English Version

Finance Handbook
Feedback, content proposals and suggestions for improvement, please contact FinanceHandbook@spmail.lear.com
Purpose
The purpose of this handbook is to provide finance personnel with a reference document that can
be used as an organized “road map” to learn about Lear, understand finance’s role (especially
the plant controller’s role) and responsibilities and provide best practice examples.
Table of Contents
Section Topic Page
1. Introduction to Lear Corporation 4 - 10

I. Lear Global Finance Team Philosophy
II. High level Overview of Lear Corporation
Information included in this section presents the Lear Global Finance
Team philosophy and provides an overview of Lear Corporation (the
“Company”), the Company's products and the Company’s financial
processes. Corporate Compliance Program and the Code of Business
Conduct & Ethics are also included in this section.
2. Lear Accounting Practices (LEAP) Manual 11
3. Internal Control Over Financial Reporting 12 - 21

I. Sarbanes-Oxley Act (SOX)
II. Quarterly Attest
III. Balance Sheet Review
IV. Reserve Reviews
V. Code of Conduct Confirmations
VI. Disclosure Committee Reviews
The information included in this section provides the controller with
background regarding the Sarbanes-Oxley Act as well as a discussion on
Management’s responsibilities. This section also explains all the
Sarbanes-Oxley tools utilized at Lear and details the Plant Controller’s
responsibilities to ensure compliance with Sarbanes-Oxley.
4. Hyperion 22 - 23
I. Hyperion Financial Products Used by Lear
II. Hyperion Chart of Accounts / Training / Support Materials
5. Month-end Plant Close Process 24 - 26

I. General Reporting Responsibilities
II. Month-end Close Procedures
The information included in this section details the plant closing
schedule and related reporting requirements
Finance Handbook – June 30, 2017

Return to Table of Contents Finance Handbook
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6. Financial Statement Analysis and Forecasting 27 - 35

I. Forecasting
II. Actual Results Variance Analysis Guidelines
III. Chart of Accounts
The information included in this section explains how operational/financial
analysis should be performed, defines certain analytical terms, shows
techniques for capturing actual mix built by plant and promotes variance
analysis techniques (e.g., calculating volume, economic variances,
exchange, pricing).
7. Cash Management 36 - 38
8. Capital Markets 39 - 44
I. External Debt
II. Government Loans or Grants
III. Corporate Guarantees and Comfort Letters
IV. Leasing
V. Inter-company Lending and Borrowing
VI. Capital Requirements
9. Financial Risk Management 45 - 51

I. Financial Risk Management
II. Insurance Risk Management
III. Credit & Collections
10. Hedge Forecasting 52 - 55
11. Value Added Tax (VAT) and Other Indirect Taxes 56 - 59
12. Restructuring - Authoritative Guidance 60 - 64
13. PAR Process - ePAR System 65 - 68
14. Inventory Control 69 - 70
15. White Papers 71

This section includes an overview of the judgmental accrual
documentation process.
16. Engineering Change Control Process 72 - 75

This section includes an overview of the ECN process.
17. Non-Production Purchasing (MRO, Tooling & Capital) 76 - 80

I. Non-Production Purchasing - Responsibilities and Definitions
II. Non-Production Purchasing - Procedures
18. Audit Services 81 - 87

I. Audit Services Philosophy, Services and Processes
II. Keys to a Successful Audit

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19. Unclaimed Property - Identification, Mitigation and Reporting 88
APPENDICES
A. Glossary of Lear Terminology 89 - 95

The information included in this section explains/defines Lear
acronyms/abbreviations.
B. Information Systems Support & Key Websites 96

This section includes links to key websites and contacts to provide
technical support and assist with any IT related issues.
C. Additional Helpful Information 97 - 98

This section includes links to templates for key accounting areas that
provide consistent application and presentation (best practice examples).

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1. Introduction to Lear Corporation
Information included in this section presents the Lear Global Finance Team philosophy and provides an
overview of Lear Corporation (the “Company”), the Company's products and the Company’s financial
processes. Corporate Compliance Program and the Code of Business Conduct & Ethics are also included
in this section.
Questions related to this section should be directed to Carla Burney-Jones – Director, Financial Reporting
and Chief Compliance Officer and Bill O’Loughlin – FP&A Finance Director.
I. Lear Global Finance Team Philosophy
We are a cohesive, customer focused team with the highest level of integrity. We believe that
data-driven analysis results in fact-based decision making. We work in partnership with the
operations and corporate personnel to ensure that the Company achieves its financial and
operating commitments. We drive continuous process and systems improvements globally, while
maintaining strong controls.
We fully understand and embrace our fiduciary obligation to act in the best interest of all our
stakeholders. In carrying out all of our responsibilities, we strive to maintain the highest level of
credibility and transparency, while seeking to strike the optimal balance between minimizing risk
and maximizing economic value.
A. Financial Priorities
In evaluating our financial condition and operating performance, we focus primarily on earnings,
operating margins, cash flows and return on invested capital.
Our success in generating cash flow will depend, in part, on our ability to manage working capital
effectively. Working capital can be significantly impacted by the timing of cash flows from sales
and purchases. In addition, our cash flow is impacted by our ability to manage our inventory and
capital spending effectively.
We utilize return on invested capital as a measure of the efficiency with which our assets generate
earnings. Improvements in our return on invested capital will depend on our ability to maintain an
appropriate asset base for our business and to increase productivity and operating efficiency.
Our role in finance includes:

• Ensuring that the Company meets its commitments
• Serving as both financial and business leaders, partnering with operations
• Continuously improving our financial controls and infrastructure
• Developing and retaining a world-class finance team
• Always working to increase transparency and maintaining open dialogue, both
internally and externally, with respect to the Company’s performance
We are keenly focused on:

• Improving our Return on Invested Capital
• Growing our business profitably
• Generating cash
• Reducing debt

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II. High Level Overview of Lear Corporation
A. General
The Company was founded in Detroit in 1917 as American Metal Products, a manufacturer of
seating assemblies and other components for the automotive and aircraft industries. Today, Lear
is a leading global supplier of complete automotive seating systems and components, as well as
electrical distribution systems and electronic components, including high-power and hybrid
electrical systems and components.
The Company serves all of the world’s major automakers, and Lear content can be found on more
than 400 vehicle nameplates. In 2016, Lear’s total sales were a record $18.6 billion, with 77% in
the Seating segment and 23% in the E-Systems segment. Lear ranked #154 in the latest Fortune
magazine survey. Lear's world-class products are designed, engineered and manufactured by a
diverse team of 150,000 employees at 243 locations in 37 countries.
Lear’s Vision is to consistently be recognized as:

• A Supplier of choice
• An Employer of choice
• The Investment of choice; and
• A Company that supports the communities where we do business
The Company’s Strategy is to invest in profitably growing the business, improve long-term
competitiveness and consistently return cash to shareholders, while maintaining a strong and
flexible financial position.
The Company’s Core Values are quality, innovation, efficiency, customer focus, diversity,
teamwork, integrity and community service.
Our success is driven by our dedication to providing the best possible products and services to
our customers, a philosophy of continuous improvement and outstanding teamwork.
We use our product, design and technological expertise, global reach and competitive
manufacturing footprint to achieve the following financial goals and objectives with the aim to
maximize shareholder value:
• Continue to deliver profitable growth, balancing risks and returns;
• Maintain a strong balance sheet with investment grade credit metrics; and
• Consistently return excess cash to our shareholders.
Seating Segment
Lear is a recognized global leader in complete automotive seat systems and key individual seat
components. The seating segment consists of the design, development, engineering, just-in-time
assembly and delivery of complete seat systems, as well as the design, development, engineering
and manufacture of all major seat components, including seat covers and surface materials such
as leather and fabric, seat structures and mechanisms, seat foam and headrests, as well as
seating-related electrical and electronic components (including software products).
Lear has the most complete set of component offerings of any automotive seating supplier and is
a market leader in every automotive producing market in the world. Further, we have expertise
and are building capabilities in seat comfort technologies, including heating and cooling. Overall,

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our global manufacturing and engineering expertise, low-cost footprint, complete component
capabilities, quality leadership and strong customer relationships provide us with a solid platform
for future growth in this segment.
We estimate the global seat systems market at more than $64 billion in 2016. Based on
independent market studies and management estimates, we believe that we hold the #2 position
in seat systems assembly globally on the basis of revenue with strong positions in all major
markets. We believe that we are also among the leading suppliers of various components
produced for complete seat systems.
Our major competitors in this segment are Adient, plc, Faurecia S.A., Magna International Inc.,
Toyota Boshoku Corporation and TS Tech Co., Ltd., which have varying market presence
depending on the region, country or automotive manufacturer.
Key 2016 Seating Statistics:

• 88,700 Employees
• 160 Facilities
• 2017 to 2019 Sales Backlog = $2.1 Billion
• 1.0 Billion Parts Shipped
• 17 Million vehicle Seat Sets Delivered
• World’s Largest Supplier of Automotive Leather
E-Systems Segment
Lear is a leader in power management and signal distribution within the vehicle for traditional
vehicle architectures, as well as high power and hybrid electric systems. The E-Systems segment
consists of the design, development, engineering, manufacture, assembly and supply of electrical
distribution systems, electronic modules and related components and software for light vehicles
globally.
We also have connectivity hardware and software capabilities, including cybersecurity expertise,
that facilitate secure, wireless communication between the vehicle’s electrical and electronic
architecture and external networks, as well as other vehicles.
We estimate the global target market for our E-Systems business to be over $70 billion. Our major
competitors in electrical distribution systems include Delphi Automotive PLC, Leoni AG,
Sumitomo Corporation, TE Connectivity and Yazaki Corporation. Our major competitors in
electronic modules, including connectivity solutions, include Continental AG, Delphi Automotive
PLC, Denso Corporation and Harman International Industries, Incorporated (acquired by
Samsung Electronics Co. Ltd.).
Key 2016 E-Systems Statistics:

• 58,700 Employees
• 56 Facilities
• 2017 to 2019 Sales Backlog = $750 Million
• 9.2 Billion Parts shipped
• Produced 129 Million Wire Harnesses
• Processed 43 Million Printed Circuit Boards

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B. SEC Filings, Annual Reports and Earnings Releases
By clicking on the following link, you can get the latest investor information to learn about the
Company, the Company’s products, and other reported information: Investors
Reviewing the latest 10-K (annual filing with the U.S. Securities & Exchange Commission (“SEC”))
may be the most beneficial way to obtain a comprehensive overview of the Company. Not only
does the 10-K include the latest audited consolidated financial statements and related disclosures
of Lear Corporation it also provides information relating to:
• Principle objectives of the Company and how we plan to meet our objectives
• Explanation of product operating segments
• Products and product technology
• Customers
• Joint ventures and minority interest
• Competitors
• Employees
• Significant Risk Factors
C. Corporate Compliance Program
Lear Corporation is committed to:

• Conducting business in accordance with applicable laws, rules and regulations and in
an ethical manner
• Obeying the letter and spirit of the law. This is the foundation on which our ethical
standards are built
All Employees must respect and obey the laws of the cities, states and countries in which we
operate.
Lear’s Corporate Compliance Program is designed to promote an ethical and compliant culture,
which in turn, minimizes the risk of criminal and financial liability to the Company.
Lear’s Compliance Program consists of various policies, including the Code of Business Conduct
and Ethics, conflicts of interest, anti-corruption, gifts and entertainment, among others. Lear has
a Compliance Committee consisting of senior management who meet regularly to provide
oversight to and assess the effectiveness of the program. In addition, compliance program
activities are reviewed with the Company’s Board of Directors.
Why is an effective Compliance Program important?

• Reduces risk of or potentially avoid criminal or civil actions brought against the
Company or its officers or directors by governmental agencies as a result of
misconduct
• Helps prevent unethical or illegal behavior, thereby reducing unnecessary costs
• Assists in identifying issues early, allowing the Company to efficiently address and
remediate any concerns (e.g., self-reporting); and
• Protects the Company’s reputation and business relationships with customers and
suppliers

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• Other potential benefits include:

o Improved investor confidence and analyst ratings, as well as potential
market/sales expansion opportunities resulting from a stellar business
reputation
o Reduction in unfavorable audit and internal control findings
o Improved efficiencies/lack of waste
o Improved quality/product ratings
o Stakeholder/Shareholder Perspective
D. Code of Business Conduct and Ethics (the “Code”)
The Code is the foundation of the Compliance Program and serves as a key element of the
Company’s governance, risk management and compliance efforts. In general, the Code:
• Prohibits illegal, unethical or inappropriate behavior
• Communicates basic principles designed to help employees make more informed
ethical decisions; (i.e., not intended to be an exhaustive list of rules)
• Encourages and provides various means of reporting any observed or suspected
illegal, unethical or inappropriate behavior
For more information on the Code, please select the following link:
Lear's Code of Business Conduct and Ethics
Selected Topics under the Code:
Conflicts of Interest
• A conflict of interest is described as an activity that conflict with or have the appearance
of conflicting with the best interests of Lear and its stockholders
• A conflict situation can arise when an employee takes actions or has interests that
may make it difficult for the individual to perform work for the Company objectively and
effectively
• Examples of potential conflicts of interest include:
o An employee owns a business, and regularly answers their Lear phone number
with the name of their business
o An employee is involved in a vendor selection process and either a close friend
or a family member owns one of the competing vendors
o An employee involved in a vendor selection process receives a case of wine
from one of the competing vendors
o An employee provides consulting services to small businesses after hours
o An employee also works as an employee of a competitor, customer or supplier
• Unresolved conflicts of interest can also put you and Lear at risk for reputational
damage and/or financial losses
• Because of the risks involved, the consequences for failing to disclose a potential
conflict can result in disciplinary action, up to and including termination
• If you are involved in or become aware of a potential conflict of interest, please disclose
the situation to Human Resources, Corporate Compliance and/or the Legal
Department
• Prompt and full disclosure is always the appropriate first step towards identifying and
resolving any potential conflict.

