MARPOSS Group

Inter-company Reconciliation Procedure (I.R.P.)

for 2010 financial closing

Index
1. Introduction page 2
2. Accounting principles page 2
3. Procedure and due dates (FAQ) page 2
4. Consolidation area and reference people page 4
5. Example of inter-company report with practical tips page 4
6. Particular cases page 8
7. Conclusion page 9
MARPOSS Group
Inter-company Reconciliation Procedure for 2010 financial closing
January, 2011

1. Introduction
Inter-company transactions must be booked consistently by all of the companies within the Group
for the following main reasons:
- to prepare the local statutory financial statements;
- to prepare the reporting packages (Excel files) for Italian consolidation;
- to allow the holding company to prepare consolidated financial statements for the Group.
For these purposes, you are required to carry out the inter-company reconciliation procedure as
described in the following paragraphs.
Remember that, for 2010 closing, you have to reconcile both Profit and Loss and Balance Sheet
accounts (as explained in paragraphs 3 and 5).

2. Accounting principles
As far as inter-company transactions are concerned, these are the applicable accounting principles:
a) an inter-company transaction has to be booked in the same financial year by each company
involved in that transaction.
b) Bookkeeping is based on the accrual principle as follows:
- for goods: revenues and costs are accrued/recognized when the property right is
actually transferred from the seller to the buyer;
- for services: revenues and costs are accrued/recognized as soon as the service has
been completed.
Double entry bookkeeping has to be consistent with these principles (for further details, please see
the accounting manual).

3. Procedure and due dates (FAQ)

Each company within the Group is required to follow the procedure and respect the due dates stated
below (see also the mail dated Dec 17, 2010 about “2011 Group Administrative Procedures –
Calendar”).

Who must send the inter-company report?

An inter-company transaction has to be reported by the company which has booked the revenue and
the related account receivable (i.e. the seller).
An example of inter-company report is given in paragraph 5.

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Inter-company Reconciliation Procedure for 2010 financial closing
January, 2011

When does the report have to be sent?

Within Feb 7, 2011: each company having booked inter-company revenues during 2010 or having
outstanding inter-company accounts receivable at the end of 2010 is required to send the report to
the company having incurred the corresponding costs or having outstanding accounts payable.
Copy of each report has to be sent to the holding company (mail to Ms. Alessandra Gavioli and Mr.
Andrea Cangini).
The subject of each mail has to clearly state the name of the sender and the name of the receiver, for
example: Marposs GmbH (Germany) vs Marposs Corporation (USA).
Within Feb 18, 2011: the report has to be agreed upon by the receiver. In case of any differences,
the two companies involved should try to fix the problem. If the disagreement cannot be overcome,
the case is submitted to the holding company (mail to Ms. Alessandra Gavioli and Mr. Andrea
Cangini).
Within Feb 25, 2011: the report must have all the inter-company balances duly reconciled.

What do I have to do if a transaction is not reconciled?

Based on the rules set out in paragraph 2 (see also the accounting manual), you have to find a
solution with your counterpart. If the disagreement cannot be overcome, the case is submitted to the
holding company (mail to Ms. Alessandra Gavioli and Mr. Andrea Cangini).

What does it mean to match a report?

The report is reconciled if and when both companies have booked in 2010 the same amount of
revenues (and accounts receivable) versus the same amount of costs (and accounts payable) based
on the original currency of each transaction.
The report is not reconciled until all the differences have been settled and both companies have
booked the same amounts (based on the original currency of each transaction).
For particular cases, see paragraph 6.

What do I have to do if a late transaction is booked once the report has already been sent out?
You have to update your report and send it again in order to get reconciled with your counterpart
(copy to Ms. Alessandra Gavioli and Mr. Andrea Cangini).

What do I have to do with the reconciled reports?

The balances set out in the reconciled reports are the only ones that can be used to prepare the local
statutory financial statements and the reporting package (Excel file) for Italian consolidation. Of
course, you will use the amounts as converted into your local currency.
Make sure that your inter-company balances (as converted into your local currency) comply with
this basic rule:
Reconciled inter-company balances = inter-company balances set out in the statutory financial
statements = inter-company balances set out in the reporting package.

