PDD - Enterprise Structure v2-5

Enterprise StructureProcess Definition Document

Document number: PDD051

Author: A. R. Hardie

Document Approval Log:Version

Date Document Status Approver Role

V1.0 15/11/2006 Initial draft – Financial Organisation A. R. Hardie BPOV1.1 27/11/2006 Initial draft – expanded to include full enterprise

structureA. R. Hardie BPO

V1.2 06/12/2006 Initial draft- updated use of Distribution Channel A. R. Hardie BPO

V1.3 02/01/2007 Uploaded to Solution Manager T. McLellan Project Administration

V1.4 09/01/2007 Updated to reflect revised sales organisation and company numbers, and the addition of Profit Centre, Functional Areas and Cost Centres

A. R. Hardie BPO

V1.5 14/03/2007 Updated to reflect restriction of distribution channels to “trade” and “inter co” only (not country specific)

A. R. Hardie BPO

V1.6 2/05/2007 Updated to reflect acquisition of Programma and use of parallel ledgers

A. R. Hardie BPO

V1.7 25/10/2007 Updated to reflect roll out to USA (including change to re-sale and to holding company)

A. R. Hardie BPO

V1.8 10/02/2008 US Adjustment changes and format changes A Goggin Project Manager

V1.9 01/05/2008 Further US Adjustments A Goggin Project Manager

V2.0 13/07/2009 Update to reflect roll out to India A Goggin Project Manager

V2.1 03/02/2010 Update to reflect changes in UK, Germany and Canada

A Goggin Project Manager

V2.2. 21/04/2010 Update to reflect changes in UK L Dyer BPO

V2.3 18/05/2011 Update to reflect addition of Megger SARL A Goggin Project Manager

V2.4 31/05/2011 Update to reflect split of US Mfg & US Sales A Goggin Project Manager

Megger Group Ltd Page 1 of 41

Megger Group Limited Enterprise Structure

Index:

1. PROCESS SUMMARY..................................................................................................................... 3

2. KEY MASTER DATA....................................................................................................................... 4

3. SAP PROCESS / CONCEPT / DESIGN...........................................................................................5

3.1. Ledgers.................................................................................................................................... 53.2. Operating Concern................................................................................................................... 53.3. Controlling Area...................................................................................................................... 53.4. Company.................................................................................................................................. 63.4.1. Primary Manufacturing & Sales Operations.........................................................................63.4.2. Sales & Distribution Companies...........................................................................................73.4.3. Inter Company Eliminations.................................................................................................83.4.4. Planning Adjustments...........................................................................................................83.5. Credit Control Area................................................................................................................. 93.6. Sales Organisation................................................................................................................... 93.7. Distribution Channel................................................................................................................ 93.8. Division.................................................................................................................................... 93.9. Laboratory / Design Office.....................................................................................................103.10. Sales Area.......................................................................................................................... 103.10.1. UK...................................................................................................................................... 103.10.2. US and Sales Companies....................................................................................................103.11. Sales Office........................................................................................................................ 113.12. Plant.................................................................................................................................. 113.13. Purchasing Organisation....................................................................................................123.14. Storage Location................................................................................................................ 123.15. Shipping Point.................................................................................................................... 123.16. Transport Planning Point...................................................................................................123.17. Profit Centres..................................................................................................................... 123.18. Functional Areas................................................................................................................ 133.19. Cost Centres....................................................................................................................... 13

4. ASSOCIATED DOCUMENTS........................................................................................................14

4.1. Company Legal Structure.......................................................................................................144.2. SAP Organisation................................................................................................................... 14

5. ASSUMPTIONS / OPTIONS CONSIDERED................................................................................15

5.1. Business Changes................................................................................................................... 155.2. Outstanding Issues / Actions...................................................................................................15

6. APPENDIX 1 – COMPANY LEGAL STRUCTURE.....................................................................16

7. APPENDIX 2 – SAP ORGANISATION.........................................................................................17

8. GAAP Adjustments.................................................................................................................... 38



1. Process SummaryMegger Group exists as a UK registered legal entity with a number of subsidiaries within various jurisdictions around the world. Within the US, however, the legal identities of the individual companies are blurred, for whilst the factories operate independently the sales organisations and credit control operations act as if it were a single entity and “do business as” Megger (a formally recognised concept) presenting a single face to the outside world.

This blurring of the legal organisation is carried over into the management structure, whereby Megger’s core philosophy of Profit Centres both divides legal entities and cuts across them, with manufacturing and selling responsibilities split (resulting in trading between profit centres).

In the UK however, the profit centre management structure has, to a large extent, been replicated in the legal entity structure with Megger Limited (sales company) and Megger Instruments Limited (manufacturing company). The change in legal structure was made in 2010 and differs from the single legal entity which existed in 2007 when SAP was first implemented. This will almost entirely eliminate the need for inter profit centre trading transactions, replaced by normal inter-company trading. There are a few minor exceptions, for example where the sales company sell to CSA/Iberia sales territory.

Financial reporting to Megger’s parent (TBG) is in US$ under IFRS, but Group accounts have to be filed in Sterling under UK GAAP. Additionally all local entities have to report in their own currencies under their own accounting conventions (and the UK operating company uses different UK GAAP principles to those employed by Megger Group Limited).

From an operational point of view, although the SAP implementation will eventually be Group wide, it is intended that each operation can use the system to suite its local requirements and not have a Group wide detailed solution imposed upon them.

This document details the organisational structure to be used in Megger’s implementation.



2. Key Master DataThe purpose of this PDD is to document the Enterprise Structure within SAP and Master Data is therefore not relevant (although all master data records will use elements from this structure).


Megg

er Group

Limited

Enterprise

Structure -

Appen

dice

s

Megger Group LimitedAppendix 2.10 – US Cost Centres

3. SAP Process / Concept / DesignThe Megger organisation has to be replicated within SAP by defining the Enterprise Structure – the framework within which all the SAP process and reporting will take place. The definition of this structure is done as IMG configuration and master data maintenance by Megger IT staff, and has to enable financial reporting, operational control and localisation of procedures within a Group wide implementation.

SAP has a number of organisational building blocks that create this environment.

Operating Concern

Controlling Area

Company

Credit Control Area

Sales Organisation

Distribution Channel

Division

Lab / Design Office

Sales Area

Sales Office

Plant

Purchasing Organisation

Storage Location

Shipping Point

Transport Planning Point

This is illustrated graphically at Appendix 1

In addition to the Enterprise structure above, organisational elements used by SAP include Profit Centres, Functional Areas, and Cost Centres. This document has been extended to cover these additional organisational elements

3.1. LedgersSAP has the ability to maintain three parallel ledgers in which transactions are recorded (OL, Y1, and Y2). All sales, purchase, inventory etc transactions are automatically posted to all three of these ledgers. However although Journal Entries would normally be posted to all three, they can be restricted to just one or two of them if required.

This selective posting of journals can be used to create entries that reflect differing accounting principles and this functionality will therefore be used by Megger to maintain the accounting records in the required different GAAPs:

OL (Leading Ledger) – used for group reporting (IFRS)

Ledger Y1 – used for local GAAP

Ledger Y2 – used for Megger Group Limited UK GAAP (note Megger Limited and Megger Instruments Limited use of UK GAAP differs from Megger Group’s use)

Megger’s initial proposal was to replicate the solution deployed in the Group’s COGNOS consolidation system and use “dummy” companies / cost centres to create these differences (see Appendix 4), but changed to this solution because SAP recommend against creating additional companies because of the overhead involved.

Despite this recommendation, Megger may revert to this initial dummy company / cost centre proposal because initial experience has shown that maintaining 3 ledgers in parallel is difficult.

3.2. Operating ConcernThe operating concern exists as the environment for Profitability Analysis. Megger’s group wide profitability requirements dictate that only a single Operating Concern is required, and as AIOSE comes pre-configured with one Operating Concern (1000), this will be utilised.