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Anti-Bribery (Foreign Corrupt Practices Act)

• Lear strictly prohibits the making of illegal payments to government officials
• Illegal payments include giving anything of value, directly or indirectly, to any
government officials in any country
• As U.S. law and laws in many countries prohibit these illegal payments, please
remember that the promise, offer or delivery of anything of value to any government
official would not only violate Lear policy, but may also be a criminal offense
Gifts and Entertainment

• The Gifts and Entertainment policy provides all Lear employees with guidelines and
procedures on the giving, accepting and reporting of Gifts and Entertainment
• The key provisions of this policy are:
o cash gifts are prohibited
o gifts cannot exceed $50 per person*, per occasion (please note that this limit
varies by country/region, so please check with regional compliance/legal for
further information)
o the value of giving or receiving Entertainment has been approved in advance
by your functional leadership
o under no circumstances should any gift or entertainment given or received
violate the Code and / or applicable laws and regulations
o Gift or entertainment given to government officials need to be reviewed and
approved by legal department
o Any gift or entertainment received is required to be logged into the online
Entertainment log
• As this policy cannot specifically address all possible situations, always consider the
context, nature and intent of the Gift or Entertainment
o Is it reasonable, appropriate and justified?
• For more information on Gifts and Entertainment, please select the following link:
Gifts and Entertainment Policy
Reporting Concerns
• This Policy is intended to encourage and enable Lear employees to raise concerns
without fear of retaliation
• This Policy describes and advises employees how to report a violation or concern
• It is Lear’s policy to fully investigate every Complaint of illegal/unethical behavior or
behavior that constitutes a violation of the Code
• Examples of Complaints that should be reported include:
o accounting, internal accounting controls or auditing matters
o compliance with applicable laws and regulations
o confidential information or data privacy concerns
o discrimination and/or sexual harassment concerns
o conflict of interest concerns involving any Lear employee
o fraud, theft or misuse of company assets including intellectual property
concerns
• Employees are encouraged to report what they perceive to be a violation of the Code
by using the Compliance and Ethics Line (“C&E”)
o The C&E line is a toll-free, 24-hour-a-day resource which enables employees
to report concerns anonymously, where prohibited, in their local language via
phone or the web
o The C&E line is staffed and managed by an outside provider

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• Lear’s Complaint Reporting Policy describes and advises how to report a violation or
concern by either:
o Calling the Lear Ethics Hotline
o Using the online web-form
o Calling the Chief Compliance Officer or General Counsel
o Mailing or emailing a concern to the Chief Compliance Officer; or
o Notifying the Legal Department
• For more information on reporting concerns, please select the following link:
Complaint Reporting
Anti-Retaliation Policy
• No one who reports a Complaint in good faith shall suffer retaliation, or adverse
employment consequence as a result of submitting a Complaint
• A Lear employee who retaliates against someone who has reported a Complaint or
made a statement in an investigation process, in good faith is subject to discipline up
to and including termination of employment
• Examples of adverse employment consequences that will not be tolerated include:
o Exclusion from work-related decisions and activities
o Verbal abuse by a supervisor or other member of management
o Termination, demotion or threats to terminate or demote
o Denial of promotion, raise, assignment or transfer
o Suspension or reassignment of job responsibilities
o Threats of or actual physical harm to persons or property
o Any other material adverse impact
• For more information, please select the following link: Anti-Retaliation Policy

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2. Lear Accounting Practices (LEAP) Manual
I. LEAP Manual
Amy Doyle, Chief Accounting Officer, is responsible for the accounting practices and policies documented
within LEAP and questions related to this section should be directed to her regional team members:
• Asia – Eva Zhu
• Europe – Bob Hooper
• Mexico – Carolina Flores
• South America – Marco da Silva
• U.S. & Canada – Amy Doyle
A. Overview
The LEAP manual contains Lear’s documented policies and procedures with respect to the
following areas.
• Financial Reporting
• Accounting
o Assets
o Liabilities and Stockholders’ Equity
o Income Statement
• Internal Control
• Corporate Governance
• Financial Planning
• Capital Expenditures
• Insurance
• Tax
• Treasury
• Travel
To view the LEAP manual, select the following link: Lear Accounting Practices Manual (LEAP)
B. Controller’s Responsibility
It is the responsibility of each plant controller to be familiar with each section of the LEAP manual
and ensure compliance with the requirements of the LEAP manual.

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3. Internal Control Over Financial Reporting
Amy Doyle, Chief Accounting Officer, is responsible for internal control over financial reporting and
questions related to this section should be directed to her regional team members:
• Asia – Chong Kiat Yeo
• Europe – Daniel Spiegel
• Mexico – Mauricio Lorenzo Gamboa Trejo
• South America – Fabio Almeida
• U.S. & Canada – Tim Jordan – Seating, Aarika Gerstler – E-Systems
I. Sarbanes-Oxley Act (SOX)
A. Overview
SOX was enacted in 2002 and introduced new and expanded requirements for all U.S. public
company boards, management and external auditors.
Section 404 of SOX requires management and the external auditor to report on the adequacy of
the company’s internal control over financial reporting. Management is required to include in its
annual report on Form 10-K an internal control report which affirms the responsibility of
management to establish and maintain an adequate internal control structure and procedures for
financial reporting. In addition, the report includes an assessment as of December 31, of the
effectiveness of the internal control structure and procedures for financial reporting. The external
auditor is required to attest to, and report on, management’s assessment of its internal controls.
In response to SOX, Lear strengthened and enhanced its internal control framework based on
five criteria:
• The overall Control Environment, which sets the tone and is the foundation for all other
components
• Risk Assessments, which identify, analyze and manage risks early
• Control Activities, which help to ensure that management’s directives are executed
• Information and Communication, which affect management’s ability to make
appropriate decisions; and
• Monitoring, which assesses the quality of internal control performance over time
B. Financial Reporting Cycles
To facilitate SOX compliance, management has identified the following six cycles (and related
processes) that are key to accurate financial reporting, adopted a SOX monitoring process and
developed SOX tools:
• Revenue
o Sales and accounts receivable process
o Accounts receivable reserve process
o Cash receipts process
o Customer purchase and change order process
• Production
o Capital expenditures and disposition process
o Accounting for recoverable customer engineering and tooling process
o Inventory costing and management process
o Excess and obsolete inventory reserve (including customer claims) process
o Physical inventory process

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• Expenditure
o Accounts payable (including purchasing, receiving and vendor discrepancies)
process
o Cash disbursements process
o Payroll process
• Accounting & Reporting
o Financial statement close process
o Asset impairment assessment process
o Income tax calculation process
o Property, plant and equipment depreciation process
o Commitments and contingencies estimation process
o Intercompany matching process
o Treasury
o Debt issuance, recording and monitoring process
• Information technology (IT)
o Change control and procedures
o System security
o System configuration change
o Problem management
o Data management
o Facilities
o Operations
C. Monitoring Approach
The SOX monitoring process uses a three-pronged approach to ensure the integrity of Lear’s
internal controls over financial reporting and IT general controls:
• Self-assessment and certification by all Lear plants, divisions and corporate functions
on a quarterly basis
• Internal process auditing and/or monitoring by internal audit
• External auditing by EY
D. Location Responsibilities
The SOX monitoring process from a location perspective is outlined below, as are the SOX tools,
which have been developed to assist with each location’s SOX compliance:
• Standard Control Matrix – A standard control matrix has been developed for
each process outlined above. Each standard control matrix lists the significant
risks to accurate financial reporting in the related process, as well as the key
controls, which mitigate each risk. Each key control has a control matrix
reference number, as well as an ICQ reference number (see below). The
standard control matrices can be accessed on the Lear homepage under
Departments – Sarbanes-Oxley (SOX)
• Process Narratives – A generic process narrative has been developed for each
process outlined above to assist the locations in documenting the internal control
environment related to each process. The generic narratives should be modified by
each location to reflect the actual processes at that location
o The modified narratives at each location should include all key controls (cross
referenced to the standard control matrix via the control matrix reference
number) within each process. The modified narratives should be reviewed and

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updated for changes in risks, processes and/or systems as necessary in

conjunction with the completion of the ICQ (see below). The generic process
narratives can be accessed on the Lear homepage under Departments –
Sarbanes-Oxley (SOX)
o Internal audit (as well as the external auditors) will use the process narratives
to determine the design effectiveness of the internal control environment.
During a SOX audit, the auditor will “walk through” each significant process
from beginning to end to ensure that the process is adequately documented
• Internal Control Questionnaire (ICQ) – The ICQ lists the internal controls that should
be standard at each location. Each control has an ICQ reference number. Key controls
are cross referenced to the standard control matrix via the control matrix reference
number
o The ICQ is organized by the cycles outlined above. The ICQ for each cycle is
completed annually (with the exception of IT which is completed semi-annually)
based on the following schedule:
▪ Revenue – Q1
▪ Production – Q2
▪ Expenditure – Q3
▪ Accounting and Reporting – Q4
o To complete the ICQ, a self-assessment (including sample testing) is
performed. The self-assessment should involve the process owners (e.g.,
finance, IT, operations, purchasing). The sample testing should be
documented, and the documentation should be retained
o Each control listed in the ICQ is answered either “Yes,” “C/C” (compensating
control), “No” or “N/A” (not applicable) based on the results of the self-
assessment
▪ “Yes” indicates that the control is in place and operating effectively
based on the results of the self-assessment
▪ “C/C” indicates that although the control is not in place, a compensating
control is in place and operating effectively based on the results of the
self-assessment
- “C/C” responses require that the compensating control be
documented and approved by the regional SOX champion and
the global SOX champion
▪ “No” indicates that the control is not in place or the control is not
operating effectively based on the results of the self-assessment
- “No” responses require that a deficiency be documented,
including a description of the deficiency and remediation plan,
as well as the timing of remediation (among other things)
▪ All open deficiencies should be reviewed quarterly to ensure that
remediation is in accordance with the plan. Once remediated, controls
should be retested and deficiencies closed (assuming that retesting
supports that controls are in place and operating effectively)
▪ “N/A” indicates that the control is not applicable to the location. “N/A”
responses require an explanation as to why the control is not applicable
o The ICQ, including the documentation of compensating controls and
deficiencies and the explanation of controls that are not applicable, are
completed using the global SOX application, which can be accessed on the
Lear homepage under Departments – Sarbanes-Oxley (SOX) or at
sox.lear.com

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• Certifications – On a quarterly basis, the finance, IT and operations leaders

for each location complete the following certification:
o “We are responsible for the design and operating effectiveness of internal
control over financial reporting at the location. The required sections of the ICQ
have been completed (including sample testing), all process narratives have
been reviewed and updated and any deficiencies and associated remediation
plans have been reported in the global SOX application.
We are not aware of any other deficiencies in the design or operation of internal
controls that could materially affect any location’s ability to record, process,
summarize and report financial information, other than those communicated by
us, internal audit or EY.
We represent that the financial statements had no significant misstatements

for the period when any controls were not functioning as expected. In addition,
there have been no changes in any location’s internal control over financial
reporting (including information technology general controls) that would cause
the originally effective design or operation of controls to now be ineffective.
In connection with our internal controls, we represent the following:

▪ The following cycles were reviewed using the Internal Control
Questionnaire (ICQ) during the assessment period
- “List” of cycles reviewed during the current quarter
▪ All sampling testing requirements have been met. Documentation of the
testing results is retained within the ICQ section of the SOX application.
▪ Compensating controls have been properly approved
▪ Currently reported deficiencies (identified in any period) have been
reviewed to ensure that remediation plans are current.”
o The quarterly SOX certifications are completed using the global SOX
application, which can be accessed on the Lear homepage under Departments
– Sarbanes-Oxley (SOX) or at sox.lear.com
E. Corporate Functions Responsibilities
Each function (accounting, finance, financial reporting, human resources, shared services, tax
and treasury) must update their respective process narrative for changes in risk, processes and/or
systems.
Identified exceptions and deficiencies, including a description of the issue and remediation plan,
as well as the timing of remediation (among other things), should be documented in the global
SOX application.
All open exceptions and deficiencies should be reviewed quarterly to ensure that remediation is
in accordance with the plan. Once remediated, controls should be retested and issues closed
(assuming that retesting supports that controls are in place and operating effectively).
Finally, each function should complete a quarterly SOX certification.