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MARPOSS Group
Inter-company Reconciliation Procedure for 2010 financial closing
January, 2011

4. Consolidation area and reference people

Find below the list of companies within the Group that are required to carry out the inter-company
reconciliation procedure. This group of companies is called consolidation area.
Find also the names of the people to whom the reports, follow-ups and other communication
relating to I.R.P. have to be sent.

COMPANY COUNTRY File name People in charge of I.R.P.

Marposs Australia Pty. Ltd. Australia AU Mr. Shigeo Kodaira
Marposs Austria GmbH Austria AT Mr. Matthias Frey
Marposs - Aparelhos Eletronicos de Medicao Ltda. Brazil BR Ms. Magda Melo
MG Exim Técnica Ltda. Brazil MGEXIM Ms. Amelia Crespi
Marposs Canada Corporation Canada CA Mr. Jude Abreo
Marposs Electronic Gauges (Shanghai) Co., Ltd. China MEGS Ms. Cherrie Zhang; copy to Ms. Jessica Zhu
Marposs (Nanjing) Automation Co., Ltd. China MNA Ms. Jessica Zhu
Marposs (Shanghai) Trading Co., Ltd. China MST Ms. Jessica Zhu
MG (Wuxi) Co., Ltd. China MGWUXI Ms. Lin Li; copy to Ms. Jessica Zhu
Marposs s.r.o. Czech Rep. CZ Mr. Matthias Frey
SAS Marposs France FR Mr. Cyrille Niepceron; copy to Mr. Hervé Labourée
Mr. Cyrille Niepceron; copy to Mr. Hervé Labourée and Ms.
SAS TRACE France TRACE
Amelia Crespi
SAS Kern France KERN Ms. Emilie Botineau
Marposs GmbH Germany DE Mr. Matthias Frey
Mr. Matthias Block (block@artis.de); copy to Mr. Christian
ARTIS GmbH Germany ARTISDE
Emde (emde@artis.de)
MG Asia Limited Hong Kong MGASIA Mr. Alfred Yuen
Marposs India Pvt. Ltd. India IN Mr. Vrindaban Khandelwal
Ms. Sabrina Lombardi (sabrina.lombardi68@fastwebnet.it);
Helium Technology S.r.l. Italy HETECH
copy to Mr. Nicolò Bonaccorsi
Marposs S.p.A. Italy SPA Mr. Mauro Tarozzi
Marposs Italia S.p.A. Italy ITA Mr. Stefano Minguzzi; copy to Ms. Alessandra Gavioli
MG S.p.A. Italy MG Ms. Amelia Crespi
Marposs K.K. Japan JP Mr. Shigeo Kodaira
Marposs, S.A. de C.V. Mexico MX Mr. Roberto Rivera
Marposs B.V. Netherlands NL Mr. Matthias Frey
Marposs Company Limited South Korea KR Mr. Jin Kook Lee
Marposs T&E Co., Ltd. South Korea MTE Mr. Jin Kook Lee
Marposs, S.A. Spain ES Mr. Eugenio Reales
Marposs AB Sweden SE Ms. Inger Leimalm
Marposs AG Switzerland CH Mr. Thomas Bieler
Marposs Company Limited Taiwan TW Ms. Amy Hsu
Marposs Limited UK UK Mr. Robert Beddoe
Ms. Mary Hammond (mhammond@controlgaging.com);
Control Gaging, Inc. USA CGI
copy to Mr. Jude Abreo
Marposs Corporation USA US Mr. Jude Abreo
Millennium Automation USA MILL Mr. Jude Abreo
ARTIS Systems, Inc. USA ARTISUS Mr. Jude Abreo

5. Example of inter-company report with practical tips

Along with these instructions, you have received an Excel file (“IRP - Jan 2011”) which must be
used to prepare inter-company reports.
Please find below an example of inter-company report.

