MOD_Final General Ledger Blueprint

AcceleratedSAP - Business Blueprint

ASAP Business BlueprintGeneral Ledger

Period-end Closing

Consolidations

1

2


Contributors and Roles.............................................................................................................................................PROJECT- BUSINESS BLUEPRINT......................................................................................................................Document Flows......................................................................................................................................................Legal Entity Structure..............................................................................................................................................QADB/CI Template.................................................................................................................................................

Chart of Accounts................................................................................................................................................Master data.......................................................................................................................................................

G/L account master record processing..........................................................................................................Planning...........................................................................................................................................................

G/L planning................................................................................................................................................Posting to G/L..................................................................................................................................................

G/L account posting.....................................................................................................................................Manual foreign currency valuation...............................................................................................................

Closing operations................................................................................................................................................Period-end closing............................................................................................................................................

Period Closing..............................................................................................................................................Foreign currency valuation balances.............................................................................................................Foreign currency valuation open items.........................................................................................................Periodic reporting.........................................................................................................................................Goods Received/Invoices Received (GR/IR) clearing accounts maintenance................................................Customer/vendor balance interest calculation processing..............................................................................

Year end reports...............................................................................................................................................Year-end closing preparation........................................................................................................................Year-end closing...........................................................................................................................................

Archiving.........................................................................................................................................................Archiving (FI)..............................................................................................................................................Archiving.....................................................................................................................................................

Consolidation.......................................................................................................................................................Master data.......................................................................................................................................................

Creation of consolidation guideline..............................................................................................................Company acquisition....................................................................................................................................FS chart of accounts change..........................................................................................................................Company split..............................................................................................................................................

Preparations for Consolidation..........................................................................................................................Implementation of consolidation guideline...................................................................................................

Centralized Data Entry.....................................................................................................................................Data transfer.................................................................................................................................................

Currency translation.........................................................................................................................................Central currency conversion.........................................................................................................................

Postings............................................................................................................................................................Standardizing entries....................................................................................................................................

Intercompany Eliminations...............................................................................................................................Intercompany balance declaration.................................................................................................................

SAP Financial Close Sequence.................................................................................................................................- End -.....................................................................................................................................................................

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3 PROJECT- BUSINESS BLUEPRINTExecutive Summary - General Ledger/Consolidations Team

Financial Overview

Lam Research currently operates on a variety of financial systems merged at period-end to support external and management reporting requirements. The processes include both manual and automated activities. The sources of information are varied and non-integrated, thus requiring manual intervention and reconciliation to control totals in the preparation of financial results. When the financial community has a firm knowledge that results are whole, only then may they focus attention on the analysis of the result rather than in the preparation of those results. This is the paradigm shift which SAP enables.

Business functions in the SAP Phase II implementation initiative include administration and management of the general ledger (G/L) and the Company-wide financial consolidation process within SAP’s “FI” module. The SAP G/L and Consol functions will replace the functionality of legacy systems enhancing the reporting and tracking aspects of all related G/L and Consol activities.

To the extent that best practices are already incorporated in the SAP FI module, Lam will generally be implementing the standard suite of G/L and Consol tools. Operationally, SAP applications will be far superior to what is currently available. For instance, the integrated nature of SAP allows immediate posting of all intercompany transactions resulting in balances between subsidiaries always remaining in balance. Additionally, reporting from the FI module is far superior to what is currently available. Time consuming investigations of data flow problems through dis-aggregated information and ad hoc routines will be replaced by basic SAP queries.

Key Functionality & Assumptions

Key Functionality of SAP’s General Ledger and Consolidations modules:· One global chart of accounts will provide Lam with the flexibility to handle continued expansion and to

meet county-specific requirements. A global chart of accounts will provide real-time drill-down access to worldwide financial data. The chart of accounts will allow for centralized control. The number of accounts will be significantly reduced through the use of sub-ledgers (A/P, A/R) and supporting product-line data managed separately in the SAP’s CO module.

· Period-end closing will be streamlined and result in a reduction of the closing cycle (Two Day Goal). A number of enablers will aid this reduction including, but not limited to; automated journal entries, balanced sub-ledgers, and a significant reduction in reconciliations.

· SAP will facilitate one close process for all company entities.· Data is entered directly into the general ledger once and is available to all components and users of the

system. The quality of data can be ensured by monitoring information at the transaction source. Customized data entry screens will enable rapid, efficient data input.

· The design will allow local and foreign currency transactions to occur in parallel. SAP will translate the entry into local currency and store both transaction amounts. This results in the ability to view balances in foreign currencies and facilitates the automation of foreign exchange gain and loss recognition.

· Intercompany transactions will result in automatic postings to the G/L, eliminate out of balance situations, and streamline the data entry process.

· Changing fiscal periods from one to the next, either monthly or yearly, is very simple, with controls to easily open prior periods for posting when needed.

· Every account in the G/L has a large set of controls and rules that help manage and reconcile each account based upon its own characteristics.

· Cost allocations will efficiently post using SAP automated functionality.

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· SAP provides an improved audit trail though the use of the “document’ concept. Every transaction which results in a financial impact to the general ledger (and even transactions which do not) receives a document number. All transactions are stamped with a date, time, and user who entered the transaction.