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F. Management Responsibilities
The regional SOX champion prepares a quarterly risk assessment which summarizes the all of
the SOX deficiencies for the region by division and facilitates quarterly SOX certification by the
division finance, IT and operations leaders. In addition, the regional SOX champion provides
cycle-specific training to the locations on a quarterly basis.
The global SOX champion compiles, analyzes and reports to management and the audit
committee on the open deficiencies, as well as the overall internal control environment, on a
quarterly basis.
The CEO and CFO certify on a quarterly basis that (among other things) they are responsible for
establishing and maintaining internal control over financial reporting.
• These certifications are included as exhibits to the annual reports on Form 10-K and
the quarterly reports on Form 10-Q
• In addition, management issues an annual report on internal control over financial
reporting. This report indicates that management conducted an evaluation of the
effectiveness of internal control over financial reporting and that based on this
evaluation, management concluded that the Company’s internal control over financial
reporting was effective as of year-end
o This report is included in the annual report on Form 10-K
G. Lear Audit Services (LAS)
LAS performs testing on the behalf of management to evaluate the design and operating
effectiveness of internal control over financial reporting through financial/operational and
monitoring audits. If a location is selected for audit and internal audit identifies a control that is
either not in place or not operating effectively, an exception or deficiency will be documented,
including a description of the issue, in the global SOX application.
• The remaining documentation related to the issue should be completed, including a
description of the remediation plan and the timing of remediation (among other things),
by the location
• The exception or deficiency should be reviewed quarterly to ensure that remediation
is in accordance with the plan. Once remediated, the control should be retested and
the issue closed (assuming that retesting supports that the control is in place and
operating effectively)
H. External Auditors
EY must perform an independent evaluation of the design, implementation and effectiveness of

Lear’s internal control structure as of December 31 each year. If a location is selected for audit
and EY identifies a control that is either not in place or not operating effectively, an exception or
deficiency will be documented, including a description of the issue, in the global SOX application.
• The remaining documentation related to the issue should be completed, including a
description of the remediation plan and the timing of remediation (among other things),
by the location
• The exception or deficiency should be reviewed quarterly to ensure that remediation
is in accordance with the plan. Once remediated, the control should be retested and
the issue closed (assuming that retesting supports that the control is in place and
operating effectively)

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II. Quarterly Attest
A. Overview
The quarterly attest process is used to document the accuracy and completeness of, as well as
any significant issues related to, a location’s accounting and financial reporting records. Internal
audit and EY review the quarterly attest process, on a test basis, when performing their audits.
B. Controller’s Responsibilities
On a quarterly basis, each location must complete and submit to division “Minimum Requirements
for Quarterly Attest Submissions” (see LEAP manual section 66.1, appendix C). Locations should
obtain any additional submission requirements from their division.
C. Management’s Responsibilities
Based on the locations’ submissions, each division must complete and submit to the corporate
controller’s office “Quarterly Attest Representation Letter” (see LEAP manual section 66.1,
appendix D), “Entities included in Quarterly Attest” (see LEAP manual section 66.1, appendix A)
and “Reportable Items” (see LEAP manual section 66.1, appendix B).
Based on the divisions’ submissions, the corporate controller’s office must prepare a global
summary of the reportable items, which is provided to EY.

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III. Balance Sheet Review
Division finance performs a semi-annual balance sheet review at all locations. These reviews
ensure the following:
• Operating reports used in financial reviews are reconciled to HFM
• Variances from forecasted operating results are identified, investigated and evaluated
on a timely basis. The quality of the forecast need not be evaluated. LAS, EY and/or
others will want to confirm that management is monitoring operations. Year-over-year
actual results may be reviewed in addition to actual vs. forecasted results
• Evidence supports that internal controls over financial reporting are operating on a
continual basis and that the internal control structure (and related documentation) is
updated for changes in risk, processes and/or systems
The results of the balance sheet reviews must be summarized and retained for future review by
internal and external audit, as well as management. The summary must provide highlights of the
review, including action items and follow up plans. Additional review and documentation
requirements are established by each division.
Any exception or deficiency identified during the balance sheet review should be documented,
including a description of the issue, in the global SOX application. The remaining documentation
related to the issue should be completed, including a description of the remediation plan and the
timing of remediation (among other things), by the location. The issue should be reviewed
quarterly to ensure that remediation is in accordance with the plan. Once remediated, the control
should be retested and the issue closed (assuming that retesting supports that the control is in
place and operating effectively).

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IV. Reserve Reviews
• White Papers (see section 15, “White Papers”)

• Reserve Rollforwards
o On a quarterly basis, each location must complete a rollforward of its reserve
accounts (i.e., A/R, inventory, customer, supplier, environmental, legal and
warranty). Each division reviews, analyzes and summarizes the rollforwards
of its locations
o The corporate controller’s office reviews, analyzes and summarizes the
rollforwards of the divisions. The global rollforward is reviewed with EY
o The reserve balances are reviewed with the audit committee semi-annually

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V. Code of Conduct Confirmations
The compliance department surveys key employees as to their understanding of and compliance
with Lear’s Code of Conduct on an annual basis. Self-reported conflicts are documented,
investigated and resolved. The results of the survey are reviewed with the audit committee.

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VI. Disclosure Committee Reviews
The disclosure committee meets on a quarterly basis (at a minimum) to discuss risks and the
related financial statement impacts, including disclosure of such risks in the financial statements.

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4. Hyperion
Questions related to this section should be directed to key regional support champions, which are identified
on the Hyperion Team Site.
Hyperion is a Global Financial Systems application with the purpose of providing a common
source for the…
• Plants/Entities to enter and post both actual and projected financial information
• Divisions to review information about their plants/entities
• Corporate Financial Planning & Analysis (FP&A) team to globally consolidate, analyze,
and prepare financials for both internal and external use
I. Hyperion Financial Products Used by Lear
• FDM LIGHT: Financial Data Management (available through Prod–FDM)

• HFM LIGHT: Hyperion Financial Management Application (available through Prod–
Workspace or Prod–Excel)
• PPR: Hyperion Planning Application (available through Prod–Workspace or Prod–
Excel)
FDM LIGHT Application

• Used to load an entity’s activity during month-end close process from local general
ledgers to the HFM LIGHT application. General ledger account mappings and custom
dimension mappings are stored and maintained here
HFM LIGHT Application

• Repository of all Lear consolidated financial data for Actual, Forecast and Budget. All
currency translations, calculations and consolidation of data is completed in LIGHT
and stored in scenario specific categories (e.g., Actual, WrkFcst, Budget)
PPR Application
• Repository of all Lear program profitability data by individual Hyperion location. Data
is segregated by Commercial Sales, IC Sales, Material, Labor and OH/SGA. The data
is used as a key management reporting tool

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II. Hyperion Chart of Accounts / Training Documentation / Support Materials
• Other pertinent information relating to Hyperion is located on the FP&A

Financial Systems Support Page: FP&A Financial Systems Support Page
• Information and resources include:
o Chart of Accounts
o Quarterly Financial Reporting Calendars
o Training Documentation and Application Manuals
o Application maintenance activity notes
o Support requests submission / Open Issue Log
o HFM base-entity listing
• All Hyperion support requests can be made through this site or by emailing Lear
Hyperion Support

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5. Month-end Plant Close Process
This section details the plant closing schedule and related reporting requirements. Questions regarding this
information should be directed to your regional Finance Managers and Directors.
It is the controller’s responsibility to ensure that the ledgers are properly closed and reconciled at
the end of every month and that all reporting requirements are completed on time. Lear operates
on a fiscal calendar, so all month-end dates will be on a Saturday (except for December 31). The
specific timetable and requirements are provided by each of the respective operating divisions to
comply with the overall corporate reporting requirements. The specific reporting format will also
be provided by each of the operating divisions. For a general overview, listed below are some of
the key reporting responsibilities.
I. General Reporting Responsibilities
• Actual Results – Includes variance explanations, generally due the 4th business day
after close
• Monthly Forecast – Includes current month through December forecast with variance
explanations. Generally, due to your division one week prior to the close of the month
• Platform Profitability (PPR) – Full P&L reporting by major product line. Due monthly
for Actuals only
• Quarterly Attest – Controller sign-off and reconciliation of major accounts. Submitted
at the end of every quarter
• Project Status Report – Forecast of capital spending by quarter. Submitted on a
quarterly basis
• Online Improvement Plan – Includes current month through December forecast
• Other Divisional Reports – Headcount (Actuals uploaded by HR. Forecast uploaded
by Accounting Department), Purchase Savings, Six Sigma, Other Manufacturing
Metrics

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II. Month-end Close Procedures
It is the Controller’s responsibility to oversee the monthly close process. There should be a
systematic process that captures all issues and results in properly stated financial statements.
The process should be well documented and include a checklist of items (including standard
journal entries) and tasks to be complete and the list responsible parties along with the expected
completion dates.
One of the key controls in the month-end process is to complete account reconciliations on all
significant accounts. This process should also be well documented and performed in a timely
fashion.
Below is a sample of some of the key areas of a typical close. As each facility or operating division
may have different requirements it is best to check with division management for more clarification
or a complete list.
General Close Procedures by Function:

• Material & Inventory Control
o Excess & Obsolete (“E&O”) stock review and provision and write-off
▪ See link for guidance preparing the E&O Inventory Analysis
Section 13.1 Product Costing and Inventory Valuation
o Review of Goods received and transfers to Production
o Review Scrap Reports for proper disposal
o Reconcile Inventory to Balance Sheet accounts – Raw Material, Work in
Process (“WIP”) & Finished Goods
o Review On Hand Adjustments
• Payroll
o Reconcile the Accrued Payroll Accounts to Payroll registers
• Treasury/Bank Accounts
o Ensure Bank Accounts are reconciled
o Petty Cash (If applicable) – reconciled & reviewed to ensure proper use
• Accounts Payable (“AP”)
o ERS exceptions
o Supplier Invoice Matching
o Accruals for goods received not invoiced and reconcile monthly against
receiving reports
o Reconcile the AP Control account to subledger
o Reconcile the vendors accounts (i.e., inventory items) monthly to supplier
statements
• Accounts Receivable (“AR”)
o Invoicing matching to delivery documents
o Reconcile Sales Accruals to Customer Self Billings
o Review discrepancy reports and reconcile monthly
o Ensure receipts are allocated on time to customer accounts
o Review Aged debtors reports monthly
o Provide for Bad Debts (potential uncollectible)
o Obtain proper approval for write-off of AR
o Reconcile the AR Control account to subledger
• Intercompany (“IC”)
o Ensure proper support documentation for IC charges

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o
Formalize IC Service Agreement for fixed allocated charges (via
Headquarters/Legal)
o Reconcile IC Accounts monthly
• Accrued Liabilities (Customer and Supplier)
o All reserve should be based on known issue with Customer and/or Supplier
o Commercial and Purchase team should assist/provide the support to establish
the reserve
o Amounts recorded should be probable and reasonably estimable
o Supported by appropriate commercial documentation, historical trend analysis
or other detailed analysis
Attached below are two examples of the monthly closing activities checklist. If a checklist is not
already created for your location, it is important to create one similar to the one below (best
practice) to identify all activities that need to be completed, who is responsible for their completion
and when the activities are required to be performed/completed.
Month-End Close Checklist - Example 1 Month-End Close Checklist - Example 2

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6. Financial Statement Analysis and Forecasting
The information included in this section explains how operational/financial analysis should be performed,
defines certain analytical terms, shows techniques for capturing actual mix built by plant and promotes
variance analysis techniques (e.g., calculating volume, economic variances, exchange, pricing). Questions
regarding this information should be directed to your regional Finance Managers and Directors.
Financial Statement Analysis and Forecasting
This section outlines the general terms, procedures, and documents relating to financial statement
analysis and forecasting. Further guidance and detail can be found in the LEAP Manual
(Link: Section: 75.1 Current Year Forecasting). Specific requirements, forms, and due dates are
provided by each of the respective divisions.
The general expectations of the plant controller are to prepare an annual one-year budget (by
month), prepare periodic forecasts for the current year and report actual results on a monthly
basis. The reporting and forecasting responsibilities include a full Profit & Loss Statement
(Income Statement), Balance Sheet, and Cash Flow Statement. It is the controller’s responsibility
to ensure that all known variables (assumptions) are taken into account and that the forecast
accurately reflects the expected business performance.
The controller must also provide detailed variance explanations of actual results from prior year,
prior forecast and plan. Each respective division will generally provide reporting formats and
specific requirements.
Each of these topics will be discussed separately below.
I. Forecasting
Terminology
• Calendar – Lear reports on a fiscal calendar with each quarter consisting of two 4 week
months, and ending with a 5-week month (4,4,5). All forecasting must take into
account the Lear Fiscal months. A Lear Fiscal calendar can be obtained from the
Corporate Business Planning group or Division office. It is also important to note that
customer planning volumes are reported on a calendar month and must be adjusted
to reflect the Lear Fiscal month.
• Forecast Periods - Lear’s forecast periods reflect the current year time frame. Lear’s
forecast consists of the actuals to date and the remaining forecast months for the
current year. Lear’s 1+11 Forecast is January’s actuals and February to December’s
forecast. The next forecast period is referred to as the 2+10 (2 months actual, 10
months forecast).
A. Profit and Loss Items
• Sales and Mix

Sales Volumes for the near term forecast should be based directly from customer
releases (typically 12 weeks of information). Longer term forecasts and plan should
be based on Corporate provided platform volume assumptions (available on the Lear
Intranet under Corporate Finance) or Divisional directed assumptions. Any significant
known differences should be reported to the respective Division.

