aug 28 presentation 28.08.2014
TRANSCRIPT
-
8/11/2019 Aug 28 Presentation 28.08.2014
1/15
28th
August 2014
Cost Allocation (CA)Process Flow
-
8/11/2019 Aug 28 Presentation 28.08.2014
2/15
2
Nature of Costs 3 H-Energy I/O List 8Rational & Purpose for CA 5 Allocation Order & Basis 9
Components of Common Cost 6 Allocation Process Flow Charts 10
Initial Booking of Expenses 7 Additional Points to be Reckoned 14
Agenda
-
8/11/2019 Aug 28 Presentation 28.08.2014
3/15
Nature of Cost
Direct Cost
Direct cost are those costs that can be attributed directly to a specific project.Direct cost will be incurred directly from specific project company.Indicative list of direct cost is as follows:
Salary cost of project specific employees;Cost of project specific studies and professional fees;Travelling cost incurred for project;Communication expenses in relation to project specific employees;Project site office related expenses.
3
-
8/11/2019 Aug 28 Presentation 28.08.2014
4/15
Nature of Cost
Indirect Cost
Indirect costs are those costs that are incurred for common or joint interest andcannot be directly attributable to a single project.Major component of indirect costs are G&A exp, cost of support servicedepartment, common asset usage cost, lease rent etc.Indirect cost are allocated to various projects through CA process.
From October 2013, major Indirect costs are incurred by H-Energy (till September2013 by HEGCPL) and are allocated to subsidiary companies on the basis of time,facilities utilized by them.
To the extent possible we should ensure that all cost should be project specificdirect cost so that allocation of expenses can be minimize. This will provide morecontrol to project head over direct cost and also help in reducing projects outflowby way of reduction in service tax.
4
-
8/11/2019 Aug 28 Presentation 28.08.2014
5/15
Rational & Purpose for CA
Rational for CA
For arriving accurate and transparent cost of each project.Consistent and logical allocation helps in proper explanation of cost to internalas well as external stakeholders.
Cost of each project is subject to audit by internal/ external auditors.
Purpose of CA
To allocate cost of common resources & facilities like infrastructure, office,assets and cost of common support service department.To provide accurate information needed for decision making and costmonitoring.To present true and fair financial statements to internal as well as externalstakeholders.
5
-
8/11/2019 Aug 28 Presentation 28.08.2014
6/15
Components of Common Cost
Cost of Common Assets: Till September 2013 common assets were procured byHEGCPL. Benefits of these assets are enjoyed by HEGCPL as well as various groupcompanies. Assets usage cost is allocated to other group Companies by HEGCPL.
Cost of Common Facilities: At Mumbai location, common costs are incurred at twolocations viz. Olympia office & KPO. These costs are incurred by H-Energy and
allocated to subsidiaries who have received the benefit.
Cost of Common Support Service Functions: All service functions are employed byH-Energy. These employees are working for H-Energy and other group companies.Their time needs to be allocated to respective projects in order to arrive at accurateproject cost. Support service function includes following:
6
HR/ Admn / Delhi office/ MDs office Procurement & Commercial
Accounts Business Development
Finance Projects
Legal Advocacy & sales
-
8/11/2019 Aug 28 Presentation 28.08.2014
7/15
Initial Booking of Expenses
In SAP system, while booking cost selection of either Work Breakdown Structure(WBS) or Internal Order (I/O) is mandatory.
WBS and I/O s are used in following manner:
WBS: To track Budget Line Item (BLI) wise expenditure for the project i.e. direct cost ofproject.
I/O: Used for booking of cost to be allocated
7
-
8/11/2019 Aug 28 Presentation 28.08.2014
8/15
H-Energy List of I/O
Following Internal Orders have been created in SAP for tracking departmentwise cost:
8
200601000000 H-Energy General 200601000010 H-Energy - Accounts
200601000001 G&A P&L Charge 200601000011 H-Energy Finance
200601000002 G&A Cost Olympia 200601000012 H-Energy Legal
200601000003 G&A Cost HKPO 200601000013 H-Energy Procurement
200601000004 Admin/ HR/ MD office 200601000014 H-Energy Advocacy
200601000005 H-Energy HAPL 200601000015 H-Energy Common
200601000006 H-Energy H-Gas 200601000016 H-Energy HEECPL
200601000007 H-Energy HREPL 200601000017 H-Energy HEPL200601000008 H-Energy IFTI 200601000018 H-Energy BD
200601000009 H-Energy - HEGCPL 200601000019 H-Energy Projects
-
8/11/2019 Aug 28 Presentation 28.08.2014
9/15
Allocation Order and BasisOrder and basis of allocation of accumulated cost in respective I/O is as follows:
9
Sr. No. Cost component Allocation basis
1 Depreciation of assets On the basis of actual usage of assets
2 Allocation of G&A cost - Olympia Equivalent work station occupied at Olympia
3 Allocation of G&A cost - Knowledge Park Equivalent work station occupied at KPO
4 Allocation of Admin/ HR/ MD office costTotal head count of H-Energy group excludinghead count of these department
5 Allocation of Accounts & Tax teams cost Time sheet
6 Allocation of Finance teams cost Time sheet
7 Allocation of Legal teams cost Time sheet
8 Allocation of P&C teams cost Time sheet
9 Allocation of Advocacy teams cost Time sheet
10 Allocation of BD teams cost Time sheet
11 Allocation of Project teams cost Time sheet
12 Invoice raising on various group companies
-
8/11/2019 Aug 28 Presentation 28.08.2014
10/15
Allocation Process Flow Charts
Allocation of cost accumulated in Olympia I/O
10
Office Supplies& Maintenance
OfficeElectricity Exp
Telephone,Int.net & Com
Lease Rent forOlympia office
Office SecurityCost
Repairs &Maintenance
Other G&Aexpenses
IO Admin/HR/MD
Empl Exp.