· The integrated nature of SAP’s financial applications will result in a reduction of reconciliation processing. Closing and reporting from one central system will result in a shift of duty and responsibility for the financial community at Lam from compiler/consolidator/reconciler to business/financial analyst with the responsibility for monitoring, controlling, and reporting results.

Key Assumptions:

· Specific key resources are assigned full time to work in this process and are empowered to make decisions.

· Business personnel take responsibility of the activities that belong to them, and participate actively on the project.

· Legacy systems resources are assigned to work on interfaces and conversions.· Development computer hardware environment is set up and ready after business blueprint workshops are

finished.

Key Benefits· Information needed for decision making will be stored in one system only. As of this moment, several

systems contain necessary operational and reporting data (ASK, Excel, Sun Systems, Essbase, etc.).· SAP system is year 2000 compliant.· Business processes will be improved, according to Lam’s strategic vision.· SAP FI system will have a much better audit trail, which will in turn simplify research and period-end

reconciliation.· Close time will be significantly reduced.

Major Organizational Changes Anticipated

· The General Accounting department will be enabled to become pro-active problem solvers and decision making drivers.

· International sites must truly act in concert with a centralized close process.

Key Risk

· With the high degree of visibility between legal entities, the open system will require sound business policies to be in place to control intercompany charges and aid disputes.

Key Outstanding Issue· Decision required on the use of local currency as the functional currency in all foreign sites. Initial

configuration requires that this issue be resolved. Corporate Controller and Treasury VP are working the issue. For NextGen Team, resolving the issue before the end of November is crucial to successful implementation.

4

4

5 Document Flows

Need for NewAccount Exists

Request for NewAccount

Completed13.2.42

RequestApproved13.2.43

System ValidatesAccount appearson FI Financials

13.2.47

System ValidatesProper # Schema

13.2.45

Account Createdin Lam COA.

(Copy withReference to

Existing Settings)13.2.44

Account Copied toAppropriate Legal

Entities13.2.45

Entity SpecificData Entered

13.2.46

FI Account Maintenance FI Financials

CO Maintenance

Revenue/CostElement Required?

13.2.51

No

End13.2.54

Copy Accountfrom FI 13.2.52

Yes Enter CO specificdata 13.2.53

Validate ElementAppears on COReports 13.2.55

Consolidated FSitem required?

13.2.59

End13.2.60

No

Copy Accountfrom FI13.2.61

Add toConsolidated

Reports 13.2.64

Add to FinancialStatement

Versions 13.2.50

Add to CCA/PCAReports13.2.58

End13.2.57

End13.2.49

AccountNeeds to be Added

to Financials?13.2.48

Validate FS ItemAppears on

ConsolidatedReports 13.2.62

Account Requiredin Financials?

13.2.63

Account required in CCA/PCA Reports?

13.2.56

End

Yes

No

Yes

No

Yes

No

Yes

General Ledger Account Maintenance

End13.2.65

Pre-Close Collect and Process DataOngoing processing to the end of a fiscal period

Automatic IntegratedPostings13.2.10

General Ledger DetailedTransactions

13.2.12

JournalEntry

Needed?

13.15.22Periodic

Settlements13.2.17

Post Entries13.2.14

Possible back-updocumentation

13.2.13

GLAuto Recurring

JEs and AccrualReversals

13.2.8

Review Auto JEsto Create, Change,

or Delete13.2.9

OngoingValidation

of Postings13.2.11

MMAll InventoryMovements,Shipments,

Receipts13.2.1

SDAll SalesOrders,

Revenue/COS,Reserves

13.2.2

SMAll SalesOrders,

Revenue/COS,Reserves

13.2.3

13.3.35All Invoicing,

CashApplications

13.2.4

13.4.38All Cash

Distributions,Expenses

13.2.5

13.5.60All Asset

Transfers,Retirements

13.2.6

13.12.11Sal./WagesActuals &Accrual13.2.7

All OtherInterfaced

Transactions13.2.18

Review Validate and ReconcileDay One Close

12:01AMDayOne

Complete First Set ofPeriodic Postings

(Depr, P/R Accrual)13.2.20 Complete "Regular"

Journal Entries13.2.22

Complete SecondSet of Periodic

Postings(Allocations,Settlements)

13.2.23

Preliminary Review,Reconcile & Adjust/

Re-post13.2.21

Remeasurement atForeign Legal Entity

13.2.25

Freeze CompanyPostings13.2.24

Update CurrencyTable

13.2.19

Prepare BalanceSheet and P&L

13.2.26

13.2.28Consolidate

13.1.1

Results asExpected?