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Forecasted selling prices should be based upon customer Purchase Orders (“PO”). If
a PO is not received for the current engineering level, the forecasted price may be an
estimate. Estimates for these forecasted prices should be based on direction from the
appropriate Division(s). Price changes to incorporate Long Term Contracts should
also be based on direction from the appropriate Division(s).
• Product Costs
Forecasted manufacturing costs must be supported by the Bills of Material and
Routers used in developing Standard Costs. Locations with multiple end items may
wish to standardize by program, type of component, manufacturing process, and/or
trim level.
• Projected Cost Reductions and Engineering Changes

Known cost reductions and engineering changes are to be incorporated. Regular
reviews with the materials, engineering, and quality groups should occur to ensure all
known changes are incorporated. Detail should be kept by project in a manner that
can quantify the financial impact of changes from standard cost and potential volume
revisions.
Six Sigma, VAVE and Purchasing Savings should be included in forecasts. Any
variances from prior forecasts need to be explained in the variance analysis.
• Operating Performance and Overhead Costs

Operating performance indicators such as scrap rates and labor efficiencies should be
developed with the location’s operating departments and quantified for the forecast.
Departmental overhead expenses should be developed in conjunction with
departmental managers for their items on the MFE (manufacturing factory expenses)
report.
Overtime premium, indirect labor, and benefit costs should be revised based on
changes in the production schedule.
Depreciation Expenses should reflect the planned timing for placing the assets in
service based on the expected in service date.
All Other Overhead Costs and Operating Expenses, including unusual items such as
tooling gains and losses, should be noted as appropriate.
B. Balance Sheet Items
• Capital Expenditures
Forecasted Capital Expenditures should reflect the timing of asset purchases and their
placed in service dates. The amounts must tie to the amount shown on the Project
Status Report (PSR) submitted to the divisions.
• Fixed Assets and Accumulated Depreciation

Fixed Assets balances should show the current amounts and revisions for the
forecasted Capital Expenditures as noted above. Forecasted Depreciation Expenses
should be consistent with projected dates for placing new assets into service. The
Accumulated Depreciation balances should be verified for consistency with forecasted
Depreciation Expenses and tie to the fixed asset ledger or reporting system.

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• Working Capital
Accounts Receivable projections are to incorporate expected customer payments and
billings given the expected revenue stream. Month-end cutoff dates need to be
reviewed relative to known payment dates.
Inventory estimates should be made in conjunction with the Materials Department and
reflect known business conditions.
Accounts Payable and Cash Overdrafts balances should consider past payment
practices, month-end cutoff dates, expected revenue changes, and any unusual
payments, such as Capital Expenditures and Tooling. Accounts Payable forecast
should be based on normal payment terms. CPS (Centralized Payment System)
vendors must be forecasted to terms. No holds of CPS vendors should be
forecasted.
Other Accrued Assets and Liabilities should reflect timing for payroll-related items,
utilities, taxes, long-term contracts, and other miscellaneous accruals.
C. Intercompany Balances
Intercompany balances should reflect the latest actual month reported (agreed to)
balances. Any changes need to be communicated to the reciprocating plant and
agreement reached on the balance to be used.
D. Other Assumptions
• Exchange Rates
As with actual results, the Current Year Forecast is to be entered into HFM in the
location’s functional currency.
The current exchange rates used for month-end closing should also be used for
forecasting purposes and will be pre-loaded into HFM. The last month’s actual rates
will be loaded throughout the forecast period. If a location has had significant exchange
rate changes from the budget, it may wish to prepare forecasts at both budgeted and
forecasted conversion rates to aid in answering follow-up questions.
• Income Tax Rate
The income tax rates used in the budget should also be used in the Current Year
Forecast unless otherwise directed by the Tax Department or BP&A.
• Other Assumptions
Assumptions for items such as Unknown Pricing, Long Term Contracts, Currency
Transaction and Translation, Benefit Accruals, must be consistent with accounting
policies in the LEAP. Assumptions for items not specifically covered by a LEAP policy
must be documented and agreed upon with Division. Recoveries for commercial
settlements should be consistently projected.

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II. Actual Results Variance Analysis Guidelines
A. General
Variance reporting is a tool used to identify the causal factors related to changes in revenues and
costs between two periods. This technique is important because it translates accounting
information into business issues and events that can be acted upon by operating management.
The periods used for these comparisons are typically actual-to-budget, actual to prior year, actual
to forecast, and current forecast vs. prior forecast. Variances calculated generally fall into the
following categories: 1) volume and mix, 2) currency (f/x), 3) economics, 4) customer long term
agreements (LTA), 5) pricing 6) purchasing savings 7) manufacturing efficiencies (including Six
Sigma and Lean Manufacturing), 8) other.
Outlined below is an overview of generally accepted techniques in calculating the variance walk.
Further detail can be found in the LEAP Manual (section 75.1) or directly from the appropriate
Division.
• Volume / Mix
Volume and Mix variances reflect the revenue and cost impacts directly associated
with changes in shipments. Volume is calculated by multiplying the change in units
shipped from the base period by the base period per unit revenues. The associated
operating income is then calculated by taking the change in revenue multiplied times
the base period’s variable margin percentage.
Depending on the complexity of products (number of finished part numbers), the level
of detail used to calculate the volume / mix may vary. The methodology is the same
at all levels (part or platform). Volume can be defined as the change in units assuming
a standard mix assumption. Mix is then calculated as the change in individual units in
relation to the overall volume change. For example, if overall volume is increased 2%,
but a particular platform has increased 4%, then that platform would have an increase
in volume of 2% and an increase in mix of 2%.
If doing this analysis at a more summary level care must be taken to ensure that the
weighted average selling prices and variable margins are accurate.
Below is an example of a volume / mix calculation for a seat plant producing one
program:

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"A" "B" "C" "D" "E" "F" Notice in

Unit Shipments (B - A) (C - B) (D + E)
Forecast Unit Variance Due to: column “E”
Volume at Linear Mix how manual
Model Budget Budget Mix Forecast Volume Change Total
cloth units
Power Cloth 20,000 21,302 22,000 1,302 698 2,000
were
Power Cloth Deluxe 22,000 23,432 23,500 1,432 68 1,500
Manual Cloth 21,000 22,367 26,000 1,367 3,633 5,000 substituted
Manual Cloth Deluxe 35,000 37,278 34,000 2,278 (3,278) (1,000) for manual
Sport Cloth 5,000 5,325 4,500 325 (825) (500)
Leather Power 3,000 3,195 2,900 195 (295) (100)
cloth deluxe
Total 106,000 112,900 112,900 6,900 0 6,900 units. This
"G" "H" "I" "J" resulted in an
(G x D) (G x E) (H + I) unfavorable
Budget Revenue Impact of Change
Per Unit Linear Mix Total mix shift as
Revenue Volume Change Vol & Mix shown in
$(000) $(000) $(000)
columns “I”
Power Cloth $500 $ 651 $ 349 $ 1,000
and “M.”
Power Cloth Deluxe $525 752 36 788
Manual Cloth $400 547 1,453 2,000
Manual Cloth Deluxe $475 1,082 (1,557) (475)
Sport Cloth $625 203 (516) (313)
Leather Power $1,200 234 (354) (120)
Total Revenue $ 3,470 $ (590) $ 2,880
"K" "L" "M" "N"

(K x D) (K x E) (L + M)
Budget Op Income Impact of Change
Per Unit Linear Mix Total
Variable Margin Volume Change Vol & Mix
$(000) $(000) $(000)
Power Cloth $ 50.00 $ 65 $ 35 $ 100

Power Cloth Deluxe $ 57.75 83 4 87
Manual Cloth $ 48.00 66 174 240
Manual Cloth Deluxe $ 61.75 141 (202) (62)
Sport Cloth $ 87.50 28 (72) (44)
Leather Power $ 180.00 35 (53) (18)
Total Profit $ 418 $ (115) $ 303
• Currency
Currency variances identify the financial effects of exchange rate changes between
two periods. This variance is calculated by multiplying the net revenue and cost
exposure in each currency by the percentage change in exchange rates. For example:
"B" (B X A)
Exchange Exposure (in $ U.S.) Exchange
$C $ U.S. Total Variance
Revenue 100,000 100,000 -
Material Cost 60,000 15,000 75,000 3,750
Freight 1,000 200 1,200 63
Direct Labor 5,000 5,000 313
Overhead 7,000 7,000 438
Other 500 500 31
Net Op. Income Exposure (73,500) 84,800 11,300 (4,594)
Budget Exchange Rate $ 0.80

Forecast Exchange Rate $ 0.75
Pecentage Change from Budget 6.25% "A"

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• Economics
Material Economics - Cost changes compared with budget attributable to inflation
related cost increases on purchased parts and raw materials. These changes are
normally captured in standard cost systems as Purchase Price Variance (PPV).
Freight Economics - Variances in inbound and premium freight attributable to inflation.

(Note: variances due to increased frequency of freight shipments or air freight should
be classified as either volume or performance depending upon the event that is driving
the need for the change in freight cost.)
Labor Economics - Variances in direct labor, indirect labor, salaried labor, or fringes
associated with changes in wage and fringe rates or other contractual obligations as
the result of pay and benefit changes.
Other Economics - Variances from budget, after adjusting for volume factors, in cost
categories such as fuel and utilities, taxes and insurance.
• Purchasing Savings (Purchasing Performance)

Cost savings achieved by the Purchasing organization compared with the budget
commitment. These savings should be reported on a “volume adjusted” basis -- after
adjustments have been made to exclude the effects of volume and exchange as
discussed above. Generally, more advanced Purchasing Performance measurement
systems will track both annualized and calendarized Purchasing savings. This
allows for more sophisticated identification and tracking of “year-over-year”
Purchasing Savings Performance as shown in the example below:
Effective Savings
Annual Starting New Date of "A" "B" (A - B)
Volume Cost Cost Cost Change Annualized Calendarized Carryover
Part A 1,200 $ 1.00 $ 0.85 8/1/1997 $ 180 $ 75 $ 105
Part B 2,000 $ 1.20 $ 1.10 3/1/1998 $ 200 $ 167 $ 33
Performance Reporting
1997: New Calendarized Savings of $ 75.
1998: Total Savings of $272 = $ 167 of New Calendarized savings plus

$ 105 of carryover from 1997.
Generally, systems within the Company are not robust enough to address a
fundamental “gap” in Purchasing performance reporting. This “gap” is the difference
between the savings reported by the Purchasing organization, and the amounts
identified by the plants. There are various reasons why this “gap” exists, including:
use of existing stock, effective date differences on P.O.’s, unit volume differences
between the plant and purchasing group, and discontinued part numbers.
Accordingly, regular communication (e.g., monthly meetings) must occur between the
plants and Purchasing to resolve these reporting discrepancies.

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• Tooling/Engineering - Piece Price Amortization

Each plant should forecast tooling and engineering expenses and the associated piece
price recovery in accordance with the Emerging Issues Task Force (“EITF”)
accounting standards as referenced in LEAP Section 14.1. In addition, each plant
should coordinate with its respective division office to maintain consistency with
current reporting practices.
• Pricing and Long-term Agreements (“LTA”) (productivity paid to the customer)

Pricing variances reflect the financial impacts of changes in selling prices. For
example, they should include the effects of price changes on a new model or re-pricing
actions. The effects of LTA revenue reduction changes should be reported as a
separate variance item because they are usually significant.
• Plant Cost Performance, Freight Performance

Plant Cost Performance Variances result from changes from budget in plant
manufacturing costs such as direct labor, and overhead, after adjusting for volume and
economics. Freight performance results from a change in the “rate of usage” of freight
that is not directly tied to a change in volume.
• Balance Sheet Effects (Non-recurring Items)

Non-recurring items (also known as 1-timers) generally relate to commercial or plant
issues that are not a normal part of regular day-to-day business operations. Typically,
as the issues are identified and the financial effects quantified, the items are carried
on an operation's balance sheet until the issue is resolved. Examples of non-recurring
events include:
o Exchange payment to / from customers or suppliers
o Interim versus final price settlements -- including retroactive lump-sum
amounts
o Inventory adjustments
o Material obsolescence
o Quality-related charges from customers or to suppliers
o Workers compensation accrual changes
o Tooling gains or losses
• Other
This line item would include the profit impact of all other events that do not easily fit
into any of the above categories.