3.3. Controlling AreaThe Controlling Area is the environment for management accounting and Profit Centres. Again, therefore, Megger’s group wide profit centre and consolidation requirements dictate that only a single Controlling Area is required, and as AIOSE comes pre-configured with one Controlling Area (1000), this will be utilised.

3.4. CompanyCompanies represent individual legal entities for which full profit & loss and balance sheet reporting are required and are therefore normally used to represent each of the lowest level of legal entities within the organisation. The Company numbering convention Megger will use within SAP will be

1000 to 1999 for UK companies 2000 to 4999 spare (for “overseas” acquisitions) 5000 to 5999 for US companies 6000 to 6999 for European companies 7000 to 8999 for Sales & Distribution companies, with 2nd digit denoting country 9000 to 9999 spare

3.4.1. Primary Manufacturing & Sales OperationsUK

AOISE comes with three pre-configured UK companies - numbers 1000, 1100 (both with logistics) and 1200 (purely financial). This will be modified so that all UK companies are configured with logistics.

Megger Instruments Limited is a full manufacturing, with inter-company sales only to other Megger companies - company 1000 to be used. Prior to May 2010, Megger Instruments Limited was known as Megger Limited.

Megger Group Limited although essentially a holding company, does have purchasing and sales (all be it very limited) – company 1100 to be used

Megger Limited is a sales company with purchasing and finance – company 1200 to be used. Prior to May 2010, Megger Limited was known as AVO Limited.

USA

The US operations largely “Do Business As” Megger and act as a single entity as far as customers and suppliers are concerned with a single Accounts Receivable and a single Accounts Payable covering all operating companies, and also share common sales tax, federal tax, prepayments, etc.

SAP Companies cannot replicate this “mixed” situation and as this organisation structure is a necessary part of the Group’s operations. This is replicated in SAP as 2 companies – 1 for sales functions and 1 for manufacturing operations.

In addition, the US operations are responsible for the sale of Dover manufactured product and non-Megger Product into the USA, Latin America and North Asia Historically the sales into the US have been part of the James G Biddle (Valley Forge) operation, whilst the sales into Latin America and North Asia have been part of the Multi-Amp (Bronze Way, Dallas) operation (although this distinction has become more blurred in recent times). More recently the sales of Taby products into the USA have become the responsibility of the Multi-Amp (Bronze Way, Dallas) operation. From a management perspective it is desirable to segregate resale operations from manufacturing operations and traditionally this was achieved by using separate organisations within the PRMS system.



However, SAP’s reporting flexibility can provide this separation without the need to expand the organisation structure, and so these operations will be part of the Bronze Way and Valley Forge plants.

The local currency is US Dollars (USD).

SWEDEN

Megger Sweden AB was acquired by Megger on 4 th June 2007 and was immediately transitioned onto SAP (having been operating with an integrated ORACLE implementation within GE).

The company is a full design, manufacturing service/repair and sales facility, and as such will be set up as company 6000. Commissions are paid by Sweden to Germany and Switzerland for sales made directly from Sweden into these areas.

The local currency is Swedish Kroner (SEK).

3.4.2. Sales & Distribution Companies

INDIAMegger India Private Limited exists as a legal entity and essentially is compatible with an SAP Company. To allow for future expansion and not utilise leading numbers to denote every company, a leading 8 in the company number will be used for Sales and Distribution companies with the second digit denoting the country. 8600 will therefore be used for Megger India Private Limited.

The local currency is Indian Rupees (INR).

FRANCEMegger SARL exists as a legal entity and essentially is compatible with an SAP Company. To allow for future expansion and not utilise leading numbers to denote every company, a leading 8 in the company number will be used for Sales and Distribution companies with the second digit denoting the country. 8300 will therefore be used for Megger SARL. The local currency will be Euros.

There are however 2 requirements that need to be addressed over and above this simple one company solution

French legal requirements

Under the French legal/tax framework all accounting entries must go against the year to which they relate – prior year adjustments are not allowed.

From Megger’s perspective in reporting to TBG, the accounts for any year are finalised and closed before the end of December and except under special circumstances posting to that year are not allowed after the end of December – any such entries are posted to the P&L in the subsequent year.

The solution to this problem, had initially been the use of dummy companies, but in accordance with SAP policy, this was changed, and parallel ledgers will be used in stead, with the “prior year adjustments

Only being posted to ledger Y1 in the old year

Being posted to ledgers OL and Y2 in the new year.

AUSTRALIAMegger PTY Limited exists as a legal entity and essentially is compatible with an SAP Company. To allow for future expansion and not utilise leading numbers to denote every company, a leading 8 in the company



number will be used for Sales and Distribution companies with the second digit denoting the country. 8500 will therefore be used for Megger PTY Limited.

The local currency is Australian Dollars (AUD).

CANADAMegger Limited exists as a legal entity and essentially is compatible with an SAP Company. To allow for future expansion and not utilise leading numbers to denote every company, a leading 8 in the company number will be used for Sales and Distribution companies with the second digit denoting the country. 8100 will therefore be used for Megger Limited.

The local currency is Canadian Dollars (CAD).

GERMANYMegger GmbH exists as a legal entity and essentially is compatible with an SAP Company. To allow for future expansion and not utilise leading numbers to denote every company, a leading 8 in the company number will be used for Sales and Distribution companies with the second digit denoting the country. 8700 will therefore be used for Megger GmbH.

The local currency is Euros (EUR).

SWITZERLANDMegger AG exists as a legal entity and essentially is compatible with an SAP Company. To allow for future expansion and not utilise leading numbers to denote every company, a leading 8 in the company number will be used for Sales and Distribution companies with the second digit denoting the country. 8900 will therefore be used for Megger AG.

The local currency is Swiss Francs (CHF).

3.4.3. Inter Company Eliminations

US$ EliminationsOver and above the minor inter-company issues outlined for the Sales & Distribution companies, there is a significant volume of inter company trading of product within Megger, (the SAP inter-company facility is to be used for this). When consolidating the Group results these inter company sales and purchases must be eliminated.

The original proposal was to achieve this by use of a dummy company (9000 – 9900 range to be utilised). Instead however it has been proposed that the SAP inter company elimination facility be used. This solution has yet to be piloted and so the decision on the best solution remains outstanding.

Sterling Eliminations

Within the UK accounts there are a number of investment items and acquisition valuation adjustments that need to be eliminated on consolidation (share capital of the individual entities, holding company investments in subsidiaries etc.). Again the dummy company solution was the initial proposal but a final decision on this has still to be made (Note: a similar situation now also exist within Megger Sweden AB with the ownership of the share capital of Megger AG)



3.4.4. Planning AdjustmentsDuring the planning process it is normal for the individual profit centre managers to produce plans that when consolidated together create a more optimistic plan than the Megger Group Board’s top down view supports. This situation is resolved by maintaining the individual Profit Centre plans and creating an offsetting contingency / reserve.

In COGNOS these plan reserves are held centrally in a dummy company - final SAP solution to be determined

3.5. Credit Control AreaCredit control is organised at the company level, with the India, France, Germany, Canada, Australia and Switzerland each providing their own credit control function, whilst there is a single credit control in the US and UK.

There are very few occasions where a customer is invoiced by more than one Megger entity (taking the US as a single entity) so the need for Group wide control is limited and is currently handled manually.

It is therefore logical to have one credit control area for each country, using that country’s currency, with the number used for each Credit Control Area corresponding to the associated Company code.

3.6. Sales OrganisationThe SAP Sales Organisation represents the selling unit as a legal entity - each business transaction is carried out within a Sales Organisation. One sales organisation can therefore only be associated with one company (although one company can have many Sales Organisations. Additional flexibility is then provided by sub-dividing the sales organisation into several Distribution Channels (routes to market) and Divisions (product groupings). Each combination of these three organisational units is a Sales Area.

As with Credit Control Area, commercial (as opposed to sales) functions within Megger are country based and a single Sales Organisation per SAP legal entity is appropriate.

3.7. Distribution ChannelThe Distribution Channel within SAP is designed to represent the channel through which saleable materials or services reach customers. It also provides the ability to apply different prices, rebates, minimum quantities, delivering plant etc to the same customer.