13.2.27

No

Yes

Consolidate, Review and FinalizeDay Two Close

CurrencyTranslation

13.1.2

IntercompanyElimination AR &AP, Investment in

Sub 13.1.4

ProduceFinancials

13.1.10

Interface to FastTax

13.1.11

InternalConsolidated

Review &Reconciliation

13.1.7

Tax Accrual Entry13.1.6

Elimination of I/COSales/COS &

Profit in Inventory13.1.5

FinalManagement

Review &Adjustments

13.1.8

13.2.28ClosedBooks13.1.1

Final AdjustingEntries13.1.9

Controller Review,Adjust,Re-post13.1.3

Year-End Close Processes in FI

Create GlobalPosting Periods

and Open forPosting 13.2.32

The Year Ends

A New Year Begins

Create Fiscal YearVariant and assignto Company Code

13.2.30

Close G/L

Fiscal YearVariant for New

Year Exists?13.2.29

New YearPosting Periods

Exist & Opened?13.2.31

No

Yes

No

Yes

Close A/R Close A/P Close FA

Carry Forward ofA/R Balances

13.2.33

Carry Forward ofA/P Balances

13.2.34

Change FiscalYear (no earlier

than last month ofprevious year)

13.2.35

FA Postingscomplete for

previous year?13.2.38

Yes

Complete AssetProcessing

13.2.39

No

Close Consolidations

Carry Forward FSItem Balances

13.2.37

Carry Forward G/LBalances13.2.36

Year-End Close13.2.41

Close FACarry Forward

Balances13.2.40

6 Legal Entity Structure

Lam Consolidated

Lam Fremont(North America)

CC 1000

Foreign Sales Corporation(FSC)

CC 1100

Lam Netherlands B.V.CC 2300

Lam Singapore PTE, Ltd.CC 3300

Lam Scotland Ltd.CC 2000

Lam France SARLCC 2100

Lam Germany GmbHCC 2200

Lam Italy SRLCC 2400

Lam IsraelCC 2400

Lam Japan Ltd.CC 3000

Lam Taiwan Ltd.CC 3100

Lam KoreaCC 3200

7 QADB/CI TemplateChart of Accounts

Master dataG/L account master record processing 1. Requirements/Expectations

Lam requires a chart that will meet our needs and minimize configuration time.One Lam COA will be created for all legal entities.The Lam chart may be enhanced per specific legal requirements for each legal entity.The chart will be centrally maintained.

The chart will be designed to minimize the impact of additions and changes throughout the system.

Text on the functionality of an account should appear on each individual account.

2.1 General ExplanationsA complete review of the chart, accounts necessary and the settings per each is required.

· Comparison of Lam with Pre-configured chart required to arrive at decision regarding proper mix.

2.2 Explanations of Functions and Events· FS01 Create G/L Account Master Record.

2.3 Special Organizational ConsiderationsThe COA will be maintained centrally in SAP as it is today, therefore there should be no impact to the organization. International sites will have to route requests through this central location which is a change in process only - not necessarily an organization structure change. Unique skills in understanding SAP functionality is necessary though, since there are many rules that can be assigned to one account. Training is a key to this successful implementation.

3. Changes to Existing OrganizationLam will need to learn the new chart of accounts and functionality of the various types of accounts. Automatic postings will help reduce impact to the organization. The COA will be maintained centrally in SAP as it is today, therefore there should be no impact to the organization. International sites will have to route requests through this central location which is a change in process only - not necessarily an organization structure change.

4.1 Description of ImprovementsDue to the supporting functionality in SAP's Controlling module, the need to have specific accounts for each; product line, sales tax state, and every legal entity intercompany activity, is eliminated.

4.2 Description of Functional DeficitsNone are apparent at this time.

4.3 Approaches to Covering Functional Deficits

6.1 System Configuration ConsiderationsA substantial amount of work is required in understanding and setting up Account Groups, Field Status, Currency and Tax Settings for desired functionality and control.

6.2 File Conversion Considerations

Balance Sheet totals as of year-end 1999 will be loaded (income & expense will be zero).Reconciliation (A/P, A/R, F/A) and actual inventory accounts will be loaded with detail of 6/30/99. Any differences in inventory legacy historical cost versus new standard cost will be written off to the income statement.Other G/L accounts may be loaded as of 6/30 and subsequent adjustments made in SAP or these balances could be posted as of final close of Lam's books as this will not interfere with daily processing going forward.

Legal entity historical loads of balances will be different from entity to entity. Consideration must be given to these differences in each legal entity. While this historical load is not critical to going live, a decision as to the detail, age and method of load (system vs. Business warehouse) must be made.

6.3 Interface ConsiderationsNone if Big Bang.

6.5 Authorization ConsiderationsAuthorizations and rules can be configured to control the use of accounts and their impact on CCA, PCA. Authorization to add or update the COA will be held centrally.

Business Process Questions

1: Business Process Requirements

What types of daily, weekly, periodic, and ad hoc transaction reports do you need for general ledger?

One report for each subsidiary ledger (AP, AM, AR, MM...) weekly or on request, this includes inventory reports on quantity and fully absorbed overhead values.


Please provide your current Chart of Accounts.

Current chart is not in good order for use in SAP. Basic numbering structure can be used for most part, as it is standard 1000=assets, 2000=liabilities... Many accounts will disappear as SAP accommodates reduction in natural accounts required for financial reporting. See the "Draft of Proposed Chart of Accounts" - old accounts have been mapped to new.


How do you change your chart of accounts?

Chart of Accounts will be maintained centrally - one point affects all down-stream systems and entities. All requests for new or updated accounts will go through this central group. This group to reside most likely in General Accounting Fremont.

4: Describe how the account number is set up (for example: department, natural account)

See complete draft of Chart of Accounts in the "Requirements" folder within the Finance directory on the NextGen server.

5: Describe the numbering logic.

Follows standard SAP number logic including a six digit number. See complete draft of Chart of Accounts in the "Requirements" folder within the Finance directory on the NextGen server.

6: How many natural account numbers will you have?