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III. Chart of Accounts
A. Key Statistical Accounts
• DSO_INT – Days Sales Outstanding (Internal)

The average of prior month gross accounts receivable and current month end gross
accounts receivable divided by last three months’ commercial sales annualized times
365.
(Current Month A/R + Prior Month A/R) / 2
X 365
Last Three Months (LTM) Commercial Sales X 4
• DSO_EXT – Days Sales Outstanding (External)

The average of prior year gross accounts receivable and current year gross accounts
receivable for current period divided by last twelve months’ commercial sales times
365. (Current Period A/R + Prior Year A/R) / 2 X 365
Last Twelve Months (LTM) Commercial Sales
• DMO_INT – Days Material Outstanding (Internal)
The average of prior month accounts payable and current month accounts payable
divided by last three months cost of goods sold annualized times 365.
(Current Month A/P + Prior Month A/P) / 2 X 365
Last Three Months (LTM) Cost of Goods Sold X 4
• DMO_EXT – Days Material Outstanding (External)
The average of prior year accounts payable and current year accounts payable for
current period divided by last twelve months cost of goods sold times 365.
(Current Period A/P + Prior Year A/P) / 2 X 365
Last Twelve Months (LTM) Cost of Goods Sold
• ATR_INT – Average Turnover Rate (Internal)
Last three months cost of goods sold annualized divided by the average of prior month
inventory and current month inventory.
Last Three Months Cost of Goods Sold X 4
(Current Month Inventory + Prior Month Inventory)/2
• ATR_EXT – Average Turnover Rate (External)

Last twelve months cost of goods sold divided by the average of prior year inventory
and current year inventory.
Last Twelve Months Cost of Goods Sold
(Current Period Inventory + Avg. Prior Year Inventory)/2

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• RONA (Return on Net Assets)

Return that a company, project, plant, or division earns on the investment required to
support its operating activities. To be considered a profitable project, the return must
exceed the minimum return investors will require to provide the capital for the project.
Calculated by dividing the last twelve months’ operating income by the average of the
last 4 quarters’ ending net asset balance as defined by the following formula:
Last Twelve Months Operating Income
Average Net Assets = [Total Assets] + [Factoring and ABS] – [Cash]

– [Investments in affiliates] – [Net Goodwill] – [Accounts Payable]
– [Accrued Liabilities]

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7. Cash Management
I. Cash Management
Any questions with respect to the information reviewed below should be directed to the following Treasury
contacts on the Lear Intranet:
U.S. - Canada Cash Management
Asian Treasury Contacts
European Treasury Contacts
Mexican Treasury Contacts
South American Treasury Contacts
The global cash management function is responsible for short-term cash forecasting and analysis,
daily cash positioning, short-term borrowing, cash investments, managing bank accounts
relationships and procuring bank services.
A. Bank Accounts
• Selecting banks, contracting for bank services, analyzing service fees and opening
bank accounts are the responsibility of the VP, Treasurer and the regional treasury
teams. Plants are not authorized to open bank accounts directly. Any problems with
bank services should be directed to the regional treasury team. Plants are responsible
for the following:
o Reconcile bank account to the general ledger
o Place stop payments as required
o Store blank and cleared checks safely to avoid fraud
o Pay bank fees if they are not automatically deducted or paid by regional
treasury
• If a new bank account is needed, the following request form must be completed. The
request must be authorized, in writing, by the Plant Controller, the Regional Division
Finance VP, and then submitted to your Regional Treasury team. Lear Audit Services
requires that no more than four individuals, at the respective plant, sign on bank
accounts. This should include the controller and the assistant controller and should
not include the purchasing function or the materials management team. If additional
bank services are required on a current account, contact your Regional Treasury team.
Request to Open Bank Account
• Regional Treasury maintains a database of all bank account signers and
communicates any changes directly to the bank. If a change in signers is required,
plants should submit the add/delete signer form (link below) directly to the Regional
Division Finance VP who will then forward to Regional Treasury for processing. When
an associate resigns or changes responsibility, immediate removal from bank
accounts is required. Add/Delete Account Signers
• Check stock should follow anti-fraud standards and must be procured through
approved Lear vendors familiar with these standards
• In North America, all checking accounts must have fraud protection (payee positive
pay). Regional Treasury will arrange for this service with the respective bank and the
appropriate IT team. Plant finance is responsible for creating issue records (payment
registers) within the payroll or AP system for manual check items to avoid bank
rejection
• Locations requiring internet banking access must complete the request form (link
below) and forward to the respective Regional Treasury team. In North America,

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electronic banking access may be used for on-line statements and reconciliations only.
In other regions, plant associates are sometimes authorized to execute or authorize
funds transfers. The request form must be approved, in writing, by the Regional
Division Finance VP and then forwarded to Regional Treasury. In no circumstance
should the same individual enter and approve a wire transfer. Regional Treasury will
serve as the administrator of the bank platforms granting access accordingly.
E-Banking Svc Request Form
• When a bank account is no longer required, Regional Treasury must be contacted to
close the account (link: Request to Close Bank Account) allowing 45 days for checks
to clear. Plants must submit documentation witnessing the destruction of any unused
check stock. Delay in closing accounts causes Lear to incur unnecessary bank fees.
Within the United States, please refer to the LEAP Manual regarding unclaimed
property.
B. Cash Investment
The investment of excess cash is the responsibility of the VP, Treasurer and regional treasury
teams. Lear Corporation’s primary objective is the preservation of capital and funding
operational cash needs of the corporation. In North America, South America, and Europe and
for wholly owned entities in China, the investment of surplus cash is carried out exclusively by
regional treasury. For other regions, that authority may be delegated to individuals approved
by the VP, Treasurer. For all regions, the VP, Treasurer will approve investment vehicles and
tenors. Please find the approval and delegation forms on the Lear intranet (link: Investment
Approval Form) to be submitted to Regional Treasury and approved by the VP, Treasurer. All
investments must be entered, by Regional Treasury, into the Quantum Treasury Workstation
on a daily basis. Regional Treasury will complete the bottom portion of this form to add the
newly approved investment instruments into Quantum.
C. Petty Cash
With the availability of P-cards and T&E cards, in most countries, petty cash bank accounts
are discouraged. If a location requires a petty cash account, the account must be an imprest
account with a maximum balance of $20,000 (U.S. dollar equivalent). Should your location
have a need for an imprest account, fill out the Request to Open Bank account form on the
Lear Intranet (Request to Open Bank Account) and then contact Regional Treasury to discuss
further. Physical cash kept in the plant is generally restricted to be no more than USD$300 in
North America, USD$500 in Europe and USD$5,000 in Asia.
D. Wire Requests
North America
For North America, all electronic disbursements should be submitted through Shared
Services. This will limit the need for wire transfers outside of the Shared Service structure
and generated on an exception basis only. By the end of 2008, check-based disbursements
will be completely eliminated at the plant level. However, in unique circumstances, plants
may request a wire transfer. Wire transfer requests must be signed by the Regional VP
Finance of the appropriate division or by his/her delegate. The Division Finance VP may
delegate the authority to sign manual wire transfer requests. For same day payments,
requests must be received by Regional Treasury no later than 11 am EST in order to comply
with the established bank cut-off times.

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• Submit paperwork to Regional Treasury to become an authorized signer on plant

manual wire requests, if applicable. This should be addressed with the respective
Division personnel and submitted only if necessary. Ensure that former associates
have been removed. Follow link Authorized Signer Form Payment Requests
Outside of North America

Outside of North America, wire transfer authority is often with the plant or division. Locations
must ensure that wire transfer requests are signed by a person that has been given delegated
authority by the Regional Division Finance VP. Passwords and token must be stored securely
and should never be shared or used by anyone other than the authorized user. Please refer
to the Secure Banking Policy
E. Cash Forecasting / LEX
Liquidity Express (LEX) is Lear's global cash forecasting system. Currently, LEX is
implemented throughout Europe and North and South America for wholly owned entities and
consolidated joint ventures. The forecast is utilized to determine daily, weekly and monthly
corporate liquidity needs. In addition, forecasted information is utilized by management to
validate quarterly free cash flow. The system receives daily feeds from various AR and AP
systems. In many cases, by applying business rules and clearing patterns appropriately,
locations can have limited manual entry. Please contact your regional Treasury Team with
any questions or problems.
Submit a CARF to obtain access to LEX, the global cash forecasting system. The request
should include all entities that require access to enter both transactions and run actual
reporting. Ensure former associates have been removed from all forecasting modules.
• Obtain reference manuals. Review instructions and determine if additional training is
necessary. For additional training, please contact Treasury-Cash Management.
LeX Global Cash Forecast System Reference Manual
Executive Viewer for EssBase – LeXGroup (Counterparty) Reference Manual
• In North and South America, LEX updates are due by 6pm EST on Monday. CPS or
SAP AP data should require no manual manipulation provided that all AP invoices
have been vouched. WARRIOR or SAP AR data should be adjusted for the impact of
retroactive or incorrect pricing or unbilled shipments.
• In Europe, plants adjust LEX weekly before Friday. Any adjustment posted after this
cut-off should be notified to European Treasury by e-mail as well.
F. Letters of Credit or Bank Guarantees
A letter of credit (LC) is a document issued by a bank guaranteeing the payment of a stated
amount for a specified period provided certain conditions are met. Lear’s Credit Agreement
allows for the issuance of a limited amount of letters of credit. The VP, Treasurer approves
all letter of credit applications. LC’s should be requested only if absolutely necessary. The
lead time for a letter of credit issuance is two weeks. Letter of credit requests require type 3
contract approval and must be approved by the VP, Division Finance and should be submitted
via email to Regional Treasury.

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8. Capital Markets
Any questions with respect to the information reviewed below should be directed to the following Capital
Markets contacts: Corporate Functional Teams
I. External Debt
Lear Corporation is a party to various debt agreements that have certain restrictions and
requirements that can impact our ability to use these facilities or enter into other forms of debt
globally. The Capital Markets group in Corporate Treasury is responsible for managing
compliance with these requirements as well as obtaining approval, negotiating and putting in
place all debt arrangements. All debt and financing arrangements must be approved by the Vice
President and Treasurer prior to written or verbal commitment on behalf of Lear or its consolidated
subsidiaries. For unconsolidated joint ventures that Lear does not control, debt and financing
arrangements should be reviewed by Treasury and Accounting prior to execution. This is required
to ensure such arrangements do not trigger consolidation of the entity, obligate the Lear
Subsidiary in any way or otherwise violate any of Lear Corporation’s covenants.
Some of the more common financing agreements that Plant Controllers may request that need
Treasury approval are letters of credit, bank guarantees, corporate guarantees, comfort letters,
government grants, discounted receivables or discounted payables. For a complete listing of
various types of debt and financing agreements as well as specific policies regarding negotiation
and approvals, relationships with lenders, payments of principal and interest and compliance with
covenants, please refer to the Lear Accounting Practices Manual on the corporate.
(Link: Section:84.1 Debt and Other Financing Arrangements)
Controllers’ responsibility for external debt

• Corporate Treasury is responsible for negotiating all external debt agreements for Lear
Corporation and its consolidated subsidiaries
• Controllers should alert the Regional Treasury contact as soon as possible for any
financing need (including any items listed in Leap Manual, Section 84.1 referenced
above). Advance notice is important to provide enough time for Treasury to decide on
a proper financing vehicle, select a financing provider, negotiate the terms and close
the transaction
• Do not enter into any financing agreements (written or verbal) unless it has been
negotiated and approved by Corporate Treasury
• Inform Treasury if you become aware of any financing arrangements that do not
appear on the Hyperion balance sheet
• Ensure that all debt (including capital leases) is properly recorded into Hyperion as
either short-term debt, current maturities of long-term debt or long-term debt

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II. Government Loans or Grants
Government subsidized loans or grants are sometimes provided by local governments as

incentives for corporations to increase or sustain employment in a certain location. Over the
years, Lear has taken advantage of some of these grants; however, it is important to let Treasury
know immediately when a grant is being considered and Treasury approval of documents are
required before any verbal or written commitment is given (see Capital Markets Corporate
Functional Teams Contacts link above).
Grants usually require some form of minimum investment or guaranteed employment. Not
meeting any of these requirements can result in penalties and/or unfavorable accounting
treatment.
Grants usually restrict the movement of assets outside the country and/or restrict the ability of the
Lear subsidiary to pay dividends or repatriate capital. Lear cannot agree to any of these
restrictions.
Grant providers sometimes request assurances that we will meet the requirements. Such
assurance can come in the form of corporate support (i.e., guarantee) or asset pledges on the
acquired assets or on other Company assets. Our global credit agreements severely limit our
ability to provide such assurances.