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 MARPOSS Group
Inter-company Reconciliation Procedure for 2010 financial closing
January, 2011

2010 Inter-company Reconciliation Report

FROM (revenues) : COMPANY A (ITALY) Local Currency : EUR

TO (costs ) : COMPANY B (USA) Date : 7-Feb-11 * * * ENABLE MACROS * * *

REVENUES ( 2010 Profit & Loss ) RECEIVABLES ( 31/12/10 )

Outstanding
Amount in the Outstanding
Amount in balance in the Comments
Original original balance in
Date Doc. # local currency original
currency currency local currency
(EUR) currency
(to be matched) (EUR)
(to be matched)
Invoice was booked in 2009 and is still
1 19-Dec-09 523 USD 200.00 149.68
outstanding as of Dec 31, 2010.
2 12-Feb-10 45 USD 1,000.00 736.81
3 19-Jun-10 130 USD 2,000.00 1,614.07 1,000.00 748.39
4 18-Sep-10 12C USD -300.00 -229.46 -300.00 -224.52 Credit note.
Total USD 2,700.00 2,121.42 900.00 673.55

Short-term loan. The contract was signed on

5 31-Dec-10 USD 30,000.00 22,451.73 Oct 31, 2009. Interest at 5% is invoiced on a
six-monthly basis (on Apr and Oct).

Total USD 0.00 0.00 30,000.00 22,451.73

6 30-Apr-10 5/I USD 500.00 375.52

7 30-Oct-10 6/I USD 750.00 538.56
Accrued interest for 2 months. Invoice will be
8 31-Dec-10 USD 250.00 187.10 250.00 187.10
issued on Apr 30, 2011.
Total USD 1,500.00 1,101.18 250.00 187.10

Payment in advance was made on Oct 9,

9 31-Dec-10 EUR 1,500.00 1,500.00
2010.
Total EUR 0.00 0.00 1,500.00 1,500.00

10 4-Sep-10 443 EUR 3,000.00 3,000.00 1,000.00 1,000.00

Accrued WCF for Q4 2010, as agreed upon
11 31-Dec-10 EUR 500.00 500.00 500.00 500.00
via e-mail on Feb 5, 2011.
Total EUR 3,500.00 3,500.00 1,500.00 1,500.00

To use the Excel file you have to:

- enable macros.
- Choose the name of your company from the drop-down menu which becomes available by
clicking on the cell next to “FROM (revenues)”.
- Choose the name of the company you want to send the report to from the drop-down menu
which becomes available by clicking on the cell next to “TO (costs)”.
- State the date in the cell next to “Date”.
- The “Local Currency” is automatically selected based on the name of your company.
- There are 200 rows available in the file. If you need more rows, please contact us.
The columns are to be used as follows:
- “Date”: to state the date of an invoice or other document (if any).
- “Doc. #”: to state the number of an invoice or other document (if any).
- “Original currency”: to state the currency in which the transaction was originally carried out
(for example, the currency of the invoice).
- “Amount in the original currency (to be matched)”: to state the amount of an invoice (or
accrual), which has been booked to the P&L in 2010, in its original currency. This amount
has to be reconciled with your counterpart.
- “Amount in local currency”: this is the same amount stated in the previous column
converted into your local currency. This amount is needed for consolidation purposes and
has to be stated in the reporting package (and statutory financial statements).

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MARPOSS Group
Inter-company Reconciliation Procedure for 2010 financial closing
January, 2011

- “Outstanding balance in the original currency (to be matched)”: to state the outstanding
balance of accounts receivable at the end of 2010 in the original currency of the transaction.
This amount has to be reconciled with your counterpart.
- “Outstanding balance in local currency”: this is the same amount stated in the previous
column converted into your local currency and booked to your Balance Sheet at the end of
2010. This amount is needed for consolidation purposes and has to be stated in the reporting
package (and statutory financial statements).
- “comments”: to give explanations when deemed necessary.

The example above reads as follows.

