(B&W) PROTECTED BY MI SOTA TOBACCO LITIGATIONTROTECTIVE ORDER
C. J. awn PRIVATE & CON-1
CONTROT-TaR OCT z 6 IF76
D, L. Drobman De A. Schechter
0. A. Bryan D. R. Scott
VD. D. Cumminsv
J, R, Lilly
B. B. BACON/or October 26, 1976
ACCOUNTING FOR REVISED N&W - B. -A. T. COST SHARING AGREEMENT
In accordance with the proposed new Cost Sharing agreement
(effective October 1, 1976) R&W is obligated to share in the
costs of Central Group R&D to the extent of 0,15% of its 'net
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turnover".
Net Turnover, as defined in the C. T. B. instructions,
p7
in Gross a-id Sales (Domestic and International) to.
customers outside the Group* less u. S. excise tax
and net duty on imported leaf.
agreement further states that NBSH shall remit the amount
of its contribution within 90 days following the close of its
September 30 fiscal year.' The basis, if any, of adjusting
each participating company's share based on actual Central
Group R & D expenses, has not been determined.
Since SW 9 a share of this expense is to be based on 0. 15% of
*net turnover", D&W should attempt to charge profits and accrue
z the liability on this basis.
Monthly accruals will be made on the basis of the net turnover
amount included in the most recent quarterly profit projection.
The quarterly accrual will be adjusted to actual as soon an
practical following the end of each calendar quarter. G. 0.
Budget Department will be responsible for making the monthly
entries and should coordinate with General Accounting as to
establishing a prenumbered entry and the timing of same.
z
W The method of payment of the fiscal year amount should be de-
termined by the Treasurer's Department, and would be dependent
upon the final agreement signed.
For the last couple of years, the maximum 'Cost Sharing' amount
to be borne by N&W has been set at $100,000 a year, with this
amount being passed through the Research & Development Depart-
seats' G4A budget for responsibility purposes.
Xn view of the significant increase in the annual expense, and
the fact that Manufacturing, Engineering and R&D personnel
have no direct control over the amount so expensed, the total
amount should be charged direct to C. 0. C. Corporate without
any attempt being made to apportion between the respective
departments.
620857055

(B&W) PROTECTED BY MIN TOBACCO LITIGATIO@-MOTECTIVE ORDER
2
The estimated Contra, Group Re expenses to be borne by BSK
for the fiscal year ending September 30, 1977# is calculated
to be $1,,470,,000 an set out on attached Schedule Ae-
This memo only addresses the method of accounting for the
maount to be remitted to B. -A. T. v and does not address or
recommend any changes to the internal method of identifying
costs by projects.
Please advise abould you have any questions concerning the
accounting treatment.
S. so B.
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oit
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62085705G