At the initial enterprise workshop it was agreed to use a traditional SAP type analysis of Direct, Distribution, and Other (including internet).

However, following many discussions on the automation of Profit Centre transactions and the volume of master data maintenance that would be involved in some solutions, it was agreed that Distribution Channel would be used to distinguish between sales to third parties and sales to other Megger entities (both true inter-company transactions and profit centre transfers generated by the customer iBlock on profit centres). To provide full flexibility and ease of reporting and profit centre definition, each SAP company will have its own trade sales distribution Channel and its own inter-company / inter-profit centre distribution channel.

This solution is only possible because, for Profit Centre identification purposes, it can be used in conjunction with both

Sales Office (Sales Office had previously been designated for territory identification, but a better

solution was found for this) and

Division (Division had been designated to identify products, accessories instruments etc. but this was

“because it was available” and an alternative solution in product grouping will be utilised instead).



3.8. DivisionDivision is used as a Product Group identifier within the sales process. It allows not just pricing, delivery etc differentiation within a customer it also allows statistical analyses and separation of marketing procedures.

Megger require the ability to analyse sales orders and revenues by the source factory of the products ie which Megger factory etc originally manufactured the product (based on the assumption that any product is only manufactured by one site and there is no duplication of manufacture). In addition to reporting requirements this “source factory” code is also required in the definition of inter profit centre transfer transactions. Division provides the ideal vehicle for providing this analysis as it is attached to the material master and applies across the whole implementation (Megger currently has problems with consistency of coding in this regard where a product is sold by a factory other than the one that manufactured it).

In general terms any sales organisation can sell products from all sites so there is no restriction of division within the general sales structure. The only exception to this is in the case of service and repair carried out by the Sales and Distribution companies (Canada France and Australia) where only that company can sell its own service and repair, and Training where it is unlikely that any company other than US will sell Training Plant products to another Megger Site. However for simplicity it will be assumed that all Companies and Distribution Channel can sell all Divisions products (note: appendix 3.3 shows the Sales Areas that will actually be used as opposed to the All/All configuration)

It had originally been agreed that, Division in Megger’s implementation would be used to aid statistical analysis by being the means of distinguishing between Product, Accessory etc. (currently identified in BPCS by a “P” or an “A” suffix on the Product sub-

group code). As above, however, this statistical analysis is now being provided through product group coding

Any individual sales order can contain items from more than one factory, but “Division” is a required field at order entry stage, in the order header. However, all subsequent sales analysis picks up Division from the material Master and not from the Order Header. A default of “00” will therefore also be set up for all customers for use in order entry to avoid confusion with “real” Divisions

3.9. Laboratory / Design OfficeLab/Office is used to identify the “design authority” for a material. Generally this will be the same as the Division (ie the manufacturing site), but in the case of products factored from a third party it will designate the Megger site responsible for design and safety approval.

3.10. Sales AreaSales Areas identify each combination of Sales Organisation, Distribution Channel and Division, and each customer has to be set up for each sales area it will use. It is the need to minimise this master data maintenance requirement that has dictated the structure that Megger has decided to utilise.

3.10.1.UK In the UK, the sales areas are as follows.

Megger Limited (Sales) – A total of 9 trade sales areas (where the distribution channel is 10). Although only a small number of sales will be made inter-company, because of the sales made to CAS/Iberia, each of the trade sales areas need to be replication to inter-company so 9 inter-company sales areas will exist (where the distribution channel is 40). With the exception of Megger companies in CSA/Iberia companies, customers will only need exist in trade sales areas.



Megger Instruments Limited (Manufacturing) – Only 3 sales areas will exist in the manufacturing company for the purposes of inter-company trading of Dover and some Factored product.

.

3.10.2.US and Sales CompaniesThe US has 17 Sales Areas, and each of the sales companies has 18. However similar considerations apply here as the do in the UK, (although the number of Sales Areas per customer will generally be higher than in the UK). By excluding the inter company and non-revenue items from the vast majority of customers, the potential sales areas required are more than halved with further narrowing down according to individual circumstances

3.11. Sales OfficeA Sales Office in SAP is normally used to identify the physical location (branch office etc.) responsible for the sale. However as this is a field that is available in PA it has been decided that Megger will use this for Profit Centre identification.

For data selection purposes in reporting, Sales Offices will be split into three ranges to identify

Trade sales Inter company sales Profit Centre transfers – only used by the automated routine being developed for

inter profit centre sales

Selecting Trade sales and Inter Company sales will allow the reporting of statutory sales, whilst selecting Inter Company and Profit Centre transfers will give profit centre sales

3.12. PlantIn Logistics a plant is an organizational unit for dividing an enterprise according to production, procurement, maintenance, and materials planning and is a place where materials are produced, or goods and services are provided. A plant is unique to a Company and every “trading” company has to have at least one Plant (but could have multiple) if it is going to purchase anything. It is the level at which ATP works.

With the exception of the “umbrella” US operating company each “real” Megger company will have just one plant as there are no requirements for different operating procedures, different stock valuations, etc within any of those companies. If “dummy” adjusting companies are adopted, they do not require plants as they will have no operational requirements - just GL journal entries.

In the US however where an “umbrella” company is required to support the “dba Megger” method of operation, Plants will be used to represent the legal entities / separate operations rather than Companies. Generally the Plant number will be the same as its associated Company number. In the US however the 4 digit number will be derived from the first three digits of the existing PRMS organisation codes with a trailing zero. This creates a structured approach such that ranges can be used to identify organisations

5100 to 5199 represents Dallas with

5110 being Bronze Way operations

5140 being PowerDB

5150 being States Products

5160 being the AVO Training Institute -

5200 to 5299 represents Valley Forge (including resale operations)



5400 to 5499 represents College Station

5800 to 5899 represents Megger US Sales Operations

5900 represents the US holding company (ABE)

As can be seen, in order to fully implement this philosophy it is necessary to use 5140 for PowerDB rather than 5400 and 5160 for the AVO Training Institute rather than 5500 so that they falls within the Dallas sequence

3.13. Purchasing OrganisationA Purchasing Organisation negotiates contracts and terms with vendors, procures materials and services etc. It can range from being Group wide to plant specific (and combinations in between).

Megger does not have a Group purchasing function. Although commonality of components (cases etc) is becoming more of a feature, this is not enough to drive centralisation – in fact localisation of decision making is the theme within the Group. Each location has its own purchasing team and it is appropriate to replicate this within SAP.

Within the US therefore, each operating plant will have its own purchasing organisation (except Valley Forge where Resale and Manufacturing will have a common one), and elsewhere each operating Company will have its own purchasing organisation. These operating company/plant purchasing organisations will also be used to cover any central functions based at the relevant facility.

Generally the operating plant number in the US and the operating company number in the UK will be used as the Purchasing Organisation identifier.

3.14. Storage LocationEach plant will have multiple storage locations which hold inventory. Definitions and details of these are contained within the appropriate inventory and manufacturing PPD’s.

3.15. Shipping PointShipping Points represent the physical location from which items will be shipped – responsible for scheduling and processing deliveries. Each of Megger’s locations has a single shipping area and so each plant within SAP will have a single Shipping Point (Plant number used as identifier) with the exception of the UK. In this instance the UK manufacturing will share shipping point 1200 for the purpose of trade sales made by the sales company where material exists in both plants.

3.16. Transport Planning PointThe Transport Planning Point is the function within a Company (not Plant) responsible for transportation activities. Megger will have one Transport Planning Point per operating Company (operations are not big enough to split this responsibility). Company code number will also be used as the Transport Planning Point identifier.

3.17. Profit CentresProfit Centres as emphasised throughout this document are core to Megger’s philosophy and define its managerial organisation structure. Each profit centre manager has full P&L and Balance Sheet responsibility for his/her operation.

Essentially for the Instruments part of Megger, 3 manufacturing sites (product based) plus a software house sell their products to 3 geographic sales organisations. For sales reporting purposes two of these sales profit centres are each sub-divided into 2 geographic regions, although this level of detail is not yet carried into the P&L. This



does therefore dictate the need for a third profit centre within each of these sales organisations that will collect the overhead costs for that selling channel.