See complete draft of Chart of Accounts in the "Requirements" folder within the Finance directory on the NextGen server.

7: What procedure do you use when you need to create new account numbers?

Chart of Accounts will be maintained centrally - one point affects all down-stream systems and entities. All requests for new or updated accounts will go through this central group. This group to reside most likely in General Accounting Fremont.

8: Can you define groups of general ledger accounts that require similar information in the master record?

Yes

9: How many retained earnings accounts do you maintain per company code?

One primary current year retained earnings account. Other equity accounts include; share capital/common stock, retained earnings prior year, and possibly CTA.

10: For which general ledger accounts do you wish to retain line item detail?

Most accounts except; reconciliation accounts, sales revenue accounts, material stock accounts, and tax accounts.

11: Which accounts do you wish to have open item managed (for example: bank accounts)?

Bank clearing accounts, goods/invoice received clearing accounts, material in-transit, and any other accounts where it's important to see the balance of an account represented by the items displayed.

12: Which accounts do you wish to maintain in foreign currency (for example: bank accounts)?

Some operating accounts within foreign entities will be maintained primarily in their local currency. Non-USD accounts can basically exist throughout the balance sheet and P&L depending upon the legal entity and use of the account. The answer to this question of course will depend upon resolution of the local functional currency issue.

PlanningG/L planning


1: What is the planning (budgeting) that you maintain in your General Ledger?

Currently, no budget data is kept in the general ledger, although account hierarchy for P&L is the same. Requirement is to merge actual and budgeting data together in either a data warehouse environment, the SAP general ledger, or a third party forecasting tool.

2: Do you plan on a monthly, quarterly, or annual basis?

Currently, forecasting is completed monthly, budgeting is completed bi-yearly.

3: How do you distribute planned amounts to individual planning periods (for example: equal distribution among periods, seasonal distribution)?

Equal distribution among periods, or based upon relative actual number of days in a given period.

4: Does your planning take into consideration non-financial (statistical) data?

Yes, various statistical data such as headcount will be used in the planning process.

Posting to G/LG/L account posting 1. Requirements/Expectations

Lam requires various forms of entry into the G/L.Lam wants to reduce the time and effort required to post, validate and close the G/L.Lam expects control over and the proper use of G/L accounts.

2.1 General ExplanationsStandard G/L journal entries including accruals, reversals, recurring will be used.Additional functionality of SAP account assignment models and posting with reference will also be used.Many of the entries made into the G/L will be generated automatically from the various integrated systems within SAP. Sales & Distribution - Revenue Related & Receivable posting Service Management - Revenue Related & Receivable posting Materials Management - Inventory Movements, COS, Receipts(All) Human Resources - P/R and Accrual entries Internal Accounting applications - Cash, Currency, A/P invoices, A/R manual invoices...) Fixed Assets - Depreciation, Retirements... Controlling - Production costing and Expense allocationsAutomatic Account Assignments are created in each application to point transactions to the proper G/L account.

Settings are also made on each G/L account to ensure all necessary information is captured on transactions "hitting" the accounts where this information is shared/used in other modules (CO for example). Since transactions are instantaneously posted to FI, Validations of the postings can occur throughout the month.

Because of the set-up of "Reconciliation Accounts" - A/P, A/R, F/A are always reconciled and can be validated quickly.

2.2 Explanations of Functions and EventsJournal Entry DocumentsG/L Document Posting F-02With Reference FBR2Recurring Entries F.14Accruals F.81Reversals FB08

Account Assignment & Field Status are configuration steps that will enable the integrated processes.

4.1 Description of ImprovementsData entry time and errors will be reduced by the automatic postings to the general ledger.Journal entry tools enable faster data entry.

· Auto-reconciliation of various sub-ledgers with quick validation routines.

6.1 System Configuration ConsiderationsAll integrated processes resulting in a G/L transaction will be mapped to the required G/L account.G/L accounts will be set with predetermined additional information requirements.

This definition and setting will occur during the realization phase.

Document numbering - Italy follows a chronological numbering requirement for:· Purchase Orders - starting with number one at the beginning of the calendar year· Sales Orders - starting with number one also at the beginning of the calendar year. This is a requirement of the Italian IRS concerning VAT issues

6.4 Reporting ConsiderationsStandard SAP Deliverables for Documenting posting data including Compact Journal & Balance Audit trail.

6.5 Authorization Considerations


1: What types of general ledger transactions do you process?

[X] Journal entries[X] Recurring documents[X] Accruals/Deferrals[X] Intercompany transactions[X] Others

2: How does your current system assign document numbers (internally, externally)?

Internally

3: What is the numbering logic?

Manually assigned in a series.

4: Are the document numbers assigned on a yearly basis?

No

5: Describe any special requirements to posting to particular general ledger accounts (for example: expense accounts require an associated cost center).

Expense entries definitely require a cost center. Other account requirements will be reviewed in detail during realization, but there are no major blueprint issues at this point.

6: Is there certain information that you wish to be able to display when you view journal entries online?

Debit/credit accounts, cost centers, amounts, and descriptions of each line, journal entry number, plant code, company code, period posting to, page number.

Manual foreign currency valuation


1: In which case do you post foreign currency revaluations manually?

None, all revaluations are system generated.