Company A (Italy) has inter-company transactions to be reconciled with Company B (USA).
Subject of the mail: I.R.P. from Company A to Company B.
Transaction no. 1
Invoice no. 523 was issued on Dec 19, 2009 and expressed in USD. It was booked to 2009 P&L.
For this reason, nothing has been stated in the column “Amount in the original currency (to be
matched)”. At the end of 2010, 200 USD is still outstanding as account receivable. The value in
local currency (with the Exchange Rate as of Dec 31, 2010 at 1.3362) is equal to 149.68 EUR.
Transaction no. 2
Invoice no. 45 was issued on Feb 12, 2010 and expressed in USD. It has been booked to 2010 P&L
for 1,000 USD. The value in local currency (with the ER as of Feb 12, 2010 at 1.3572) is equal to
736.81 EUR. The invoice was collected during 2010 and, therefore, no account receivable is
outstanding at the end of 2010.
Transaction no. 3
Invoice no. 130 was issued on Jun 19, 2010 and expressed in USD. It has been booked to 2010 P&L
for 2,000 USD. The value in local currency (with the ER as of Jun 19, 2010 at 1.2391) is equal to
1,614.07 EUR. The invoice was partially collected during 2010 and 1,000 USD is still outstanding
(account receivable) at the end of 2010. The value in local currency (with the ER as of Dec 31,
2010 at 1.3362) is equal to 748.39 EUR.
Transaction no. 4
Credit note no. 12C was issued on Sep 18, 2010 and expressed in USD. It has been booked to 2010
P&L for 300 USD (as a cost or negative revenue). The value in local currency (with the ER as of
Sep 18, 2010 at 1.3074) is equal to 229.46 EUR. The credit note has not yet been paid or offset
during 2010 and 300 USD is still outstanding (account payable or negative account receivable) at
the end of 2010. The value in local currency (with the ER as of Dec 31, 2010 at 1.3362) is equal to
224.52 EUR.
Transaction no. 5
A 30,000 USD short-term loan was granted by Company A (lender) to Company B (borrower) on
Oct 31, 2009. Interest accrues at 5% and is invoiced on a six-monthly basis at the end of Apr and
Oct of each year. At the end of 2010 there is a financial account receivable which is outstanding for
30,000 USD. The value in local currency (with the ER as of Dec 31, 2010 at 1.3362) is equal to
22,451.73 EUR.
Transaction no. 6
Invoice no. 5/I was issued on Apr 30, 2010 to charge six months of interest (from Nov 2009
through Apr 2010). The invoice is expressed in USD. It has been booked to 2010 P&L for 500 USD
(the actual amount of this invoice was 750 USD but 250 USD was already accrued/booked to 2009

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MARPOSS Group
Inter-company Reconciliation Procedure for 2010 financial closing
January, 2011

P&L for the period from Nov 2009 through Dec 2009). The value in local currency (with the ER as
of Apr 30, 2010 at 1.3315) is equal to 375.52 EUR. The invoice was collected during 2010 and,
therefore, no account receivable is outstanding at the end of 2010.
Transaction no. 7
Invoice no. 6/I was issued on Oct 30, 2010 to charge six months of interest (from May 2010
through Oct 2010). The invoice is expressed in USD. It has been booked to 2010 P&L for 750 USD
(entire amount of the invoice). The value in local currency (with the ER as of Oct 30, 2010 at
1.3926) is equal to 538.56 EUR. The invoice was collected during 2010 and, therefore, no account
receivable is outstanding at the end of 2010.
Transaction no. 8
At the end of 2010, the interest income already accrued (from Nov 2010 through Dec 2010) is
booked to the P&L for 250 USD (the corresponding invoice will be issued at the end of Apr 2011).
The value in local currency (with the ER as of Dec 31, 2010 at 1.3362) is equal to 187.10 EUR. On
the Balance Sheet the same amount is booked (outstanding) as accrual (250 USD or 187.10 EUR).
Transaction no. 9
On Oct 9, 2010 a payment in advance was made to Company B in the amount of 1,500 EUR. At the
end of 2010 this account receivable is still outstanding in the same amount of 1,500 EUR.
Transaction no. 10
Invoice no. 443 was issued on Sep 4, 2010 and expressed in EUR. It has been booked to 2010 P&L
for 3,000 EUR. The invoice was partially collected during 2010 and 1,000 EUR is still outstanding
(account receivable) at the end of 2010.
Transaction no. 11
On Feb 5, 2011 it has been agreed that Q4 2010 revenues for WCF (recognized by Company B) are
equal to 500 EUR. The related accrual is hence booked to the 2010 P&L for 500 EUR (while the
invoice will be issued by the end of Feb 2011). On the Balance Sheet the same amount is booked
(outstanding) as accrual.