Megger then has two additional, largely self contained, businesses – States and Training. These businesses have their own sales organisation in the US but utilise the Instruments Sales Organisations for sales outside the US. For consistency and to reduce the number of “exceptions” in automated transactions these two profit centres will each be split between manufacturing and sales with a third profit centre for inter-company elimination on consolidation and overhead collection.

Profit Centre Hierarchy will be used to combine the various sub-divisions of profit centre outlined above, whilst Profit Centre Groups will be use for grouping Manufacturing Profit Centres and Selling Profit Centres for reporting purposes

3.18. Functional AreasMegger’s standard Profit and Loss reporting is based around functions rather than expenditure types, and SAP’s functional area provides the vehicle by which this can be achieved. The Functional Areas will replicate Megger’s profit reporting requirements.

3.19. Cost CentresMegger makes extensive use of cost centres in its existing systems and this will be carried over into SAP, with the same numbering being used where possible. However whereas currently only one cost centre is used for any particular (say) production area (with functional P&L analysis being achieved by other means), the association of Functional Areas with Cost Centres in SAP means that multiple cost centres will be required (one for COGS, one for direct labour, one for overhead etc).

Cost Centres in SAP are not Company specific but go across the whole Controlling Area. It is therefore necessary to come up with a structure that ensures uniqueness across the system and range definition for reporting purposes. To this end a 7 digit cost centre number will be used

The first digit will be the same as the country identifier in the Company number (ie 1 for the UK) – this will bring UK cost centre number lengths in line with the US which already mainly begin with a 5 and are 6 characters long

The next 5 digits will be the same as the existing cost centre numbers The 7 digit will distinguish between the various functional areas

Cost Centre Groups will then be used to group the functional sub-divisions of current cost centres, and then to provide a business function hierarchy within each company and within the Group.



Associated documents

3.20. Company Legal StructureThe Company legal structure is outlined in Appendix 1.

3.21. SAP OrganisationThe SAP Organisation is outlined in Appendix 2.



4. Assumptions / Options ConsideredA number of assumptions and options were considered at various points during the implementation and subsequent roll out projects. These have been updated to reflect the current situation.

Megger had intended to include financial consolidation reporting in phase one as well, but…

All-In-One’s initial inability to consolidate in more than one currency (this facility was introduced only 3 weeks before the phase 1 go-live date)

The time required to manually process the Trial balances of all other operations into SAP means that this has had to be postponed),

It was initially decided that the holding company - AVO International inc (aka ABE) – could be represented by a separate Company within SAP as it is independent of the mixed operational environment. However after further consideration it was agreed that this segregation was not necessary and so as not to add the system overhead of an additional company ABE is identified by a plant within this US umbrella company

It was initially decided that a single additional plant would be used for all resale products, but it subsequently became clear that the same objective could be achieved through the profit centre process and an additional plant with its associated system overhead was unnecessary

Many different combinations of Sales Organisations were been considered for ease of sales reporting and profit centre identification, but in the end the simplistic approach agreed upon is the most appropriate to minimise master data maintenance)

Group wide credit control is not a requirement and the volume of common customers will remain small enough for manual co-ordination to be appropriate

Purchasing will remain a local function

Group Consolidation will be carried on within SAP

No product is manufactured in more than one location

4.1. Business ChangesBusiness changes have previously been noted on Business Process Documents.

4.2. Outstanding Issues / ActionsThere are no outstanding issues.


5. Appendix 1 – Company Legal Structure

Megger Group Limited Appendix 2.01 – Companies & Plants

6. Appendix 2 – SAP Organisation

Operating Concern

Controlling Area

Company (Country) Local Currency

Plant

1000 1000 1000

1100

1200

Megger Instruments Ltd (UK Mfg)

Megger Group Ltd (Holding Company)

Megger Ltd (UK Sales Company)

GBP

GBP

GBP

1000

1100

1200

Dover Mfg

Group

Dover Sales

5000 Megger US (US Phantom) US$ 5110

5150

5160

5200

Bronze Way

States Products

AVO Training

Valley Forge

5800 Megger US (US Sales) US$ 5810

5820

Megger NAFTA

Megger US Dist

6000 Megger Sweden AB (Sweden) SEK 6000 Taby

8100

8300

8500

8600

8700

8900

Megger Limited (Toronto)

Megger SARL (France)

Megger PTY Limited (Australia)

Megger India PTY Limited (India)

Megger GmbH (Germany)

Megger AG (Switzerland)

CA$

EUR

AU$

INR

EUR

SFR

8100

8300

8500

8600

8700

8900

Canada

France

Australia

India

Germany

Switzerland

9500 Plan Contingencies US$


Megger Group Limited Appendix 2.02 – Sales Orgs, Divisions, Dist.Channels

SAP Sales Organisations SAP Distribution Channels1000 Dover Manufacturing 10 Trade1100 Group Sales 40 Inter Co / Profit Centre Transfer1200 Dover Sales5000 US Operations Sales5150 States Products Sales5160 AVO Training Sales5810 Megger NAFTA US5820 Megger US Distribution6000 Swedish Sales8100 Canada Sales8300 France Sales8500 Australia Sales8600 India Sales8700 Germany Sales SAP Divisions8900 Switzerland Sales 01 Order Entry Default

10 Bronze WayLab/Office 15 Valley Forge

10 Bronze Way 16 PAX15 Valley Forge 17 Täby17 Täby 20 Dover20 Dover Manufacturing 25 Factored Products21 Dover Sales 30 College Station30 College Station 50 Canadian Sales Office Service & Repair50 Canadian Sales Office Service & Repair 55 French Sales Office Service & Repair55 French Sales Office Service & Repair 60 Australian Sales Office Service & Repair60 Australian Sales Office Service & Repair 63 Indian Sales Office Service & Repair63 Indian Sales Office Service & Repair 65 German Office Service & Repair65 German Office Service & Repair 67 Swiss Office Service & Repair67 Swiss Office Service & Repair 80 States80 States 85 Training85 Training 99 Non-Revenue


Megger Group Limited Appendix 2.03 – Sales Areas

Company Credit Control Area Sales Organization Distribution Channel Sales Office

1000Megger Instruments Ltd 1000 UK 1000 Dover Mfg Sales 40 Inter Co / Profit Centre Transfer 42 Inter Co to Dover Sales

43 Inter Co to Dallas (NAFTA)

44 Inter Co to VF (US Distribution)

45 Inter Co to Taby

51 Inter Co to Canada

53 Inter Co to France

55 Inter Co to Australia

56 Inter-Co to India

57 Inter Co to Germany

59 Inter Co to Switzerland

99 Non Revenue 99 Non Revenue

1100Megger Group Limited 1000 UK 1100 Group Sales 99 Non Revenue 99 Non Revenue

1200 Megger Limited 1000 UK 1200 Dover Sales 10 Trade 11 International – UK

13 International – ROW

23 US Distribution – CSA/Iberia

40 Inter Co / Profit Centre Transfer 41 Inter Co to Dover Mfg



45 Inter Co to Taby







99 Non Revenue

5000 Megger US 5000 Megger US 5000 Megger US 10 Trade 27 College Station Sales

99 Non Revenue


42 Inter Co to Dover Sales



45 Inter Co to Täby







5150States Products Sales 40 Inter Co / Profit Centre Transfer 41 Inter Co to Dover Mfg