Closing operationsPeriod-end closing

Period Closing1. Requirements/Expectations

The ultimate goal in Lam's utilization of SAP's General Ledger module will be to reach a two day Close completion. So it follows that Lam's requirements of SAP's G/L module include:- System processing time must be kept to a minimum just before and during the two day close cycle.- Modules outside the G/L must integrate and automatically post to the G/L efficiently and in-balance not only during the period-end cycle, but also when possible DURING the period using pre-determined schedules in order to minimize the impact to processes near the end of the period and during Close.- Reconciliations and adjustments must be made DURING the period when possible, minimizing the impact to the Close. This includes inventory reconciliation, internal order settlements, reserve calculations, depreciation expense, allocations and any other process that has potential to complete work before the Close.- Worldwide control of all legal entities that effect a coordinated, centralized approach to managing postings and closings of sub-ledgers and final books. SAP G/L management and control of entities' books must consider time specific requirements, i.e. Japan will close at a very different time than Fremont yet some controls upon Japan are managed in Fremont.

· - All subsidiaries will operate from the same Chart of Accounts (see Chart of Accounts maintenance).

2.1 General ExplanationsAt Lam, the period-end closing will complete all sub-systems' and sub-ledgers' financial activities in order to understand actual and planned financial results of Company operations for monthly, quarterly, and yearly time periods. The basic deliverables include balance sheet and income statements for each legal entity based on actual and planned activity. (Other report deliverables such as product line and regional P&Ls are covered in the CO functions of SAP.) Please see the "Close Process" flow diagram and "Financial Close Sequence" Gantt chart attached to this business process blueprint for a detailed scenario for Period-end Closing.

It is expected that virtually all modules within SAP have input into Period-end Closing with regard to financial result information. Lam expects these interfaces to be extremely well integrated and automated as advertised. Please see the aforementioned flow diagrams and Gantt chart for details on the expected inputs from all sub-systems.

2.3 Special Organizational ConsiderationsWith the expectation that using SAP G/L functions and processes reduces the amount of time and effort required to complete the Period-end Closing for the Company, there should be a REDUCTION in the resource required to accomplish this. In Lam's situation this translates into greater employee productivity and moral - a key requirement for the system in general.

3. Changes to Existing OrganizationWith the expectation that G/L functions be centrally managed, it remains to be seen exactly who in Lam's organization will have this responsibility and how it will be managed. Considerations, as mentioned, must be given to local time requirements and to exactly which controls will be utilized worldwide. For example, preventing posting to accounts payable allows the Company to move on with the Period-end Closing - this control could be managed centrally with considerations. But SHOULD it be managed centrally?. These specific situations will be analyzed and set up in the Realization Phase of this SAP implementation.

4.1 Description of ImprovementsOn-line real-time integrated financial processing of most all SAP modules enables employees to become vastly more efficient. From product costing to sales order processing and all related and supporting systems, the Period-end Closing process will be the ultimate beneficiary of SAP's integrated systems. Please see the close process flow diagram showing all module inputs to the general ledger keeping in mind that most modules input real-time to the G/L. Consider the information available to act upon before the actual period-end arrives. Lam should see major improvements in cycle times and data accuracy as long as these capabilities are utilized.

The Realization Phase of the project should detail out the specific process changes that allow Lam to take advantage of real-time data. For example, intercompany receivables and payables are recorded as they occur and may be analyzed throughout the month/quarter resulting in much more time to verify postings before Close.

4.2 Description of Functional DeficitsThere are no deficits to SAP's Period-end Closing functionality perceived at this time.

5. Notes on Further ImprovementsSAP's Project System (PS) will not be utilized in this phase of the project. The interim solution for project accounting will utilize SAP's Internal Order functionality. Please see the CO module description of this process.

6.2 File Conversion ConsiderationsIt is expected that only ending balances will be brought into SAP without detail on go-live date. with the exception of:- AR balances- Fixed asset balances- AP balances (Ann MacDonald wants to freeze all AP activity prior to go-live and start over with zero balance.)

There will be no historical legacy system data converted.

6.3 Interface ConsiderationsInterface related considerations include:

- Vertex tax package for calculating tax books, plus foreign requirements of this package- Travel Spending package (Necho) and foreign requirements of this module- Third party software for Forecasting/Budgeting

Decision discussions relating to the above are in progress and expected to be resolved shortly.

6.4 Reporting ConsiderationsStandard balance sheet and income statements and trial balances are required at period-end. SAP supplies this and more using "account group" reporting functionality and "Report Painter" functionality.

6.5 Authorization ConsiderationsTop-level process control over sub-system posting and closing needs to have ownership assigned.

Lower level control over account postings needs to be assigned. Each account has rules that allow only certain types of postings. Consideration needs to be given to who maintains these controls.

Foreign currency valuation balances 1. Requirements/Expectations

One of the major steps of the closing process is the "remeasurement" of foreign currencies.Lam must "remeasure" its books into the local currency.Lam bases this remeasurement and the group consolidation upon the key rate entered at 12:01am on day 1 of the close process.This rate remains in effect as the current rate for the following monthly activity.

Only certain accounts are remeasured and this flag will be set on the G/L master record.