IO H-Energy-Legal
IO H-Energy-P&C
IO H-ENERGY-Advocacy &
Sales
At Period end, Allocation is done based on Equivalent workstations Occupied at Olympiaoffice and Internal Order is made ZERO
G&A-Olympia officeInternal Order
Depreciationon Common
Assets ofOlympia office
Initial Cost Booking
-
8/11/2019 Aug 28 Presentation 28.08.2014
11/15
Allocation Process Flow Charts (Contd )
Allocation of cost accumulated in KPO I/O
11
Office Supplies& Maintenance
OfficeElectricity Exp
Telephone,Int.rnet & Com
Lease Rent forHKPO Office
Office SecurityCost
Repairs &Maintenance
Other G&Aexpenses
G&A Cost-HKPO InternalOrder
IO HEnergy-Accounts &
Tax
IOHEnergy-Finance
IOHEnergy-H Gas
IOHEnergy-HREPL
IOHEenergy-
HEECPL
At Period end, Allocation is done based on Total Equivalent workstations Occupied andInternal Order is made ZERO
Initial Cost Booking
Depreciationon Common
Assets of HKPOoffice
-
8/11/2019 Aug 28 Presentation 28.08.2014
12/15
Allocation Process Flow Charts (Contd )
Allocation of cost accumulated in HR/ Admn / MDs Office I/O
12
Admin/HR/MD/Delhi Office Empl Exp I/O(Pooled cost)
IOHEnergy-Finance
Allocation based on Total Headcount including Project Site (Excl. Admin/HR/MD/Delhi Office) andIO is made ZERO
Allocated G&ACost from Olympia
Internal Order
IOHEnergy-Accounts
IOHEnergy-Legal
IOHEnergy-P&C
IOHEnergy-Advocacy &Sales
IOHEnergy-HEECPL
IOHEnergy-HAPL
IOHEnergy-H-Gas
IO HEnergy-HREPL
Travel &Accommodation
cost pertaining toAdmin/HR/MD
Depreciation onIT assets used by
Admin/HR/MDdepartment
Salary & Benefitspertaining to
Admin/HR/MDDepartments
IOHEnergy-HEGCPL
-
8/11/2019 Aug 28 Presentation 28.08.2014
13/15
Allocation Process Flow Charts (Contd )
Allocation of cost accumulated in Support Service Department I/O
13
Support Service Department Internal Order(Pooled cost)
Accounts & Tax IOFinance IO
Legal IO, Procurement IOAdvocacy & Sales
Gas IO
Internal Order HAPL
Internal OrderH-Gas
Internal Order HREPL
Internal Order HEnPL
Allocation based on timesheets of respective Dept and Support Service DepartmentInternal Orders are made ZERO
Internal Order H-Energy
Internal Orders Made ZERO after raising ofInvoice (Pooled Cost)
-Allocated G&A-HKPO IO
-Allocated Admin/HR/MD/Delhi Empl Exp IO-Allocated Support service Department IOs
Invoices are raised and Internal Orders are made ZERO
Allocated G&ACost from H-KPO
IO
Travel & Accom.cost pertaining
to SupportService Dept
Depreciation onIT assets used bySupport Service
department
Allocated G&ACost from
Admin/HR/ MDEmpl Exp IO
-
8/11/2019 Aug 28 Presentation 28.08.2014
14/15
Additional Points to be Reckoned
Allocation of Salary Cost by HR Department
Below mentioned employee related cost to be allocated is provided by HRDepartment by following similar process of cost allocation:
Salary CostFixed Reimbursement of Expenses
Employers Contribution to Provident Fund Full & Final SettlementBonus/ PLIESIC Contribution
Cost Allocation of Rent and Depreciation
From October 2013 onwards Depreciation of assets acquired prior to September30, 2013, KPO Rent is allocated from HEGCPL all other common costs are allocatedfrom H-Energy.
14
-
8/11/2019 Aug 28 Presentation 28.08.2014
15/15
15