Annual Report 2010 - Frauenthal Holding AG

68 Annual Report 2010
Operating Review
CoMPlianCe riSkS
As a listed company, Frauenthal Holding AG is obliged to
comply with a large body of corporate governance rules,
and stock exchange and securities legislation. New rules
are frequently added to the Austrian Code of Corporate
Governance. The Company attaches great importance to
compliance with all legal requirements, in order to avoid
violations that could result in significant damage to its
reputation and legal sanctions. During the year under review
we continued to develop our compliance processes,
and reinforced the in-house human resources assigned to
these tasks. The audit committee of the Supervisory Board
regularly assesses potential compliance risks, and discusses
action to improve compliance in the Group.
aCCounting
The recording of operational processes follows precise rules
in the Frauenthal Group.
Accounting processes at Group companies are the responsibility
of their local finance managers. The latter send the
monthly results to the Group Finance Department, which
has five staff members, using Cognos consolidation software.
Following detailed analysis and discussions with the
finance managers at the subsidiaries, monthly reports on
the consolidated results are sent to the Executive and Supervisory
boards, and the entire management team. The
managements of the operating subsidiaries provide extensive
comments on their units’ business performance.
A Group-wide accounting manual and regular training
courses for finance managers help to standardise bookkeeping
methods and maintain compliance with the current
International Financial Reporting Standards.
At the Group companies in the Automotive Components
and Industrial Honeycombs divisions the departments concerned
check invoices for formal correctness. Release for
payment is by the chief executives or finance managers
concerned. Authorisations to sign at subsidiary level are
also subject to graduated limits.
At SHT (Wholesale Plumbing Supplies Division) and its
branches there are group-wide signature regulations that
establish clear remits. Authorisations to pay individual invoices
are escalated according to the sums involved. For
example, it is mandatory for two executive board members
to sign off payments of material amounts.
The bookkeeping processes for recording transactions are
electronic. User authorisations are centrally managed by
the IT department responsible, and are frequently reviewed.
Local IT departments are responsible for data backup. Different
types of back-up are performed daily, weekly and
monthly according to precise schedules. Documents are
kept in secure archives, in accordance with the legal minimum
retention periods.
All of our operating units book transactions on an ongoing
basis. Payments are made at weekly intervals.
Group companies have comprehensive organisational regulations
which ensure that all transactions subject to accounting
requirements are included in the annual financial
statements. At Group companies with fully integrated ERP
systems internal vouchers are automatically issued whenever
goods are ordered, and then run through a routine
release process. At the end of the month all the finance
departments perform checks to ascertain whether any invoices
are missing. In order to obtain an accurate picture
of the financial position for a given period outstanding
invoices are accrued as necessary. Prior to the end of the
reporting period confirmations of outstanding invoices are
obtained from the main suppliers.
To ensure that the necessary provisions are made, the current
course of business is examined in detail at monthly
Executive Board meetings. The monthly reporting is the basis
for these discussions. The introduction of the “four-eye
principle” in the Group’s management structures will make
it easier to keep track of impending liabilities in future.
Due to the frequent communication between the central
finance department and the finance officers at the subsidiaries
it is possible to monitor deviations from target closely.
The monthly reports include detailed analyses of budget
shortfalls, statement of financial position items and cash
flows in the various segments and companies. An extensive