2.1 General ExplanationsUpon the close of business for the month (12:01 AM) after the last day of month the period is blocked for posting of normal daily activity (A/R, A/P, SD, MM...) and new period opened if not already performed.The Currency tables are maintained for the new rate to be in effect as of the last day of the month (to remeasure as of that day).The rate is US based "Reuters" currency rates on the last day of the month.An exchange rate difference key is created to point to this rate and to designate which accounts are to be "remeasured".Upon "close" of the legal entity books, two currency translations are performed.One for open item accounts which valuates each individual transaction and one that revaluates balances.

2.2 Explanations of Functions and Events

The following details the chronology of events with the accompanying SAP transaction code: The period is selectively blocked for posting new period opened (12:00 AM Day 1) OB52The new currency rates are created (12:01 AM Day 1) OB08Legal entity books are finalized Foreign Currency remeasurement for open items executed/booked F.05Foreign Currency remeasurement for balances executed/booked F.06Legal entity books closed OB52

2.3 Special Organizational ConsiderationsControl of the currency table maintenance function and the remeasurement process is an issue for Lam due to timing issues. The various Lam legal entities are spread over various time zones therefore the new period rate should be added before the first entries are processed for the new period.This is feasible since the rate could be changed on the weekends since every period closes on a weekend.The year-end close does not follow that logic however since it ends on June 30 regardless of day.Irregardless, any financial impact is negligible and would correct itself upon the next remeasurement.

Therefore, it would seem appropriate to maintain the currency tables and remeasurements centrally.

3. Changes to Existing OrganizationCentralized Currency Table Maintenance and Remeasurement Execution.

6.5 Authorization ConsiderationsCentralized authorization for the above mentioned functions


1: Describe your foreign currency revaluation process and which valuation methods and exchange rate types you use?

Remeaurement of specific accounts at legal entity level.Group consolidation translation at USDAll translations use same rate method as of same date. (Rate as of 12:01AM Day 1)

2: How do you currently maintain your exchange rates? Are they manually entered or uploaded from a service?

Lam plans to manually update currencies.

3: Do your material movements consider LIFO or FIFO accounting strategies ?

All of Europe requires FIFO, or Standard Cost which is compares closely to FIFO.

Foreign currency valuation open items


1: How do you currently maintain your exchange rates? Are they manually entered or uploaded from a service?

Lam plans to manually update currencies.

2: Describe your foreign currency revaluation process and which valuation methods and exchange rate types you use?

Run currency valuation based on rate on last day of month, that rate is also the new rate for the next month until the last day when it is updated again and valuations are run for that month.

Periodic reporting


1: Which internal and external evaluations belong to month-end closing? Please provide a sample of all evaluations.

Reconciliation of Accounts - A/R, A/P, F/A, Inventory and other key accounts such as cash bank accounts.

2: Do you want to report daily or weekly balances? (If yes, you will need to use Special Ledger.)

No

3: How do you specifically handle reporting for taxes on sales and purchases?

By tax jurisdiction. In Europe, VAT return has to be provided on a monthly basis; comprehensive quarterly reports might also be requested.

4: Do you create inventory lists using the SAP R/3 System, or using a non-SAP system?

Will use SAP system functionality.

5: What does your asset history sheet look like?

See Asset Management (Europe has differing requirements regarding useful depreciable asset life).

Goods Received/Invoices Received (GR/IR) clearing accounts maintenance 1. Requirements/Expectations

See Invoice Verification process.

6.2 File Conversion ConsiderationsLoad of open GR/IR receipts on go live date. Possible scenario: 1) load open PO's 2) create amended line items for open receipts back on to PO with dummy G/L account but original description. 3) Review these items or maintain spreadsheet of open GR items with AP referencing as backup and charging dummy GR/IR account upon manual invoice entry or maintain invoices in ASK for those open items and charge dummy GR/IR account upon manual invoice entry.


1: What is your procedure for reporting goods receipts without invoice and invoices without goods receipts separately in your balance sheet?

GR/IR account is GR without invoice receipt only.IR without IR is a manual periodic accrual.

Customer/vendor balance interest calculation processing


1: For which customers/vendors do you calculate interest on balances? Please give a brief description.

Customer by Customer decision, pre-agreed in sale. No regular interest charges. For consignment stock, we are required to charge interest on holding the inventory.

2: For which G/L accounts do you calculate interest on balances? Please give a brief description.

There is a note payable that resides on Lam Japan’s books that we calculate and record interest.

Year end reportsYear-end closing preparation 1. Requirements/Expectations

6.2 File Conversion Considerations

Year-end closing 1. Requirements/Expectations

Lam requires a clearly define process for closing a year and opening a new year.Lam expects a smooth transition from year to year processing with no time delays.

2.1 General ExplanationsThe year-end process is a sequence of events for the rolling-forwarded of balances to the new year.

There is no "hard" close of the FI module. To begin a new year the following conditions need to be met -The "Fiscal Year Variant" for the new year must be created. This is the creation of the table of period dates for the new year.The desired posting periods need to exist and be open in the open/close posting period table. The following processes can be performed at any time after the creation of the Fiscal Year Variant -The A/R & A/P balances are carried forward to the new year. This can be done even before the year-end and any subsequent prior year posting will update the balance carried forward. The following process needs to be performed at a certain time -The Asset Management module requires the running of the "Change Fiscal Year" program.This can be performed only in period 12 of the prior year going forward.