45 Inter Co to Täby








5160 AVO Training Sales 10 Trade 35 AVO Training Sales



Company Credit Control Area Sales Organization Distribution Channel Sales Office

5800 5000 5810 Megger NAFTA 10 Trade 17 NAFTA

19 Mexico

5820 Megger US Dist 10 Trade 21 US Distribution


5830 International – ROW 10 Trade 33 States

5890 States Sales 10 Trade 13 International – ROW

6000 Megger Sweden 6000 Sweden 6000 Täby Sales 10 Trade 11 International – UK

13 International – ROW

17 NAFTA









56 Inter Co to India



8100 Megger Limited 8100 Canada 8100 Canada Sales 10 Trade 17 NAFTA

8300 Megger SARL 8300 France 8300 France Sales 10 Trade 13 International – ROW

8500 Megger PTY Ltd 8500 Australia 8500 Australia Sales 10 Trade 13 International – ROW

8600 Megger India 8600 India 8600 India Sales 10 Trade 13 International – ROW

40 Inter Co / Profit Centre Transfer 42 Inter Co to Dover Sales

43 Inter Co to US

45 Inter Co to Taby


8700 Megger GmbH 8700 Germany 8700 Germany Sales 10 Trade 13 International – ROW

40 Inter Co / Profit Centre Transfer 42 Inter Co to Dover Sales

43 Inter Co to US

45 Inter Co to Taby

8900 Megger AG 8900 Switzerland 8900 Switzerland Sales 10 Trade 13 International – ROW

Megger Group Limited Appendix 2.04 – Sales & Plants

Associated Plants

Sales Organisation Distribution Channel

Dov

er M

fg

Dov

er S

ales

Gro

up

Bro

nze

Way

Val

ley

For

ge

Col

lege

S

tatio

n

Sta

tes

Tra

inin

g

Tab

y

Can

ada

Fra

nce

Aus

tral

ia

Indi

a

Ger

man

y

Sw

iss

1000

1100

1200

5000

5150

5160

5810

5820

5830

5850

6000

8100

8300

8500

8600

8700

8900

Dover Mfg

Group

Dover Sales

Megger US

States

Training

NAFTA

US Distr.

US Intern’l

States Sls

Sweden

Canada

France

Australia

India

Germany

Switzerland

1040

99

1040

1040

1040

10

10

10

10

10

1040

10

10

10

10

10

10

TradeInter Co / PC Transfer

Non Revenue




Trade

Trade

Trade

Trade

Trade


Trade

Trade

Trade

Trade

Trade

Trade

XXX

XX

X

XX

XX

XX

XX

XX

XX

X

X

X

X

X

X


Megger Group Limited Appendix 2.05 - Purchasing, Shipping and Transport

Company Plant Purchase Org Shipping Point Transport Planning Point

1000

1100

1200

Megger Instruments Ltd

Megger Group Ltd

Megger Limited

1000

1100

1200

Dover Mfg

Group

Dover Sales

1000

1100

1200

Dover Mfg

Group

Dover Sales

1000

1100

1000

1200

Dover Mfg

Group

Dover Mfg

Dover Sales

1000

1100

1200

Dover Mfg

Group

Dover Sales

5000 Megger (US) 5110

5150

5160

5200

Bronze Way

States

AVO Training

Valley Forge

5110

5150

5160

5200

Bronze Way

States

AVO Training

Valley Forge

5110

5150

5160

5200

Bronze Way

States

AVO Training

Valley Forge

5000 US

5800 Megger US Sales 5810

5820

5830

5850

NAFTA

US Distr’n

US Intern’l

States Sales

5810

5820

5830

5850

NAFTA

US Distr’n

US Intern’l

States Sales

5810

5820

5830

5850

NAFTA

US Distribution

US International

States Sales

5800 US Sales

6000 Megger Sweden AB 6000 Taby 6000 Taby 6000 Taby 6000 Taby

8100

8300

8500

8600

8700

8900

Megger Limited (Canada)

Megger SARL (France)

Megger PTY Ltd (Australia)

Megger India PVT Ltd

Megger GmbH (Germany)

Megger AG (Switzerland)

8100

8300

8500

8600

8700

8900

Canada

France

Australia

India

Germany

Switzerland

8100

8300

8500

8600

8700

8900

Canada

France

Australia

India

Germany

Switzerland

8100

8300

8500

8600

8700

8900

Canada

France

Australia

India

Germany

Switzerland

8100

8300

8500

8600

8700

8900

Canada

France

Australia

India

Germany

Switzerland

9500


Megger Group Limited Appendix 2.06 - Profit Centres

1. Profit Centre Hierarchy in SAP 2. Profit Centre Groups

P0001 Megger Group 210022002300

25003100

4100

4200

4400

5100

5200

8100

95009900

Bronze WayValley ForgeDover

TäbyCollege Station

International Sales

NAFTA

Americas Distribution

States

Training

Group & Unallocated

ReserveUnallocated

23102350

31103120319041104120419042104290441044204490511051205190521052908110812081508180

Dover MfgUS Telco

College Station EngineeringCollege Station SalesUnallocatedUK & EireROWInternational Sales GeneralNAFTANAFTA GeneralUS Distribution SalesCSA / IberiaDistribution GeneralStates ManufacturingStatesStates GeneralTrainingTraining GeneralMegger GroupUS GroupAbcOther

1000

2000

3000

Megger Group Reporting

Manufacturing & Service

Trade Sales

2100220023002500310041004200440051005200810095009900

21002200230031105110

312041004200440051205200

Bronze WayValley ForgeDoverTäbyCollege StationInternational SalesNAFTAAmericas DistributionStatesTrainingGroup & UnallocatedReserveUnallocated

Bronze WayValley ForgeDoverCollege Station EngineeringStates Manufacturing

College Station SalesInternational SalesNAFTAAmericas DistributionStatesTraining


Megger Group Limited Appendix 2.07 – Functional Areas

Z100 COGSZ110 Direct LabourZ200 CommisionsZ300 Manufacturing OverheadZ400 Sales & MarketingZ500 General &AdministrationZ505 TBG Management ChargesZ600 Engineering SpendZ700 Enginering CapitalisationZ800 GoodwillZ900 Other Income & ExpenditureZ905 Interest ReceivedZ906 Interest paidZ909 Taxation


StandardHierarchy

CostCentre

Functional Area ProfitCentre

160 Dover R&D Spend

110850611086061108706110890611089071109306

Dover R&D Comms ProductsDover R&D Power ProductsDover R&D Contractor ToolsDover R&D AdministrationDover R&D CapitalisationDover R&D Engineering Services

Z600Z600Z600Z600Z600Z600

Engineering SpendEngineering SpendEngineering SpendEngineering SpendEngineering SpendEngineering Spend

231023102310231023102310

Dover MfgDover MfgDover MfgDover MfgDover MfgDover Mfg

150 Dover Administration

101010510104051010505101090510113051011405

Dover Admin ManagementDover Admin FinanceDover Admin Computer ServicesDover Admin CanteenDover Admin Human ResourcesDover Admin Training

Z500Z500Z500Z500Z500Z500

General & Admin OhdsGeneral & Admin OhdsGeneral & Admin OhdsGeneral & Admin OhdsGeneral & Admin OhdsGeneral & Admin Ohds

231023102310231023102310

Dover MfgDover MfgDover MfgDover MfgDover MfgDover Mfg

100 Dover General 100000010000031000004100000910000101000011100001210000131010409

Dover GeneralDover General Man OheadDover General rework (prod orders only)Dover General-OtherDover General Interest recdDover - Interest PaidDover General taxationDover General-Group CostsDover - Discount Received

Z100Z300Z300Z900Z905Z906Z909Z900Z900

COGSManufacturing OverheadManufacturing OverheadOther Inc & ExpenditureInterest ReceivedInterest PaidTaxationOther Inc & ExpenditureOther Inc & Expenditure

231023102310231023102310231023102310

Dover MfgDover MfgDover MfgDover MfgDover MfgDover MfgDover MfgDover MfgDover Mfg

130 Dover Manufacturing

112950312021031201703

Dover Mfg Test Gear Dover Mfg Purchasing Dover Mfg management

Z300Z300Z300

Manufacturing OverheadManufacturing OverheadManufacturing Overhead

231023102310

Dover MfgDover MfgDover Mfg

130-12016 Site Svs & Establishment

12022031201603

Dover Mfg EstablishmentDover Mfg Works Engineering

Z300Z300

Manufacturing OverheadManufacturing Overhead

23102310

Dover MfgDover Mfg

130 - 12046 Dover Manufacturing

Contractor Tools

120460012046011204603

Dover Mfg Contractors Tool COGSDover Mfg Contractors Tool Direct LabourDover Mfg Assy contractors tool Overheads

