Srno

Issue
1 Bulk Order dispatch

2 Impact on Profitability

3 Change in Fiscal year, Month

4 Revenue recognition and IFRS

compliance

5 Cancellation of Invoice
6 Diversion of dispatch

7 Shortage of Inventory

8 Change of Price between order

and dispatch
9 Change in reporting

10 Partial dispatch of bag cement

Concern
- Order quantity (Invoice quantity ) and dispatch quantity will never be
same. For eg Order quantity is 40 ton but dispatch quantity is 39 ton.
(Will customer accept under delivery ?)
'- There will be no control over dispatch quantity and invoice quantity. for
eg. invoicing done for 40 ton but dispatch done for 41 ton. (Will tax
authority accept such transaction?)
'-Who will be responsible for checking and adjusting individual
transaction. (Adjust short delivery in next order)

- As illustrated in first eg: Revenue will be posted for 40 ton and Cost of
goods sold (COGS) for 39 ton, will lead to inflated profit and vice-versa.
- If order placed in one fiscal year/month could not be dispatched, will
lead to big recon activity.
As on cutoff day if the dispatch is not happens, Revenue & Inventory will
be shown in financial statements which is not correct. It may lead to post
some adjustment entries.
As per IFRS Revenue has to be recognized only after ownership of the
goods has been transferred. Dangote Group is compliance with IFRS
requirements , this change may lead to non compliance of IFRS

- In case of Order related invoicing, it cannot be cancelled/altered for any

unforeseen reason.
- Order cannot be diverted since Invoice is already been raised during
order creation. ( For eg. In SA Diversion happens because of non
acceptance of customer, customer silo full, quality concern where
instead of returning they divert the load etc)

- In case of shortage of inventory, order cannot be modified (to replace

product even if customer accepts)
-Invoicing will always be done based on order price even If there is a
change in price between Order and dispatch date it cannot be
incorporated.
-Few reports works on delivery related billing, can't be used.

- This will restrict partial dispatch of bag cement.

Business workaround

Srno

Point of Discussion
1 Time of Invoicing & revenue recognition

2 Transportation (Dangote transport or Third

Party)

3 Weighbridge operation

4 Replacement for broken BAGS etc

5 Production confirmation

6 SAP training related infrastructure

Client's Responses
-As per Ethiopian practice, Sales invoice (VAT Invoice) and revenue recognition should be done
after Sales order is booked. (before dispatch of goods)
-In other Dangote cement group companies, Sales invoice and revenue recognition is done on
'supply of goods'. Few concern have been raised by consultant over Order related billing. A
seperate decision note will be prepared by KPMG consultant in this regard.

-No commercial vehicle will be used or allowed for Customer delivery from Plant, but will be
allowed from depot dispatch.
- There will be Dangote tranport (similar as Nigeria) providing tranport services to Dangote
Ethiopia customers.
- Third party transporter will be hired initialy for inbound and Outbound transportation.
- Seperate legal entity will be created for Dangote tranport. Detail will be confirmed by Mr.
Teshome.

- There are two weighbridge systems (CADS & Ezee go) used in Dangote cement group
companies. Interface/Integration with SAP and these system have already been built and its
operational.Which one will be used in Ethiopia,this decision is pending with Mr. Bankole.
- KPMG consultant will meet technical team to understand existing weighbridge system in
Ethiopia.
- Utmost care will be taken by operational & logistics team to avoid such incidents.
- In exceptional cases,same process will be followed as in Nigeria.
-Daily confirmation will be done after shift change.
-At end of the month, physical inventory will be taken. Physical inventory process will be mapped
in SAP.
- 8 Mbps dedicate dline will be setup for SAP project site.
- Workstation for Core team training will be arranged.