After the change fiscal year program has been run and all Asset postings are complete you must carry forward the F/A balances. Unlike A/P & A/R subsequent prior year postings are not carried forward. If additional asset postings are required, the above process needs to be reversed and rerun.

The following process can be performed at anytime in the close process - The G/L balance carry-forward program carries forward the profit & loss accounts into the predetermined retained earnings account. Subsequent postings made to prior year will automatically update the relevant carry-forward balance.

ConsolidationsThe balances in the consolidations module must be rolled forward to the current year once thefinal consolidation for the prior year has occurred.


1: Do you run the year-end closing process in asset accounting separate from general ledger?

Asset accounting is integral to and a subset of the general ledger close.

2: When do you close your fiscal year?

[X] Always on same date[ ] When required

[X] On certain month[X] Date for GL Accounting[X] Date for AR Accounting[X] Date for AP Accounting

3: Which operations are part of the year-end closing? E.g. Correction of depreciation, revaluation...

Same as quarterly close when ALL accounts are verified to be accurately representing the period's ending balance.Goods in-transit to foreign entities are taken back by Corporate due to insurance rate calculation. Commission accruals are brought up to date at year end from the one month lag calculation made during the year.

4: Please describe your year-end closing process

See the Year End Close Process flow diagram

ArchivingArchiving (FI)

This Scenario/Process Group best represents your requirements for this Business Process.


1: Business Process Requirement

How long do you want to keep the documents online in the database? Please specify by type of transaction.

Archiving policy to be determined. In Europe, financials must be kept in archive up to ten years.

Archiving Please refer to Master data handling (Quality Management)->Archiving (quality management) for more detailed information.

ConsolidationMaster data

Creation of consolidation guideline 1. Requirements/Expectations

Lam must consolidate the results of its operations globally.Lam requires a single group consolidation for legal reporting, however a possible regional "step" consolidation (Europe, Asia, US) may need to be performed for management reporting purposes. Lam will update the consolidation module automatically from FI (system performance permitting).The consolidation module will use the "Lam" chart of accounts and Financial Statement Version subtotals as a basis for its Financial Statement Items (FSI).Additional FSI's will be created as required for reporting purposes.Lam maintains a group currency of USD, and consolidations will be maintained in such.

Lam will perform various consolidating and eliminating entries.

2.1 General Explanations

To perform the consolidation, the following steps will occur. Carry-forward of Retained Earnings from FI.Validation of the legal entities' balances. Re-measurement of legal entities' balances to local currencyTranslation of foreign currencies to USDElimination of Investment in Subsidiary.Elimination of Intercompany Payables & Receivables.Elimination of Profit in Inventory with Intercompany Sales & COSReclassification of Intercompany Sales & COS with COS.

2.2 Explanations of Functions and EventsThe following details the chronology of events with the accompanying SAP transaction code:

The individual legal entity books are "closed" A roll-forward of the retained earnings is performed OC55 A validation that the "books" are in balance is performed OC77 Currency translation is executed for all relevant entities OC91 Intercompany AP/AR accounts are eliminated. OC89 Investment in Subsidiary accounts are Eliminated/Reclassed OC69/OC90 Balance sheet evaluations are run on the inventories effected by intercompany sales. MRN9 Inventory revaluations are posted in consolidations GC23 Remaining intercompany Sales/COS are reclassed OC90/GC23 Any other Reclasses/Adjustments are made. OC90/GC23 Data Selection is performed for reporting OC87 Reporting is executed SART

4.2 Description of Functional Deficits

It is not feasible to track every piece of inventory in order to arrive at a specific elimination of profit in inventory amount.

4.3 Approaches to Covering Functional DeficitsIn order to best evaluate the profit in inventory the following enhancements will need to be performed.The US standard cost will be maintained in the material master of every relevant foreign entity.This will need to be updated as the standards change.

This will need to be maintained in USD and the valuations calculated based on USD.

6.4 Reporting ConsiderationsThe consolidation reports must be built.All pre-delivered reports contain predefined FSI's that are not specific to Lam.

Various reports can be built in a short amount of time by copying the structures of the predefined reports column and row layout structures.

6.5 Authorization ConsiderationsSAP delivers preset rules for the control of the flow of events in the consolidation process.

These are by no means complete, and therefor one person should be responsible for the entire consolidation process to ensure the complete and correct flow of events.


1: Do you have more than one legal company?

Yes

2: Are they all represented in the SAP system by an FI company code?

Yes

3: Are there transactions between these companies?

Yes

4: Does the effect of the transactions between the companies need to be eliminated when these companies are combined?

YesI/CO Sales, COS, Profit in Inventory, Assets

5: List all legal entities that will be included in the consolidation process.

See Company Code List

6: What is the currency of each of these companies?

TBD - Scenario 1 - All USD except Japan 2 - All Local CurrencyConsideration must be given to the Euro currency in Europe.

7: Which of these companies are parent companies?

Lam US will represent the parent.Group will be consolidated under group company 100. (or whatever desired)

8: How will data enter the consolidation database for each of these companies?

Auto update from FI, system performance permitting, otherwise in periodic loads.

9: Have you determined the structure of reporting on accounts for the consolidated entity? This will help in determining the number of totals financial statement items that are needed.

Will be a copy of the FI GL account structure and FSV items.Additional accounts for consolidating accounts as determined.