Z100Z110Z300

COGSDirect LabourManufacturing Overhead

231023102310


130 - 12048 Dover Mfg Power

120480012048011204803

Dover Mfg Power Products COGSDover Mfg - Main Assy ESI - Direct LabourDover Mfg Assy Power Products Overheads

Z100Z110Z300


231023102310


StandardHierarchy

CostCentre


130 - 12049 Dover Manufacturing PCB Assy

120490012049011204903

Dover Mfg PCB Assy COGSDover Mfg PCB Assy Direct LabourDover Mfg Assy PCB Assy

Z100Z110Z300

COGS Direct LabourManufacturing Overhead

231023102310


130 - 12060 Dover Manufacturing PCB Test

120600012060011206003

Dover Mfg PCB test COGSDover Mfg PCB Test Direct LabourDover Mfg PCB Test

Z100Z110Z300


231023102310


130 - 12062 Dover Manufacturing Production Svs

120620012062011206203

Dover Mfg production svs COGSDover Mfg Production Svs Direct LabourDover Mfg - Production Services - OH

Z100Z110Z300


231023102310


130 - 12025 Dover Manufacturing Warehouse

12025031202501

Dover Mfg Despatch OverheadsDover Mfg Despatch Direct Labour

Z300Z110

Manufacturing OverheadDirect Labour

23102310

Dover MfgDover Mfg

130 - 12031 Dover Manufacturing Service & Repair

12031011203103

Dover Mfg Service Direct LabourDover Mfg Service & repairs

Z110Z300

Direct LabourManufacturing Overhead

23102310

Dover MfgDover Mfg

130 - 12078 Dover Manufacturing QA

12078011207803

Dover Mfg QA Direct LabourDover Mfg Assy Quality Assurance

Z110Z300


23102310

Dover MfgDover Mfg

141 International Sales 12010021200000100012710001281000129121010512216031257304125740412576041257704125790412580041258104125820412583041258404

International Sales Dist CommissionsInternational Sales GeneralMegger Ltd interest receivedMegger Ltd interest paidMegger Ltd taxationMegger Limited AdministrationMegger Limited Site ServicesSoftware SupportFactored ProductsDover Sales UK PowerDover Sales EuropeDover Sales Applications & supportDover Sales managementDover Sales Marcomms CostsDover Sales UK Distribution & wholesalerDover Sales InternationalDover S&M Commercial

Z200Z400Z905Z906Z909Z500Z300Z400Z400Z400Z400Z400Z400Z400Z400Z400Z400

CommissionsSales & MarketingInterest RecdInterest PaidTaxationGeneral & Admin OhdsManufacturing OverheadSales & MarketingSales & MarketingSales & MarketingSales & MarketingSales & MarketingSales & MarketingSales & MarketingSales & MarketingSales & MarketingSales & Marketing

41904190419041904190419041904190419041904190419041904190419041904190

Intl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales GeneralIntl Sales General

142 NAFTA Sales 1204004 CSA/Iberia Distribution costs Z400 Sales & Marketing 4420 CSA / Iberia Sales190 Aycliffe Business

Centre19999531999959

Aycliffe Business Centre CostsAycliffe Business Centre Income

Z300Z900

Manufacturing OverheadOther Inc & Expenditure

81508150

ABCABC

999 Group & Unallocated 100011510001161000119100012010001221000125

1000115 Megger Group Administration1000116 Megger Group TBG Management Fees1000119 Megger Group-Other1000120 Megger Group Interest Received1000122 Megger Group Interest Paid1000125 Megger Group taxation

Z500Z505Z900Z905Z906Z909

General & Admin OhdsTBG Management ChargesOther Inc & ExpenditureInterest ReceivedInterest PaidTaxation

811081108110811081108110

Megger GroupMegger GroupMegger GroupMegger GroupMegger GroupMegger Group

StandardHierarchy

CostCentre


600 Taby General 6000000600000960000106000011600001260001166010409

Taby GeneralTaby General OHDTaby General Interest ReceivedTaby General Interest PaidTaby General TaxationTaby General TBG Mgmt FeesTaby Discount Received

Z100Z900Z900Z900Z900Z500Z900

COGS Other Income & Exp.Other Income & Exp.Other Income & Exp.Other Income & Exp.General Admin OhdsOther Income & Exp.

2500250025002500250025002500

Taby MfgTaby MfgTaby MfgTaby MfgTaby MfgTaby MfgTaby Mfg

630 Taby Supply Chain/QA

620160362017036202103620250362048016204803

Taby Logistics ManagerTaby Supply Chain ManagementTaby SourcingTaby Shipping/ReceivingTaby Production - Direct LabourTaby Production Overheads

Z300Z300Z300Z300Z110Z300

Manufacturing OverheadManufacturing OverheadManufacturing OverheadManufacturing OverheadDirect LabourManufacturing Overhead

250025002500250025002500

Taby MfgTaby MfgTaby MfgTaby MfgTaby MfgTaby Mfg

640 Taby Supply Chain Mgmt

6058404605750460576046057704605820460583046059002

Taby Order/Export Coordinators Taby Sales Europe Taby Nordic Sales Taby Commercial Director Taby MarketingTaby Sales Support Commission payable

Z400Z400Z400Z400Z400Z400Z200

Sales & MarketingSales & MarketingSales & MarketingSales & MarketingSales & MarketingSales & MarketingCommissions

4120412041204120412025004120

Int Sales ROWInt Sales ROWInt Sales ROWInt Sales ROWInt Sales ROWTaby MfgInt Sales ROW

641 Taby Customer Service

600100960578046057904605800460581046058504620310362031016206203

Taby International SalesTaby Support SpecialistsTaby Sales Applications & support Taby Customer Service Manager Taby Technical EditorTaby Site Product Management Taby Rep Service & RepairsTaby Rep Service Direct Labour Taby Training and Services – OH

Z400Z400Z400Z400Z400Z400Z300Z110Z300

Sales & MarketingSales & MarketingSales & MarketingSales & MarketingSales & MarketingSales & MarketingManufacturing OverheadDirect LabourManufacturing Overhead

250025002500250025002500250025002500

Taby MfgTaby MfgTaby MfgTaby MfgTaby MfgTaby MfgTaby MfgTaby MfgTaby Mfg

650 Taby Administration 6010105601040560105056011305

Taby Admin ManagementTaby Admin Finance Taby Admin Infrastructure Taby Admin Human Resources

Z500Z500Z500Z500

General & Adms OhdsGeneral & Adms OhdsGeneral & Adms OhdsGeneral & Adms Ohds

2500250025002500

Taby MfgTaby MfgTaby MfgTaby Mfg

660 Taby Engineering 6108906610890761090066109007

Taby EngineeringTaby Eng CapitalisationPax Engineering CostPax Engineering Capitalisation

Z600Z700Z600Z700

Engineering SpendEngineering CapitalisationEngineering SpendEngineering Capitalisation