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III. Corporate Guarantees and Comfort Letters
Corporate guarantees and comfort letters are forms of credit support that are provided in certain
cases by Lear Corporation to support the creditworthiness of its subsidiaries and joint ventures.
All guarantees and comfort letters are strictly controlled and provided by Corporate Treasury. All
of them are signed by the VP Treasurer and they are retained in Corporate Treasury.
Controllers’ responsibility for Corporate Guarantees and Comfort Letters

• Requests for corporate guarantees or comfort letters should be made via email to the
appropriate regional contact listed above
• Requests should include why the credit support is required, the name of the party to
whom the guarantee or comfort letter will be provided (i.e., bank, third party) as well
as specifically what is being supported (i.e., repayment of a loan, payment on a lease)
• The approval form can be found on Treasury Capital Markets website
Corporate Functional Teams

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IV. Leasing
Leasing is a form of debt and as such represents a commitment by Lear to make future cash
payments. Although present accounting rules in the U.S. do not require companies to record the
liability or asset under operating leases, external analysts, such as credit rating agencies and
equity analysts, view all forms of leases as debt.
All leases for assets (other than real estate) with an original aggregate cost greater than or equal
to $50,000 must be negotiated by Corporate Treasury. Real estate leases are handled by Lear’s
real estate administrator, CB Richard Ellis (formally Trammell Crow). For real estate leases and
related questions, please contact the Director, Global Facilities & Real Estate.
Working with Purchasing, plants/divisions can negotiate and execute leases for assets with an
original cost of less than $50,000; however, all leases must meet the accounting requirements to
be classified as an operating lease.
Capital leases are reported as debt on the Company’s balance sheet. Entering into capital leases
is against corporate policy. The Treasurer has sole approval authority for capital leases.
Corporate policy with respect to leasing (including Controllers’ responsibilities and Treasury’s
responsibilities) is outlined in Lear Accounting Practices Manual on the corporate intranet.
(Link: Section: 71.2 Leasing)
An approved PAR (Project Appropriation Request) is the starting point for the leasing process.
Procedures and responsibilities for the PAR lease-buy analysis and the capital vs. operating lease
worksheet are included in the PAR policy outlined in the Lear Accounting Practices Manual on
the corporate intranet. (Link: Section:71.1 Project Appropriation Policy)

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V. Inter-company Lending and Borrowing
Inter-company loans are formal loan agreements between two Lear legal entities. Individual
locations are prohibited from entering into inter-company loan agreements. Any such agreements
must be prepared by Regional Treasury (see contacts above) in conjunction with their Legal and
Tax counterparts. Inter-company loans must be properly documented and monitored to assure
proper tax treatment and avoid unanticipated foreign exchange.
Inter-company loans can be used to efficiently utilize funds across Lear’s global entities as well
as for tax planning. Inter-company loans are approved and documented with credit limits as to
the maximum amount and term of borrowing. To the extent that an inter-company loan is in place,
but it is anticipated that a higher limit will be necessary, Controllers’ must contact Regional
Treasury in advance with financial details to support the request for an increase. Likewise,
extensions of inter-company loans must also be approved by Regional Treasury.
Please note, any inter-company trade payable that is not paid according to term, is an inter-
company loan and, as such, must be approved by Regional Treasury and properly documented.
For procedures on inter-company funding, please refer to the Lear Accounting Practices Manual
on the corporate intranet. (Link: Section:84.1 Debt and Other Financing Arrangements)
Controllers’ responsibility for inter-company lending and borrowing

• Treasury is responsible for the worldwide interest expense reporting and analysis. If
inter-company interest is not reconciled between each counterparty worldwide interest
expense can be misstated
• Debt and interest should be accounted for correctly in Hyperion (including interest
expense for borrowers and interest income for lenders). Controllers are responsible
for making the accounting entries based on calculations provided by Treasury
• Regional Treasury (Cash Manager in the Americas and the Regional Treasury
contacts shown above for the other regions) is responsible for determining interest
expense for loans and providing controllers with the data to make the appropriate
entries in HFM
• If there are any questions with respect to loans, please contact your regional Treasury
contact

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VI. Capital Requirements
Plant controllers are among the first to learn of potential cash shortages or new investment
requirements for new legal entities. Whenever new funds are required to be raised, Regional
Treasury should be contacted as soon as possible so we can help efficiently fund the local
requirements. Local legal, tax and regulatory requirements also must be considered when
funding new capital requirements. This is especially important in legal entities and locations
where cash is not easily pooled between countries (e.g., China, India, South America), countries
where we are starting up new operations (e.g., Eastern Europe, Africa, Asia) and new and existing
joint ventures.
Generally, Lear’s preference is to minimize the equity investment because returning equity capital
is usually more difficult than with debt capital. Each circumstance is different, and is why it is
required to include the Treasury team in the early discussion stages.
Controllers’ responsibility for capital requirements (where new debt or equity funding is
anticipated)
• Contact Treasury (see contacts link above) as soon as possible when a new funding
requirement is anticipated
• Provide a copy of the completed PAR and/or details of the funding requirement
including legal entity, anticipated funding need, timing, reason for funding need and
income statement, balance sheet and cash flow projections, which should show ability
to repay (prefer 5 years)
• In addition to 5-year projections, if possible please provide an indication of peak
borrowing needs and cash flow cycles expected within any given month. This is
important to help Treasury appropriately size the capital requirement to meet the daily
operating needs of the business
• If you are aware of any country or region specific legal, tax or regulatory requirements,
please share that information with your Treasury contact

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9. Financial Risk Management
I. Financial Risk Management
Any questions with respect to the information reviewed below should be directed to Capital Markets or
Risk Management contacts: (Link: Corporate Functional Teams)
Financial Risk Management is responsible for identifying financial risks throughout the operations
in the form of foreign exchange, interest rate and commodity price risk as well as developing and
implementing strategies to minimize the impact of these risks on Lear’s operating margins and
financial performance, including cash flows.
A. Foreign Exchange Transactions
General information has been posted within our LEAP Manual at the following links:
Section: 81.1 Foreign Exchange Transactions - Supporting Documentation
Section: 82.1 Foreign Currency Management
Spot Transactions
• Immediate exchange of one currency into another
• Will be negotiated and executed by Treasury unless exchange control regulations
prohibit Treasury from entering into the transaction on the local entity’s behalf
• If exchange control regulations exist, Treasury will work with the local entity to execute
the transaction; transactions may NOT be executed without prior consent of Treasury
• To request a spot foreign exchange trade, complete the form posted at
Request for Foreign Currency Transaction
o Must be submitted no later than two days in advance of when funds are needed
o Request is reviewed by Treasury against most recent exposure/currency mix
forecast
o If requested trade differs from submitted forecast (amount, currency, and/or
timing), requestor is contacted and additional information/approval is required
prior to trade execution
o Settlement instructions will be delivered to the requesting entity once the trade
has been completed
Forward FX Contract
• Buy/sell currency for future date at today’s market rate
• Will be negotiated and executed by Treasury
• Settlement instructions will be provided in advance of the maturity date
B. Inter-company Payables and Receivables
Inter-company reconciliations and payment terms are located within our LEAP Manual at:
Section: 33.1 Inter-company Policies and Procedures
Multilateral Netting
• Settlement mechanism/process that consolidates inter-company transactions and
calculates ‘net’ settlement requirements per participant instead of using external
payment systems

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• System is payables driven. As a result, transactions are entered by the plant paying
the funds (or the plant that received the material) NOT the plant receiving the funds
(or the plant that shipped the material)
• Occurs monthly through the Citinetting system for those countries who are allowed to
participant per central bank requirements. A list of participating entities can be found
at Citinetting - Participants
• Procedures, submissions/payment schedule, and associate access information is
posted at: Citinetting
• A minimum of two associates should have access at each location due to vacations,
illness, or conflicts
Manual Netting Process

• For those entities that cannot participate in the Citinetting process due to central bank
restrictions, inter-company activity should be settled monthly per the aforementioned
payment schedule
• Payment should be made via wire transfer
• Refer to Treasury, Cash Management, Wire Requests above for additional
information/procedures
• Documentation supporting payment should be forwarded immediately to receiver
C. Non-Functional Cash Balances
At a minimum, each entity should ensure that non-functional cash balances are funded or traded
monthly into their functional currency prior to the close of the accounting period to avoid
revaluation. Reference “Foreign Exchange Transaction – Spot Trades”
D. Foreign Exchange Exposure Management / Risk Forecasting System (RFS)
Definition: Section: 82.1 Foreign Currency Management
The Risk Forecasting System (RFS) is utilized to gather currency mix percentages each forecast
period and during the budget process.
• RFS system support user reference manual, submission schedule, associate access
and entity profile information is posted at
Corporate Functional Teams - Risk Forecasting System
• While updates occur as outlined in the aforementioned submission schedule,
substantial changes to the currency mix that have occurred or are expected to occur,
should be communicated immediately to Financial Risk Management
• A minimum of one associate should have access at each location, preferably two due
to vacations, illness, or conflicts
• Questions can be directed to one of the associates listed above or can be emailed to
RiskManagement@lear.com.

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II. Insurance Risk Management
Questions should be directed to Corey Baird, Insurance Risk Management (CBAIRD@lear.com).
Insurance Risk Management Department
The Insurance Risk Management (IRM) Group of the Financial Planning and Analysis Department
has global responsibility for purchases of insurance by Lear Corporation and its majority-owned
or controlled subsidiaries.
The IRM mission is to lower Lear’s long-term total cost of risk by:
• providing liquidity following certain catastrophic events through transfer of related
losses to insurance companies;
• efficiently and effectively serving Lear’s operations in the management of insurance
and related issues;
• working with internal “risk owners” (e.g., Facilities, H.R., Legal, Environmental, Health
& Safety) to develop and employ risk-control policies; and
• ensuring low-cost compliance with insurance requirements imposed by counterparties
and government authorities.
Generally, IRM fulfills this mission by purchasing global, blanket insurance policies that cover all
Lear majority-owned or controlled subsidiaries. These global insurance “programs” provide the
broadest available coverage at the lowest overall cost by pooling Lear’s worldwide risks to achieve
economies of scale. Separate insurance purchases are generally unnecessary and any
exceptions must be reported to, and coordinated with, IRM.
The scope and scale of Lear’s insurance coverage are determined based on periodic risk
assessment, benchmarking and cost/benefit analyses.
Please see Marsh contact information attached.

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Corporate Insurance Coverage

How to Report Claims
Geographic
Scope of Outside U.S.
Coverage What’s Covered Coverage U.S. & Canada & Canada
Property Damage to Worldwide Report immediately to Insurance
tangible property Risk Mgmt. by phone on +1-248-
& resultant 943-5249 & using attached form
business and notify local Marsh office
interruption, (contact info attached)1
including Property First Notice of Loss
interruption
Property Risks
caused by
Property First Notice
suppliers or of Loss
customers
Transit Damage to Worldwide Report to cbaird@lear.com and
tangible property Lear Logistics Dept.
during transit
Crime Direct loss of Worldwide Notify Lear Legal Dept. and
money, securities cbaird@lear.com
or property from
unlawful taking
(e.g., theft, fraud,
embezzlement)
Automobile Liability arising Primary in Report incidents As arranged
Liability from ownership, U.S. & involving rental & by local Lear
operation or Canada, Lear-owned/leased management
maintenance of secondary vehicles to (contact
motor vehicles elsewhere Insurance Risk Insurance
Management and Risk Mgmt.
or Amex for rental and local HR
cars in the event of
an uninsured
liability claim)
General/Public Liability arising Worldwide Notify Lear Legal Notify Lear
Liability Risks
Liability from bodily injury Dept. and report to Legal Dept.

(including or property Gallagher Bassett and report to
Products damage using the attached Marsh as
Liability) sustained by form attached
others Third Party
Accident Report
Lear GL Claim Form
Workers’ Liability for Primary in Contact local HR. As required by

Compensation statutorily defined U.S., local laws or, if privately insured, as
& Employer’s benefits or secondary arranged by local Lear management
Liability damages arising elsewhere
from employee
injury sustained in

Page 49 of 98
the course of
employment
Employment Liability arising Worldwide Notify Lear Legal Dept. and
Practices from allegations cbaird@lear.com
Liability of wrongful
employment
practices, such as
wrongful
termination,
harassment,
discrimination
Director’s & Liability of Worldwide Notify Lear Legal Dept. and
Officer’s directors & cbaird@lear.com
Liability officers of the
company & its
subsidiaries
arising from one’s
capacity as a
director or officer
Fiduciary Liability arising Worldwide Notify Lear Legal Dept. and
(Pension from alleged cbaird@lear.com
Trustee) negligent
Liability management or
oversight of
employee benefit
plans

Page 50 of 98

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III. Credit & Collections
Regional Treasury assists in credit evaluation of new customers

• In North America, please complete the new customer add request form
(Link: Add New Customer)
• Outside of North America please contact Regional Treasury for assistance
Locations should follow shipping, discrepancy management and invoicing guidelines as per the
Leap Manual (Link: Section 12.1 Shipping, Accounts Receivable Policies and Cash Receipts)
Locations on WARRIOR can refer to the Accounts Receivable website for information and
references for Warrior setup, reporting and technical assistance (Link: Accounts Receivable).

