|Effective Date||March 1, 2015|
|Author / Maintainer||Director Policy and Internal Control|
|Responsibility / Owner||Vice-President and Chief Financial Officer|
|Related to Rules and Procedures, Guidelines||Rules and Procedures on external financial statements|
|Related to Policy||Policy on Accounting and Financial Reporting|
The objective of this Directive is to ensure consistency across the Corporation regarding the preparation, adequacy of documentation, timeliness, and approval of all manual journal entries (JEs).
|Audience||Any personnel who input and/or monitor manual JEs.|
|Processes||The preparation, adequacy of documentation, timeliness, approval, posting and monitoring of manual JEs.|
|Exceptions||System generated JEs which are automatically posted to the General Ledger (GL) by the sub-ledger, supporting system or module, and/or system interface. |
“RE-POST” transactions (KB61, KB11N) that are posted in the SAP Controlling (CO) module and are created to re-allocate costs and/or manage internal charge-backs.
Consolidating JEs: JEs that adjust the final reporting results to record business events and/or to properly reflect IFRS but that are not immediately posted to the GL, and will be posted at a later date and not in the current reporting period (may include “material adjustments”).
Recurring JEs: JEs that are known and are expected to be manually posted to the GL on a recurring basis.
Non-recurring JEs: JEs that are manually posted on an ad hoc basis to properly record business events and/or to adjust the reporting results to properly reflect IFRS.
Significant JEs: JEs that include a line item over $5M and/or JEs that are non-standard, complex, prepared by new employees, related to a newly implemented process or accounting standard and/or that have a significant impact on the disclosures within the notes to the financial statements.
Journal Entry Preparation
- All Journal Entries (JEs) must include the following:
- Accurate amounts, supported by calculations and relevant, complete, clear and concise supporting schedules and/or explanation(s) that are understandable to someone with general financial knowledge;
- References to the applicable IFRS standard or other relevant guidance;
- The period of time (e.g. month, quarter, YTD) to which the JE applies or the period of adjustment;
- JE line item amounts that are clearly referenced to the supporting documentation/schedules;
- The name of the preparer/individual who parks the JE; and
- The date of completion/submission.
- The JE format must be consistent with the following data posting requirements (upload tool/template, etc.):
- All minimum required fields must be completed;
- The SAP JE header description must provide a brief description of the JE; and
- The correct data format/structure must be used.
- Recurring JEs must be consistent with similar prior entries. Finance personnel must note in the supporting documentation or description that the JE is recurring, and that the entry is basically unchanged (e.g. the logic/calculation employed remains consistent with prior periods). If part of a recurring JE has changed, Finance personnel must provide an explanation of the change and ensure the changes are reviewed and have the appropriate level of approval.
- Recurring JEs must include a schedule of payments/recurring JEs. The JEs must be scheduled for periods ending within the current fiscal year. If necessary, the entry can be re-scheduled at the beginning of the subsequent fiscal period
Journal Entry Review and Approval (Posting)
- All JEs must be reviewed and approved by a second Finance person prior to their posting. Recurring JEs only require one review and approval, prior to initiation.
- To ensure proper segregation of duties (SOD), JEs must not be prepared (parked) and approved or posted by the same individual.
- The reviewer/approver is responsible for ensuring that the JE documentation meets the requirements of this Directive.
- If the reviewer/approver does not have the requisite knowledge or experience to review the JE (e.g. in cases of highly technical JEs), he/she must request that the JE be reviewed by someone with the appropriate knowledge.
- Reviewers/approvers must be at the same level or higher of organizational seniority as the preparer; and have the appropriate functional Delegation of Financial Authorities (DFA).
- Approvers must document their review of the JE for reasonableness and accuracy, and that they have verified the supporting documentation.
- If the JE has been reviewed and approved by someone other than the individual posting the JE, the appropriate physical signatures/approvals must be in place, and retained, before posting JE.
- The act of posting a JE in SAP is considered the documented approval of the JE.
Consolidating JEs (Corporate Finance)
- In cases where a JE is required but is not reflected in the GL during the appropriate reporting period, Accounting and Corporate Reporting must post a Consolidating JE in the following period and retain proof that entry was subsequently posted.
- The Director, Accounting and Corporate Reporting, or the Corporate Controller must review and approve all Consolidating JEs.
Under exceptional circumstances, where full compliance to this Directive is not possible, (e.g., in foreign offices with limited staff), Finance personnel who are responsible for the areas where full compliance has not been implemented must establish appropriate compensating controls/processes to effectively monitor the preparation and approval of JEs.
Segregation of Duties (SOD)
- If full SOD is not operationally possible, and the JE preparer/approver is the same person, the preparer/approver must advise his/her superior and the Director of Policy and Internal Control.
- The superior must then review and approve these JEs or implement an alternative mitigating control to address the SOD deviations. This review can be documented via email.
- If an individual with the appropriate functional DFA is not available to approve the JE in SAP, the manager with functional DFA is permitted to temporarily delegate his/her JE approval authority via email to another party. This cannot be a standing delegation.
- The email delegating the JE approval authority must be kept with the JEs in question and/or in the centralized JE file/binder.
- In the rare cases where the JE approver is not as senior as the JE preparer, an email from the Finance Senior/Executive Director or his/her delegate must be retained to document this authorization. The approver must still have the requisite functional DFA to post JEs.
Journal Entry Monitoring
- On a quarterly basis, all Senior/Executive Directors responsible for financial reporting, or their delegates, must confirm that:
- All necessary JEs, including standard and recurring JEs, have been posted;
- They have reviewed all significant JEs for compliance with the JE preparation and JE review and approval requirements within this Directive; and
- The review has been documented and evidence of the review has been maintained and is available for review.
- The SAP Master Data must ensure that the following controls are implemented:
- The SAP park and post functionality for transactions identified and annually reviewed by the Director Accounting and Corporate Reporting; and
- Any requests to re-open the GL in SAP are properly authorized in accordance with the Directive on General Ledger Accounts;
- On a quarterly basis, the Director Policy and Internal Control must:
- Collect and maintain the confirmations of JE review from each Senior/Executive Director responsible for financial reporting; and
- Provide a list of JEs to each Senior/Executive Director responsible for financial reporting for analysis, including:
- All significant JEs;
- JEs posted after the quarter end GL close;
- Potential SOD conflicts where the same person parks and posts a JE or where a JE is posted without first being parked; and
- Other attributes/reports/metrics/measures, as deemed appropriate.
- The Corporate Controller is responsible for ensuring that there is a process in place to identify high-risk JEs, in order to help detect control weaknesses or indicators of fraud, and possibly identify opportunities for improvement.
All questions pertaining to the interpretation or application of this Directive should be referred to the Director of Policy and Internal Control.