level 1 Lgr Lgr Lgr+ Lgr+ IAS IAS PRC Segment 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 LEGEND Ledgers Reports Modified report/consldtn system Consolidation entry Consolidation file Data flow diagram of rollup process PRC PRC Lgr Lgr Notes: Lgr+ = ledger report plus some other special reports. System Design for FMIS Modification 17 Roll up and consolidation process chart Enter transactions for Level 6 HO Enter same segment, samelocation elimination entries Import reports from level 6 HO ledgers Create reports for Level 6 HO ledgers Receive reports amp。 Provision。 accumulated depreciation ? Cost: Beginning balance, additions, disposals, ending balance。 Deductions。 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 beginning of period。 r efini n g pla nts c o nstr ucti o nW or k i ng capit al l oan Aver ag er ateRMBU S$YEN……? Aging report of accounts receivable ( PRC GAAP ) ? Longterm equity investment ( PRC GAAP ) Investee, stock type, share number of stock, share percentage, amount, remarks ? Longterm bond investment ( PRC GAAP ) Bond type, par value, rate, purchased amount, due date, interest of this year, accumulated interest, remarks ? Other nonequity longterm investment ( PRC GAAP ) Debtor, principal, rate, due date, interest ine of current period, accumulated interest, remarks ? Longterm 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, accumulated interest ? Related party transactions ( PRC GAAP amp。 depreciation amount based on unreevaluated amount by unit of production method or straight line method ( depend on assets class ) ? Deferred business initial cost ( preoperation expenditures ) ? Beginning balance, ending balance ? Monthly revaluat