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10. Hedge Forecasting
I. Hedge Forecasting
This process ensures that gains and losses related to foreign exchange that have been identified
and hedged are properly booked and forecasted. Three accounts have been created on the
Income statement to capture gains and losses associated with these instruments. These new
accounts are as follows:
• SALES.COMMERCIAL.1500
• MATERIAL.DIRECT.1300
• OVERHEAD.MISC.2450
A. HEDGE FORECAST
Treasury Risk Management prepares a hedge forecast

• The file is located at R:\Divdir\33.Treasury Hedges Forecast
• Information is available on
o Non-quarter-end months – Wednesday prior to the month-end cutoff
o Quarter-end months – Monday following the month-end cutoff
B. FORECAST ENTRY
Other Comprehensive Income

• Hyperion account OCI.1000 should be utilized
• The balance should be held constant each forecast period. For example, the January
actual balance posted to account OCI.1000 should become the forecast for months
February through December
JANUARY 2009 ACTUALS POSTED TO HYPERION

DEC 09 JAN 09 FEB 09 MAR 09 APR 09 MAY 09 JUN 09 JUL 09 AUG 09 SEP 09 OCT 09 NOV 09 DEC 09
OCI.1000 (9,531) (10,678)
1 + 11 HYPERION FORECAST
OCI.1000 (9,531) (10,678) (10,678) (10,678) (10,678) (10,678) (10,678) (10,678) (10,678) (10,678) (10,678) (10,678) (10,678)
HOLD CONSTANT

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Hedge Asset and/or Liability

• Hyperion accounts OTH_CUR_LIAB.HEDGE.1000 – Foreign Exchange or
OTH_CUR_ASSET.HEDGE.1000 – Foreign Exchange should be utilized
• The balance should be held constant each forecast period. For example, the January
actual balance posted to account OTH_CUR_LIAB.HEDGE.1000 – Foreign Exchange
should become the forecast for months February through December

OTH_CUR_ASSET.HEDGE.1000 531 178
OTH_CUR_ASSET.HEDGE.1000 531 178 178 178 178 178 178 178 178 178 178 178 178
HOLD CONSTANT
OTH_CUR_LIAB.HEDGE.1000 9,000 10,500
OTH_CUR_LIAB.HEDGE.1000 9,000 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500
HOLD CONSTANT
C. CASH SETTLEMENT
• Hyperion account SALES.COMMERCIAL.1500, OVERHEAD.MISC.2450 or

• MATERIAL.DIRECT.1300 should be utilized to forecast monthly cash settlements,
gains and/or losses
• Utilizing 2009 Hedge Forecast file, enter forecasted settlements for your entity:
o Locate appropriate currency pair / entity in file
o Locate strategy utilized by Financial Risk Management to determine
appropriate account to forecast settlements to
▪ Sales = SALES.COMMERCIAL.1500
▪ Labor & Overhead = OVERHEAD.MISC.2450
▪ Cost of Sales = MATERIAL.DIRECT.1300
• Utilize “Forecast Hedge P/L (functional currency)” column to determine monthly
settlements that should be forecasted
• Offset should be posted to Hyperion Account CASH.1000 – Cash in Bank

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MATERIAL.DIRECT.1300 0 (488,704) (400,947) (401,090) (399,950) (399,522) (399,142) (398,620) (398,097) (397,670) (397,100) (396,720) (396,387)
ACTUAL FORECAST
Note: This is a forecasted gain therefore it is a reduction to material cost
. 1 + 11 HYPERION FORECAST
OVERHEAD.MISC.2600 0 875,565 681,351 677,472 673,889 671,420 668,142 668,142 661,362 657,058 65,348 649,857 646,681
ACTUAL FORECAST
Note: This is a forecasted loss therefore it is an increase to labor and overhead

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SALES.COMMERCIAL.1500 0 (200,071) (182,531) (180,260) (177,980) (175,921) (173,049) (171,319) (169,121) (166,216) (164,115) (162,008) (159,775)
ACTUAL
FORECAST
Note: This is a forecasted loss therefore it is a decrease to sales

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11. Value Added Tax (VAT) and Other Indirect Taxes
I. Value Added Tax and Other Indirect Taxes
Plant and entity Finance compliance responsibilities for value added tax (VAT), goods and
services tax (GST) and other indirect taxes vary by region and country. In some regions the
process is fully centralized in the SSCs, in others it is in the process of moving to SSCs, while in
Asia Pacific it remains largely a plant-level responsibility. See below for each region.
Indirect taxes, customs (import), export controls and customs-related security programs (AEO,
OEA, CTPAT) are managed by Lear’s Indirect Taxes & Customs team led by Steve Gardon, VP
Global Indirect Taxes & Customs, located in Southfield. Regional leads are listed below.
Steve Gardon – VP Global Indirect Taxes & Customs – sgardon@lear.com
A. Asia-Pacific
Asia Indirect Tax contacts:

Douglas Mackay - Indirect Tax & Customs Director Asia – dmackay@lear.com
Angela Zhao – Indirect Tax Manager China – xzhao05@lear.com
Nitin Nalnikar – Indirect Tax Manager India – nnalnikar@lear.com
There is a VAT/GST in all countries in the region where Lear has operations. Effective July 1,
2017, India replaced several federal and state indirect taxes with one federal/state GST system.
The plant Controller is responsible for the administration of VAT/GST for the plant’s activities.
The Controller is responsible to ensure that the plant has claimed credit for VAT/GST paid on
all supplies received and has charged VAT/GST on all supplies of goods or services made while
ensuring that all transactions are accurately captured in the plant’s books according to local
accounting policies and the Lear Chart of Accounts.
VAT/GST return information is extracted from the ERP systems on a monthly basis. The
exceptions to this monthly process are Korea, where both quarterly and monthly returns are filed
and Japan and Australia, which have annual returns.
Plant controllers are required to prepare and complete the VAT/GST returns according internal
procedures maintained by the Lear Asia Indirect Tax & Customs team. Controllers must also
complete a reconciliation every month according to the LEAR VAT Reconciliation Package prior
to submitting the VAT/GST Return and uploading the package to the Indirect Tax shared portal
on the Finance drive.
For India the reconciliation takes place a) within the internal GST Portal and b) a reconciliation
between the ERP GST ledger accounts. The returns are uploaded into the GST Portal. This
process is directed by the India Indirect Tax Manager.
In each country in the region there are many different requirements for VAT/GST. Controllers are
required to refer to all country-specific guidelines issued by the Lear Asia Indirect Tax & Customs
team who have oversight for all VAT/GST compliance in the region as well as to accounting
treatments issued by the Asia Corporate Accounting team.

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B. Europe-Africa
Europe-Africa Indirect Tax contacts:

Isabel Hanot – Indirect Tax & Custom Director Europe-Africa – ihanot@lear.com
Stephan Heinsch – Indirect Tax Manager Europe-Africa – sheinsch@lear.com
There is a VAT in all countries in the region where Lear has operations.
The plant Controller is responsible for the administration of VAT for the plant’s activities. Each
plant accounts for VAT as if it was a separate legal entity. Where there is a consolidated entity
return, the Country Champion is responsible for making any consolidation adjustments, preparing
and filing the return, making the necessary payments and claiming any relevant VAT refunds.
As of Q3 2017, the responsibility for the preparation and the filing of the VAT returns is being
transitioned to the Brno SSC. The target is to complete this transition by the end of 2018. Under
this transition process, each Country Champion validates the process with SSC before the
transition takes place but monitors the process to ensure compliance is maintained. Any changes
to the VAT recordkeeping policies need to be approved by the Europe VAT manager before they
occur.
After the transition to the SSC is completed, the Country Champions will retain responsibility to
monitor the SSC process for their respective VAT returns and will retain final responsibility to
confirm the returns are complete, accurate and timely filed. Support will be provided by the
Europe Indirect Tax & Customs team.
The Europe-Africa Indirect Tax & Customs team has overall responsibility for VAT compliance for
the region. The team is responsible for advising the plant and entity finance teams of all VAT-
related requirements and changes.
C. South America
South America Indirect Tax contacts:

Guilherme Moreno – Indirect Tax Manager South America – gmoreno@lear.com
There are several indirect taxes in Brazil and Argentina. In Brazil, Lear is subjected to
PIS/COFINS (Federal Social Contributions – VAT type of tax), IPI (Excise Federal Tax) and ICMS
(State VAT). Lear is also responsible for withholding tax from suppliers. In Argentina, Lear is
subject to VAT (federal) and Ingressos Brutos tax (provincial).
The Tax team at the Joinville SSC is responsible for the calculation, accounting, preparation and
filing of the returns for all indirect taxes. The plant controller is responsible for providing the
required information timely to the SSC, such as all the data related to sales (invoices, amounts,
quantities), purchases (invoices, amounts, quantities), inventory losses and destruction (amounts
and quantities) and any other relevant information as requested by the SSC team.
Compliance with indirect tax requirements is the responsibility of the South America Indirect Tax
manager.

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D. Mexico- Honduras-Dominican Republic
Mexico-HN-DR Indirect Tax contacts:

Oscar Mata – Tax Director MX-HN-DR – omata@lear.com
Ernesto Hernandez – Tax Manager MX-HN-DR – ehernandezchavez@lear.com
There is a VAT (IVA) in Mexico. It applies at a rate of 16%. Importantly, VAT is managed on a
cash flow basis not an accrual basis.
All Lear plants in Mexico operate as maquiladoras under the IMMEX program. The IMMEX
program is a special tax/customs regime granted by the Mexican Government. The
manufacturing services performed by the plants are treated as export activities. As a result, most
purchases and sales are not subject to Mexican VAT (IVA) and IVA paid on certain purchases is
recovered by refund. The exception is domestic sales by Lear Corporation Mexico (LCM), which
are subject to the 16% IVA.
The Juarez SSC is responsible to record the accounting entries of the output VAT, although some
minor activities are managed by the plant finance teams. The SSC is also responsible for
accounting for all input VAT paid on purchases. The SSC also has the responsibility to reconcile
input and output VAT to determine the payable or receivable VAT position and the monthly VAT
account reconciliations. The SSC team utilizes software to support the VAT reconciliation
(MTAX/Warrior/MTAP/MTGL) taking into account all different accounting systems used at the
Lear Mexico plants.
Based on the monthly reconciliations performed by the SSC, a VAT analysis is provided to
Mexico’s Tax team to electronically file the monthly tax returns. Additional monthly informative
tax returns are required (DIOT which is an informative tax return of suppliers and imports).
Generally, LCM remits IVA every month. In most months, refunds are due for the three
manufacturing entities (CIMA, LMTO and LESM). The Mexico Tax team is responsible for
obtaining the refunds.
The Mexico Tax team is responsible for IVA compliance. The Mexico Tax team is responsible for
advising the SSC and plant finance teams of all IVA-related requirements and changes.
In both Honduras (HN) and the Dominican Republic (DR) Lear operates in a Free Trade Zone
(FTZ). The plants export all of their production and a 0% VAT (ISV for HN and ITBIS for DR) rate
applies on exports. All imports into the FTZ and are also tax exempt pursuant the FTZ regulations.
Local purchases from suppliers are tax exempt provided that the plant maintains a valid tax
exemption certificate.
In HN and the DR, the tax exemption certificate is valid for one year and must be renewed. If the
certificate is not in force, the plant is required to pay ISV/ITBIS and the tax will become an
unrecoverable expense since the tax is not recoverable after it is paid to the supplier. The plant
Controller is responsible for maintaining a valid exemption certificate and timely obtaining
renewals.
The plant Controller is also responsible to record the accounting entries for the tax, which is
generally zero since all revenues are exports and all purchases are ISV exempt, provided that
the plant maintains a valid tax exemption certificate.

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In both HN and countries there is an obligation to file informative tax returns on a monthly basis.
The plant Controller is responsible for preparing and timely filing these monthly returns.
The plant Controller is responsible for compliance with the ISV/ITBIS rules and regulations.
Assistance is provided by the Mexico Tax team and local tax/accounting firms.
E. U.S. & Canada
U.S. & Canada Indirect Tax contacts:

Erica Brown – Indirect Tax Manager US-Canada – ebrown@lear.com
There are state sales and use taxes in the US. Lear’s sales and purchases of production materials
(inventory), equipment and supplies are generally tax exempt. Generally, only purchases of non-
production materials not related to the manufacturing process, such as office supplies, are
taxable.
As of Q3 2017, the compliance responsibility for sales and use taxes is being transitioned from
the plants to the Corporate Tax team in Southfield. This transition will be completed by the end
of 2017. Once completed, the plant Controller will only be required to respond to information
requests from the Tax team on an as-needed basis.
In Canada, the plant Controller is responsible for the preparation and filing of HST returns and tax
compliance. The Controller is supported by the Southfield Tax team.

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12. Restructuring – Authoritative Guidance
I. Restructuring – Authoritative Guidance
A. Restructuring Costs
Employee termination benefits

• One-time termination benefits
o Accounting Standards Codification (“ASC”) No. 420, “Accounting for Costs
Associated with Exit or Disposal Activities”
• Contractual / statutory termination benefits
o ASC No. 715, “Employers’ Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits”
▪ Contractual benefits payable only if a specified event occurs.
o ASC No. 712, “Employers’ Accounting for Postemployment Benefits”
▪ Postemployment benefits (i.e., severance, healthcare, disability, life
insurance) payable per company policy / statutory requirements / other
contractual agreements
Special termination benefits (i.e., voluntary/individually negotiated)

• ASC No. 715
Facility consolidation costs

• ASC No. 360, “Accounting for the Impairment or Disposal of Long-Lived Assets”
- Fixed asset impairment charges
Contract termination costs

• ASC No. 420 / other authoritative guidance
Other associated costs

• ASC No. 420 / other authoritative guidance
B. Employee Termination Benefits
Accounting for employee termination benefits depends on whether the benefits are due to
a one-time or an ongoing benefit arrangement.
One-time
• One-time benefit arrangements are established by a plan of termination
• Applies to a specified termination event or a specified future period
On-going
• Ongoing benefit arrangements may be established by statutory regulations, collective
bargaining agreements or past company practice.
• Consider whether additional termination benefits offered in conjunction with a
restructuring activity are an enhancement to an ongoing benefit arrangement or a one-
time benefit arrangement.