2500250022002200

Taby MfgTaby MfgValley Forge MfgValley Forge Mfg

StandardHierarchy

CostCentre


50261 US Regions NAFTA

50264045026402

NAFTA US Regions Overhead NAFTA US Regions Commissions

Z400Z200

Sales & MarketingCommissions

42004200

NAFTANAFTA

50262 NAFTA East 50264145026412

NAFTA EAST OverheadNAFTA East Commissions

Z400Z200


42004200

NAFTANAFTA

50263 NAFTA South 50264245026422

NAFTA South AdministrationNAFTA South Commissions

Z400Z200


42004200

NAFTANAFTA

50264 NAFTA Central 50264325026434

NAFTA Central CommissionsNAFTA Central Overhead

Z400Z200


42004200

NAFTANAFTA

50265 NAFTA West 50264425026444

NAFTA West CommissionsNAFTA West Admin

Z200Z400

Commissions Sales & Marketing

42004200

NAFTANAFTA

50266 NAFTA Open 50264525026454

NAFTA Open Commissions NAFTA Open Administration

Z200Z400


42004200

NAFTANAFTA

50241 NAFTA Inside Sales

50265545026552

NAFTA Inside Administration NAFTA Inside Commissions

Z400Z200


42004200

NAFTANAFTA

50242 NAFTA TSG 50265825026584

NAFTA TSG CommissionsNAFTA TSG Administration

Z200Z400


42004200

NAFTANAFTA

50243 NAFTA Cust. Support

50265925026594

NAFTA Customer Support CommissionsNAFTA Customer Support Administration

Z200Z400


42004200

NAFTANAFTA

5027 Mexico 50263045026302

NAFTA Mexico OverheadNAFTA Mexico Commissions

Z400Z200


42004200

NAFTANAFTA

5028 NAFTA General 50279955026994502699250262045026202500200050282005028100

NAFTA Administration AllocationNAFTA Sales AllocationNAFTA Commissions AllocationNAFTA Admin OverheadNAFTA Admin CommissionsNAFTANAFTA Other ExpenseNAFTA Other Income

Z500Z400Z200Z400Z200Z100Z900Z900

General & Admin OHeadsSales & MarketingCommissionsSales & MarketingCommissionsCOGSOther Inc/Expenditure Other Inc/Expenditure

42004200420042004200420042004200

NAFTANAFTANAFTANAFTANAFTANAFTANAFTANAFTA

StandardHierarchy

CostCentre


5110 Bronze Way 5110000 BW General Manufacturing Z100 COGS 2100 BW Manufacturing5119 BW Rework 5000004

5000005Rework Bronze wayRework BW MPRT

Z300Z300

Manufacturing OverheadManufacturing Overhead

21002100

BW ManufacturingBW Manufacturing

51141 Bronze Way Production

51140235114021

BW MANUFACTURING – OHBW MANUFACTURING - DL

Z300Z110


21002100


51142 MPRT Assy 51141015114103

BW MANUF. MPRT – DLBW MANUF. MPRT - OH

Z110Z300


21002100


51143 MPRT Test 51141115114113

BW MANUF. MPRT TEST – DLBW MANUF. MPRT TEST - OH

Z110Z300


21002100


51144 BW Other Assy 51142035114201

BW OTHER ASSEMBLY - OHBW OTHER ASSEMBLY - DL

Z300Z110


21002100


51145 BW Other Test 51142135114211

BW OTHER TEST - OHBW OTHER TEST - DL

Z300Z110


21002100


51146 BW SRO 51143115114313

BW OTHER SRO - DLBW SRO - OH

Z110Z300


21002100


5112 Bronze Way Manufacturing Overhead

511441351144235114433511451351146135114913

BW MATERIAL MGT OHBW MATERIAL STORAGE OHBW ORDER MGT & LOG OH BW QUALITY OHBW MFG ENG OHBW BUILDING MAINTENANCE

Z300Z300Z300Z300Z300Z300

Manufacturing OverheadManufacturing OverheadManufacturing OverheadManufacturing OverheadManufacturing OverheadManufacturing Overhead

210021002100210021002100

BW ManufacturingBW ManufacturingBW ManufacturingBW ManufacturingBW ManufacturingBW Manufacturing

5115 Bronze Way Engineering

511510651151465115996

BW ENGINEERING BW AVTS ENGINEERING BW ENGINEERING ALLOCATIONS

Z600Z600Z600

Engineering SpendEngineering SpendEngineering Spend

210021002100

BW ManufacturingBW ManufacturingBW Manufacturing

5116 Bronze Way Management

511699451161345116114

BW PM ALLOCATIONSBW PRODUCT MGT OH BW INDUSTRY SPEC OH

Z400Z400Z400

Sales & MarketingSales & MarketingSales & Marketing

210021002100

BW ManufacturingBW ManufacturingBW Manufacturing

5117 Bronze Way Admin

511799551179055117805511740551172055117105

BW ADMIN ALLOCATIONSBW ADMIN OTHERBW EXECUTIVE OFFICEBW HUMAN RESOURCES BW IT/MISBW ACCOUNTING

Z500Z500Z500Z500Z500Z500

General & Admin OHeadsGeneral & Admin OHeadsGeneral & Admin OHeadsGeneral & Admin OHeadsGeneral & Admin OHeadsGeneral & Admin OHeads

210021002100210021002100

BW ManufacturingBW ManufacturingBW ManufacturingBW ManufacturingBW ManufacturingBW Manufacturing

5118 BW Other Inc /Expense

51182005118100

BW OTHER EXPENSE BW OTHER INCOME

Z900Z900

Other Inc.&ExpOther Inc.&Exp

21002100


StandardHierarchy

CostCentre


5150 States 51579955150000

States Admin AllocationStates General Manufacturing

Z500Z100

General & Admin O/HeadsCOGS

51205110

States SellingStates Mfg

5154 States Manufacturing

51542015154203

States Manufacturing Direct LaborStates Manufacturing Overhead

Z110Z300


51105110

States MfgStates Mfg

5156 States Sales 515629251562945156994

States Sales Commissions States Sales Overhead States Sales Allocations

Z200Z400Z400

CommissionsSales & MarketingSales & Marketing

512051205120

States SellingStates SellingStates Selling

5158 States Other Inc/Exp

51581005158200

States Other IncomeStates Other Expense

Z900Z900

Other Inc / ExpOther Inc / Exp

51205120

States SellingStates Selling

StandardHierarchy

CostCentre


5200 Valley Forge 5200000 Valley Forge General Manufacturing Z100 COGS 2200 VF Mfg52043 VF Mfg O/head 5204513

52046135204913520441352044235204433

VF Quality OHVF MFG Engineering OHVF Bldg Maintenance OHVF Material Management - OHVF Material Storge OHVF Order Management Logistics OH

Z300Z300Z300Z300Z300Z300

Manufacturing OverheadManufacturing OverheadManufacturing OverheadManufacturing OverheadManufacturing OverheadManufacturing Overhead

220022002200220022002200

VF MfgVF MfgVF MfgVF MfgVF MfgVF Mfg

52042 VF SRO 52043115204313

VF SRO - Direct LaborVF SRO - Overhead

Z110Z300


22002200

VF MfgVF Mfg

52041 VF Production 52040235204021

VF Manufactured Products – OverheadVF Manufactured Products - Direct Labor

Z300Z110


22002200

VF MfgVF Mfg

5205 VF Engineering 520514652051665205996

VF Engineering PAX Engineering VF Engineering Allocations

Z600Z600Z600


220022002200

VF MfgVF MfgVF Mfg

5206 VF Sales Support

52061545206164

VF Customer Support VF Marketing

Z400Z400

Sales & MarketingSales & marketing

22002200

VF MfgVF Mfg

5203 VF Product Management

52062245206994

VF Product Management VF PM Allocations

Z400Z400

Sales & MarketingSales & Marketing

22002200

VF MfgVF Mfg

5207 VF Admin 52071055207205520740552078055207995

VF Accounting VF IT/MIS VF Human Resources VF Executive Office VF Admin Allocations

Z500Z500Z500Z500Z500

General & Admin O/HeadGeneral & Admin O/HeadGeneral & Admin O/HeadGeneral & Admin O/HeadGeneral & Admin O/Head

22002200220022002200

VF MfgVF MfgVF MfgVF MfgVF Mfg

5208 VF Other Inc/Exp

52082005208100

VF Other ExpenseVF Other Income

Z900Z900

Other Inc/ExpOther Inc/Exp

22002200

VF MfgVF Mfg

StandardHierarchy

CostCentre


5400 College Station 540799554069945400000

College Station Admin Rollup College Station Sales & Mkt Rollup College Station Cost of Sales