Procedure
Company A must send this report to Company B no later than Feb 7, 2011. Company B must reply
to Company A no later than Feb 18, 2011. Disagreements must be settled no later than Feb 25,
2011.
The subject of each mail has to clearly state the name of the sender and the name of the receiver, for
example: Marposs GmbH (Germany) vs Marposs Corporation (USA).

Tips
Find below some practical tips taken from the example:
- receivables of both trade and financial nature must be included in the report;
- payments in advance and loans are to be considered as financial receivables and stated in
separate lines (one line for each transaction);
- credit notes are entered as negative revenues/receivables;
- revenues and receivables of the same nature (trade or financial) and expressed in the same
currency can be summed up.

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MARPOSS Group
Inter-company Reconciliation Procedure for 2010 financial closing
January, 2011

6. Particular cases
Transactions with (purchases from) Marposs S.p.A. and/or MG S.p.A. routed through
Confirmec, Fintec, AZ Comisionaria Industrial and Associated Contractors
Purchases from Marposs S.p.A. and/or MG S.p.A. routed through the intermediaries Confirmec,
Fintec, AZ Comisionaria Industrial and Associated Contractors must be considered as inter-
company transactions and therefore have to be reconciled.
You will receive for those transactions reports from Marposs S.p.A. and/or MG S.p.A. which do not
consider (before) the discount applied by the intermediaries.
You have to proceed as follows:
- for purchases (P&L) you have to reconcile 100% of the cost1;
- for accounts payable you have to reconcile the amount booked locally (net of discount) and
explain (in the accompanying mail) the difference with the amount showed by Marposs
S.p.A. and/or MG S.p.A. (before discount), which should be equal to the discount applied to
those invoices still outstanding at the end of the year.

Marposs Singapore Branch (Marposs K.K., Japan)

Any transactions with Marposs Singapore, a branch of Marposs K.K., has to be reconciled with
Marposs K.K. (Japan).

SIDCO S.A.
The company SIDCO S.A. (Switzerland) is a third party to the Group and therefore it is not
included in this procedure.

Cut-off differences due to local rules

From a theoretical point of view, there should be no differences and all inter-company balances
should be reconciled between companies within the Group.
There are sometimes particular circumstances where the reconciliation is not possible due to local
rules with specific requirements (to be explained and verified with the holding company).
In these situations, any difference must be explained (in the accompanying mail) and stated in the
reporting package as adjustment between statutory and package.

Financial cut-off for companies included in the Cash Pooling scheme of Marposs S.p.A.
From a theoretical point of view, there should be no differences and all inter-company balances
should be reconciled between companies within the Group.

1
Remember that purchases through Confirmec, Fintec, AZ Comisionaria Industrial and Associated Contractors are
booked as follows:
DEBIT
Purchases (or Inventory) 100
CREDIT
Accounts Payable 98.25
Other income (discount) 1.75

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MARPOSS Group
Inter-company Reconciliation Procedure for 2010 financial closing
January, 2011

As we have seen, sometimes there could be a gap/delay between the day when the transaction is
booked by the local bank and the day the same transaction is booked by the Italian bank managing
the centralization (cash pooling).
In these situations, any difference must be explained (in the accompanying mail) and stated in the
reporting package as adjustment between statutory and package.

7. Conclusion
For 2010 financial closing you are required to reconcile both Profit and Loss accounts and Balance
Sheet accounts.
Remember that only the reconciled balances can be used for the preparation of reporting package
and statutory financial statements:
Reconciled inter-company balances = inter-company balances set out in the statutory financial
statements = inter-company balances set out in the reporting package.

Should you need further information, please contact Ms. Alessandra Gavioli and Mr. Andrea
Cangini at Marposs S.p.A.

Bentivoglio, January 2011