10: What are the posting attributes for each of the financial statement items that will be created? This will determine the validation that will be done on each FSI that is posted to by the consolidation system (trading partner, transaction type currency, etc.).

I/CO transactions are coded with trading partner identification.Transaction type currencies will be the same as the FI transactions.All consolidating transactions will be in USD group currency.

Company acquisition


1: Will your company make another company acquisition?

Yes, most likely.

FS chart of accounts change


1: Within your consolidation, do you need to convert your accounts to a different Chart of Accounts?

Not really. Additional accounts, sets and formatting are needed to assist consolidations. The French COA will need to be converted once a year.

Company split


1: Will you convert a company to two or more separate legal entities?

Not in the short term, but there is a possibility that this will happen.

Preparations for ConsolidationImplementation of consolidation guideline


1: What types of validations need to be performed on the data at the original currency level?

Validation of balanced financials from FI.Necessary currency translations performed.

2: What types of validations need to be performed on the data at the translated currency level?

Intercompanies balance.Eliminations have been performed.

Centralized Data EntryData transfer


1: Do you want real-time access to consolidation data?

Yes, performance permitting

2: Do you want drilldown capability in reports from the consolidation database to the original entry?

Yes

4: Do you want to impact your Special Purpose Ledger with entries from non SAP systems (similar to direct data entry, but as an interface.)

No, all data will come from SAP same client unless we do not have a big bang implementation.

Currency translationCentral currency conversion


1: Are any of the companies denominated in a foreign currency?

Yes

2: What is the translation method that this company uses (Temporal or Current Rate)?

Current rate updated at 12:01 AM of day 1 of close.

PostingsStandardizing entries


1: Will there be a need to enter transactions directly into the Consolidation database without impacting the balances in any of the SAP applications?

YesThese will be consolidating entries only.

2: What strategy will be used to make adjustments in consolidated results if the other SAP financial applications are closed for the period?

In the case where an FI document needed to be posted, Lam will re-post to FI and rerun the consolidation procedure if required. Only foreign currency entries, I/CO entries in FI would force a re-consolidating.Tax entry to Lam US would not effect consolidation process.

Intercompany EliminationsIntercompany balance declaration


1: Identify the type of inter-company transactions that occur in the organization.

(E.g.: Inter-company payable/receivable, sales/COS, corporate interest charges)

I/CO payables and Receivables Trade - based on I/CO Sales and COSI/CO payables and Receivables non-trade based on I/CO charges

2: Identify the accounts that will be involved in each of these inter-company postings.

I/CO AP & AR TradeI/CO AP & AR - OtherI/CO Sales Revenue & COSInventory (or Inventory in Transit)Various Expense Accounts

3: What companies are involved in each type of inter-company transaction?

All Companies

4: Will any of these elimination's be one-sided elimination entries?

No

5: Is there any profit in transferred inventory that needs to be eliminated?

Yes

6: Is there any profit in transferred assets that needs to be eliminated?

Yes

7: Are there any inter-company transactions that will be needed to eliminated manually?

Yes:The elimination of Profit in Inventory with offsets to I/CO Sales & COS.The elimination remaining I/CO Revenue & COS with difference to Trade COS.

8: Where should the differences in inter-company balances be posted?

There should not be any differences due to controls and rules established for I/CO charges.Billed I/CO entries should automatically post to other legal entity.In the case of billed inventory, amounts could be posted to an inventory in-transit account and moved to regular inventory upon physical receipt.

8 SAP Financial Close SequenceC = Within Two Day CloseP = Precursor to CloseT = TransactionsX = Post Close (not gating) C2 = Close but minimize impact to system processing Dependant upon Other Module = not needed in Soft Close Eliminate this task in Soft Close

Fiscal Day: Tasks -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 1 1.1 1.2 1.3 1.4 2 2 2.1 2.2 2.3 2.4 2.5 3 4 5 6 7 8 9

X/T Inventory Reconciliation MM

P Reserve Calculations CO

T/P Variance Calculations CO

P Manufacturing Overhead Application CO

P Settle Internal Orders CO

P Asset Close, Depr/Amort posting (last before close) AM

C AP Vendor Close AP

C MM Period End Close/Open (Logistical Dependency) MM

C Update F/X Rate TableC AR Customer Close - Complete Billing Docs/Recon AR

C/T Revenue Recognition SD C/T Payroll Accruals (External Force) C FI AllocationsC2 Product Standard Cost Release: Bi-yearly CO

P/C Benefits (External Force)C CO Allocations CO

C Work In Process Calculation (RA) CO C Accruals C Commissions (External Force) ? C Re-measurement of Foreign Entity to Local CurrencyC Intercompany Receivable/Payable EliminationsC Intercompany Transferred Asset Depreciation ElimC Intercompany Profit EliminationsC Translation of Foreign Entity Balances to USD

C/P Journal Entries (Opr. Exp Review/Adjust)C Transfer Costs to PCA CO

C Taxes - Vertex (External Force) VER

C Reports (Deliverable)C+1 Plan Updated (Deliverable)

X Reversals P Data Maintenance/Clean Up (Logistical Dependency)P Open Next Period FIT Actual Taxes (External Force) VER

X Product Costing Roll CO anytimeX ArchivingC Material Ledger? (Logistical Dependency)

9 - End -

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