Z500Z400Z100

General & Admin O/HeadsSales & MarketingCOGS

311031203110

College Station EngCollege Station SalesCollege Station Eng

5405 College Station Engineering

54059965405106

College Station Engineering Allocations College Station Engineering

Z600Z600

Engineering SpendEngineering Spend

31103110

College Station EngCollege Station Eng

5408 College Station Other Inc /exp

54081005408200

College Station Engineer Other Income College Station Engineer Other Expense

Z900Z900

Other Inc/ExpOther Inc/Exp

31103110

College Station EngCollege Station Eng

StandardHierarchy

CostCentre


5500 Training 55000005505996

Training Revenue and Expense SummaryTraining Engineering Rollup

Z100Z600

COGSEngineering Spend

52105210

Training ServicesTraining Services

55041 Training Courses 55042615504263

Training Direct LaborTraining OH

Z100Z300


52105210


55042 Engineering svs 55042735504271

EES OverheadEES Direct Labor

Z100Z300


52105210


55043 Bookstore 55042835504281

Bookstore OHBookstore DL

Z300Z100


52105210


5506 Training Sales 550626255062645506994

Training Sales CommssionsTraining Sales OverheadTraining Sales Allocations

Z200Z400Z400

CommissionsSales & MarketingSales & Marketing

521052105210

Training ServicesTraining ServicesTraining Services

5507 Training Admin 55079955507985

Training Admin AllocationsTraining Admin

Z500Z500

General & Admin O/HeadsGeneral & Admin O/Heads

52105210


5508 Training Other Inc/Exp

55081005508200

Training Other IncomeTraining Other Expense

Z900Z900


52105210


StandardHierarchy

CostCentre


5700 US Central Costs

57078455707805

Group Software Management Group Management

Z500Z500


81208120

US GroupUS Group

5706 US Marketing 5706102570610457069925706994

Group Marketing CommissionsGroup Marketing OverheadGroup Sales Allocations CommissionsGroup Sales Allocations Overhead

Z200Z400Z200Z400

CommissionsSales & marketingCommissionsSales & Marketing

8120812081208120

US GroupUS GroupUS GroupUS Group

5707 US IT 57072055707115

Group IT VFGroup IT Dallas

Z500Z500


81208120

US GroupUS Group

5708 US Other Inc/Exp

57082005708100

Dallas Other Expense Dallas Other Income

Z900Z900


81208120

US GroupUS Group

StandardHierarchy

CostCentre


5750 USA Comms 5757995 US Comms Admin Allocations Z500 General & Admin O/Heads 2350 US Telco5755 US Comms

Engineering575599657551365755126

US Comms Eng AllocationsUS Comms Eng Tennessee US Comms Eng Dallas

Z600Z600Z600


235023502350

US TelcoUS TelcoUS Telco

5756 US Comms product Mgmt

57569945756134

US Comms Product Management US Comms Product Management

Z400Z400

Sales & MarketingSales & Marketing

23502350

US TelcoUS Telco

5758 US Comms Other Inc/Exp

57581005758200

US Comms Other IncomeUS Comms Other Expense

Z900Z900


23502350

US TelcoUS Telco

StandardHierarchy

CostCentre


5046 CSA 50467225046724

CSA Latin America CommissionsCSA Latin America Admin

Z200Z400

CommissionsSales & Marketing

44204420

CSA / Iberia SalesCSA / Iberia Sales

5048 US Distribution 50467525046754

US Distributor CommissionsUS Distributor Admin

Z200Z400

CommissionsSales & Marketing

44204420

CSA / Iberia SalesCSA / Iberia Sales

5047 Americas Distribution General

504820050481005047995504699450469925004000

CSA Other ExpenseCSA Other IncomeCSA Admin AllocationCSA Alloc OverheadCSA Alloc CommissionsAmericas Distribution Sales

Z900Z900Z500Z400Z200Z100

Other Inc / ExpOther Inc / ExpGeneral & Admin O/HeadSales & MarketingCommissionsCOGS

442044204420442044204420

CSA / Iberia SalesCSA / Iberia SalesCSA / Iberia SalesCSA / Iberia SalesCSA / Iberia SalesCSA / Iberia Sales

GAAP Adjustments

Consolidating adjustments are required within the system as a result of the use of IFRS for reporting to TBG and the use of UK GAAP for statutory accounting. There are three areas of difference

Capitalisation of R&D

IFRS requires product development expenditure to be capitalised and then amortised to the P&L over several years following product launch. Under UK GAAP whilst such capitalisation is permitted is not mandated. Within Megger Group the consolidated statutory accounts include the capitalisation of R&D, whereas the Megger Limited statutory accounts do not. This anomaly arises because when the Group introduced R&D capitalisation in 2002, there was a concern that if it was adopted for Megger Limited statutory accounts it could have adverse tax consequences whereas Group consolidations have no tax implications it is preferable to keep this as closely in line with TBG reporting as possible.

Goodwill Accounting

Unlike UK GAAP, IFRS does not amortise goodwill, rather it utilise an annual impairment test and the balance sheet values and P&L charges under the two systems are very different

Pension Scheme accounting

IFRS partially recognises pension scheme funding on the balance sheet and uses an actuarial calculation for the P&L, whilst UK GAAP has historically excluded these items (showing them only as notes to the accounts) and using actual contributions to the scheme as the P&L charge. With effect 2006 UK GAAP now also recognises pension scheme funding positions on the balances sheet, but the calculation of the surplus/deficit is different to that used under IFRS, and an accounting difference therefore still exists

Generally local accounts are required by Megger to be produced under UK GAAP, with any adjustments to local requirements being treated separately. The company records outlined above will therefore be in accordance with IFRS, and Group consolidation can be achieved for management reporting by taking all companies within the range 1000 to 9799. UK statutory reporting however requires adjustment from this, and this will be achieved by extending the consolidation to cover all companies in the range 1000 to 9899

US Adjustments to Group AccountsThe US capitalises R&D which is compatible under both accounting conventions so this is not an issue and nor is Goodwill as it has been fully written off under both accounting conventions. Pensions are however an issue as the US has two pension schemes and these require adjustment from IFRS too UK GAAP. These adjusting entries will be made in company 9850 using US$ as local currency (it is in the range 9800 to 9899 which is the range used for GAAP adjustments and 5 is the leading company character denoting the US

UK Adjustments to Group AccountsThe UK capitalises R&D in its IFRS books which is compatible under both accounting conventions so this is not an issue. Goodwill however does create a problem (whilst it has been fully written off under UK GAAP it retains a significance asset value under IFRS), as does the significant pension scheme deficit.

These adjusting entries to convert Goodwill and pensions to UK GAAP will be made in company 9810 using Sterling as local currency (it is in the range 9800 to 9899 which is the range used for GAAP adjustments and 1 is the leading company character denoting the UK)

UK Adjustments to Company Accounts Whilst the UK adjustments to Group Accounts allow Megger Group consolidated reporting in the UK they do not convert the Megger Limited accounts to its individual statutory reporting as in its statutory accounts it does not capitalise R&D. There is therefore a requirement for a separate UK adjusting company that not only adjusts goodwill and pensions, but also eliminates capitalised R&D. This will be Company 9910 (in the range 9900 to 9999 which are exclude from all consolidation reporting, and 1 is the leading company character denoting the UK)

By adding company 1000 and company 9910 together accounts will be produce for Megger Limited under its own UK GAAP requirements.

Megger SARL Adjustment to French Requirements

Under the French legal/tax framework all accounting entries must go against the year to which they relate – prior year adjustments are not allowed. However from Megger’s perspective in reporting to TBG, the accounts for any year are finalised and closed before the end of December and except under special circumstances posting to that year are not allowed after the end of December – any such entries are posted to the P&L in the subsequent year.

The solution to this problem is to use a dummy company to hold the adjustments from French GAAP to Megger reporting

Megger Sweden AB Adjustments to Group AccountsThe books of Megger Sweden include a pre-acquisition $6.4 mln purchase of intellectual property from GE. In the Swedish GAAP books this has been capitalised and is being amortised over 5 years. In the Group’s consolidated accounts however this purchase is treated as having been written off in tye P&L. The adjusting entries to switch between capitalised and non-capitalised IPR will be made in company 9860 using Swedish Krona as local currency (it is in the range 9800 to 9899 which is the range used for GAAP adjustments and 6 is the leading company character denoting the Sweden)