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Note: Liabilities for salaried and hourly employee termination benefits may be
accounted for differently even if the liabilities were incurred as a result of the
same restructuring action.
Examples –
As part of a current restructuring action, the Company negotiates additional termination
benefits in excess of those required by statutory law or the current collective bargaining
agreement. These benefits apply to:
o The current termination plan only –
▪ Account for additional benefits as a one-time benefit arrangement
o All future involuntary terminations –
▪ Account for additional benefits as an ongoing benefit arrangement
o All future involuntary terminations within the next two years –
▪ Account for additional benefits as a one-time benefit arrangement
o Future involuntary terminations in the event of a plant closing –
▪ Account for additional benefits at plant closing as a one-time benefit
arrangement
One-Time Benefit Arrangements as of the Communication Date:

• Management, having the proper authority, commits to a plan of termination (customer,
government and/or union agreement may be needed)
• Plan identifies the # of employees to be terminated, their job classifications and
locations and the expected completion date
• Plan establishes the terms of the benefit arrangement, such that employees are able
to determine their benefits in the event of termination
• Significant changes to the plan are unlikely
If employees are not required to render service until termination, a liability for termination
benefits is recognized at the communication date.
If employees are required to render service until termination, a liability for termination
benefits is recognized ratably from the communication date until the termination date.
(Consider statutory minimum retention period.)
Ongoing Benefit Arrangements per Contractual / Statutory / Company Policy:

Liability for termination benefits generally recognized when it is probable that a liability has
been incurred and the amount can be reasonably estimated.
• Probable > 70% likelihood of occurrence
o Management has authority, intent and ability to complete the action.
o If applicable, the action has also been “accepted” by
▪ the customer;
▪ regulatory authorities; and/or
▪ the collective bargaining unit.
o Consider whether action is initiated by company management or the customer.
Example –
A customer initiated action could result in a plant closure if there are no
alternative uses for the facility. In this instance, regulatory and/or union
“acceptance” would not be necessary to conclude that the action is
probable.
o Consider all publicly available information.

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Note – A plan that provides employee termination benefits for virtually all terminations is
a pension plan and has specific accounting-treatment requirements.
Employee Termination Benefits - Other

• Special termination benefits (i.e., voluntary / individually negotiated)
o Liability for special termination benefits is recognized when the employee
accepts the offer and the amount can be reasonably estimated.
• Consultation with legal counsel may be required to identify and determine contractual
obligations.
• Ensure restructuring estimates include the cost of any benefit continuation promises.
o Accounting guidance under ASC No. 712 (see previous slides on accounting
for termination benefits due to contractual / statutory / company policy).
o Consider post-employment benefits such as salary continuation, supplemental
unemployment benefits, job training and counseling and continuation of
healthcare benefits.
C. Other Restructuring Costs
Facility Consolidation Costs

• Initiation of restructuring action (i.e., action probable) triggers impairment test and
recognition of impairment charge
• Impairment – General Guidance
o Assets to be held and used
▪ Assets are impaired if the carrying amount of the asset exceeds the
sum of the undiscounted cash flows expected to result from the use
and disposition of the asset
▪ An impairment loss is measured as the amount by which the carrying
amount of the asset exceeds the sum of the discounted cash flows
expected to result from the use and disposition of the asset
o Assets to be disposed of by sale
▪ Recorded at the lower of carrying amount or fair value less costs
to sell
▪
Costs to sell include broker commissions, legal and title transfer fees
and exclude costs to maintain the asset during the “for sale” period
o Consider change in depreciation estimates (i.e., accelerated depreciation)
o Consider value of real estate, as well as M&E
Contract Termination Costs - General

• Liability for costs to terminate a contract (including an operating lease) before the
end of its term are recognized when the contract is terminated in accordance with its
terms
• Liability for costs that will continue to be incurred under a contract (including an
operating lease) for its remaining term without economic benefit are recognized at
the cease-use date
o In the case of an operating lease, the liability at the cease-use date is
determined as the present value of the remaining lease payments, less the
estimated sublease payments that could be reasonably obtained for the
property (actual sub-lease agreement does not need to be entered into).

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• Pension and Other Post-Employment Benefits (OPEB)

o Curtailment Charges
o Settlement / Wind-up Charges
Restructuring Related & Other Costs

• Liability for other costs associated with an exit or disposal activity are recognized at
the time the liability is incurred.
o Costs include:
▪ Employee relocation costs
▪ Equipment relocation costs
▪ Incremental employee training costs (i.e., third-party training costs and
increased payroll costs) – Use of this category will be rare.
▪ Temporary warehouse costs
• Costs associated with incremental operating inefficiencies as a result of restructuring

activities are expensed as incurred.
o Costs include:
▪ Plant rearrangement costs
▪ Costs associated with bank builds
▪ Start up and launch costs
D. Restructuring Reporting Requirements
Standard Template
• The standard template must be completed for each restructuring action at quarter-end
and forecast periods (templates are currently excel-based and are in process of being
transitioned to a Hyperion webform).
• Templates are consolidated and utilized to complete SEC required disclosures.
o Costs incurred, cash/non-cash utilization, restructuring accrual rollforward.
o MD&A disclosures vs. financial statement disclosures
• Template Reporting must include (if applicable):
o Headcount impacted by action
o Restructuring Charges (Section 1)
▪ Employee Termination – Severance, health insurance/benefits
continuation, supplemental unemployment benefits, job training and
counseling (salary vs. hourly)
▪ Facility Consolidation – Asset impairment charges
▪ Contract termination costs – Termination of lease, supply or other
agreements, repayment of government grants, pension and OPEB
curtailment/settlement charges
o Restructuring Related / Periods Costs (Section 2)
▪ Equipment costs – Relocation of equipment from one location to
another (as part of a restructuring action)
▪ Employee costs – Relocation costs; training (rare)
▪ Asset disposition – gain/loss on disposal of assets
▪ Other

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o Other Costs / Manufacturing Inefficiencies (Section 3)

▪ Bank builds
▪ Start-up and launch costs – costs incurred 90 days after start-up
▪ Other
o Cost Savings
▪ Saving net of associated ongoing costs (i.e., labor rate arbitrage)
o Cash Flow Impact (Pretax)
Approvals
• New actions should be submitted as soon as the action is known. Please do not wait
until Quarter End to announce a new action.
• All new actions must be approved by the Division President and VP of Finance.
• All new actions must be reviewed and signed by the Vice President of BP&A and by
the Corporate Chief Financial Officer.
• Commitments & Spending should not occur on any new action until approval has been
obtained.
• To communicate new actions, the “Summary Sheet” must be attached which includes
a complete description of the action and any other pertinent facts supporting the
business case.
Controller Reporting Responsibility

1. Any restructuring action must be approved prior to initiation.
2. All actions must be recorded in the “Statistical Account” in Hyperion for each location.
Cost impacts must be separated between labor, overhead or SG&A accounts.
3. All restructuring actions must be reported via the Restructuring Template. Templates
must tie to the respective Hyperion statistical account.
a. Actuals: Templates are required to be submitted to the Global FP&A team each
quarter-end. See reporting calendar for timing. Changes to a template’s prior-
quarter reported value are not permitted. Corrections/reclassifications should be
made in the next quarter on an ‘action-to-date’ basis.
b. Forecasts: Templates are required to be submitted for each forecast that is
prepared. See reporting calendar for timing.
c. Restructuring actions are reviewed prior to each quarter-end via the template with
the Corporate Controller’s Office and the Global FP&A team.
4. Supporting schedules within the template (e.g., severance, asset impairment, savings)
must be completed. Totals must agree to the “Tracking Sheet” tab.
5. A reconciliation of the restructuring templates and statistical accounts should be
provided for actions requiring multiple templates or that are recorded through multiple
Hyperion entities.
6. Locations are asked to pay particular attention to the amounts that they record in the
“Cash Expenditure” and the “Cost Savings” categories since these line items are
evaluated in detail by Lear’s Auditors; E&Y.
7. The YOY “Cost Savings” amount shown on the templates should agree to the YOY
restructuring cost savings in the provided in the division forecast packages.
8. Questions related to completion of the Restructuring Template should be directed to
the Global Financial Planning & Analysis team.

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13. PAR Process - ePAR System
*Please refer to the LEAP Manual for a full explanation of guidelines and requirements. *
I. PAR Process / ePAR System
A. Overview
• The PAR document is the method used to communicate the financials of a business
case to Lear’s senior management. All capital expenditures must be approved via the
PAR as defined in the LEAP manual.
• PARs must be prepared for the acquisition of all fixed asset purchases > USD$10,000
regardless of whether the asset will be purchased or leased. The business case
should be developed as a purchase with the decision to lease evaluated through a
Lease-Buy analysis.
• The amount of the PAR should be stated in USD and reflect the total spend including
Tooling and ED&D (net of recovery) in addition to the amount to be capitalized.
• All assumptions used to create the PAR need to be clearly and accurately reflected in
the financial calculations.
• The time period covered by the PAR is usually five years. If the life of the project is
expected to be greater than or less than 5 years, use the time period necessary. In
preparing a PAR, each year within a five-year time period is defined as a full twelve-
month period rather than a model year or a calendar year (e.g., a program starting
production in May 2017 would define year 1 as May 2017 through April 2018).
• All PAR’s must be submitted for approval and tracking via the ePAR System
o The ePAR system will automatically assign a PAR #
o The ePAR system will automatically create an Approval Workflow
o Additional instructions for using the system can be found at the ePAR website
under the link “Policies and Documents” & “Instructions”.
• Effective management, monitoring, and tracking of the spending process is critical to
Lear’s financial goals and objectives.
• A revised (supplemental) PAR is to be submitted for approval when it becomes evident
that a previously approved project will change significantly in scope or cost. Overruns
of more than 10% or $100,000, whichever is greater, require a supplemental PAR to
be submitted for approval; or if the value of the revised PAR results in a change in the
required authorization level, regardless of the amount of the overrun.
B. PAR Numbering (via ePAR System)
PAR numbering system follows a systematic format as shown below:
• SSD-17-G9-001
o SSD Seating Systems Division
o 17 Year (e.g., 2017)
o G9 Hyperion Code (e.g., Saltillo)
o 001 Serialization of PARs written during the year (starting at 001)

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C. PAR Type
PAR types are categorized as follows and full description can be found in the LEAP manual:
• New Program
• Replacement Program
• Increased Capacity
• Engineering Facilities
• Information Systems
• Maintenance
• Cost Reduction
• Other
D. Executive Summary
A well-prepared executive summary should address the following areas:

• What is being purchased?
• What vehicle program(s) are involved (if any)?
• Which locations are involved?
• Why should Lear undertake the project?
• Is the PAR included in the current year budget? If not, why?
• Is the PAR included in the current forecast? If not, why?
• What are the volume assumptions?
• What is the program timing?
• How will Tooling and E&D Costs be recovered?
• Will the approval of this PAR create the need for future PARs?
E. Financial Evaluation Criteria
PARs for New Programs, Increased Capacity, and Cost Reduction need to be justified
financially. The following financial evaluation criteria help determine if the expenditures make
financial sense.
These amounts have all been calculated based on information included in the Cash Flow tab,
which is created from the Income Statement tab, which is derived from the PAR Assumptions
tab. Based on this fact, it is very important for the controller to ensure the accuracy of the
PAR Assumptions tab.
• Internal Rate of Return (“IRR”) – the interest rate at which the project’s future after-
tax cash flows must be discounted in order to be equal to the requested investment
amount. In other words, it is the interest rate at which the projects Net Present Value
(defined below) is equal to zero. A higher IRR, particularly when the IRR exceeds
Lear’s region-specific weighted average cost of capital, is viewed as a positive
indication.
• Net Present Value (“NPV”) – the cumulative cash flow of the project, discounted
using the region-specific weighted average cost of capital, and taking into account the
project investment spending and future cash flows. This statistic is meaningful
because it indicates the relative magnitude of cash flow benefit to Lear. As a general
rule, an NPV must be positive for the project to be economically justified.

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• Payback – this calculation indicates the number of years required for the projects
cumulative cash flow to equal zero. Two variations of this statistic are presented in the
PAR form (Payback Period from initial spend, and Payback Period from year zero),
which are meaningful for programs with substantial spending (such as tooling or
ED&D) prior to Job 1. A shorter Payback period is viewed as a positive indication.
In calculating the investment statistics, it is necessary to add the projects working capital
requirements in the early years of the project, and to liquidate those working capital
requirements at the conclusion of the five-year PAR analysis time frame. At the program
launch, this generally takes the form of a use of funds for the working capital investment in
accounts receivable and inventory, offset by the source of funds resulting from accounts
payable. These amounts are all reversed (zeroed-out) in the final year of the project.
Additional descriptive details and explanations on the follow topics can be found in the LEAP
Manual
• Investment / Depreciation Worksheet
• PAR Assumptions
• Investment Summary
o Income Statement
o Cash Flow
▪ Working Capital Calculations
▪ Accounts Receivable - DSO
▪ Accounts Payable - DMO
▪ Inventory – ATR
o Net earnings after tax
▪ Used to calculate cash flow and IRR
▪ Tax rate to be used should be the national statutory income tax rate of
the entity’s country.
▪ Special tax abatements must be noted in the PAR assumptions
F. Joint Venture Capital Requests
Joint venture capital spending must be reviewed and approved using both the APR and PAR
processes. The same approval process applies for capital, tooling and Engineering &
Development (“ED&D”) spending.
G. Lease vs. Buy Analysis Worksheet
The purpose of preparing the PAR is to obtain approval to make an investment, not approval
of how to finance the investment. The Lease-vs.-Buy Analysis portion of the PAR provides an
indication of how the investment may ultimately be financed. Based on (1) the best overall
purchase quote obtained from Purchasing to complete the PAR and (2) the
indicative/estimated lease information obtained from Treasury/Corporate IT/Purchasing, the
Lease vs. Buy Analysis gives a general indication of whether it is more cost effective to lease
or buy the asset. The final analysis of how to finance the investment will be prepared by
Treasury based on final committed lease quotes for all approved PARs that show leasing as
a possibility. See Section 71.2 in the LEAP manual for further guidance.

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H. Approval Authority Levels
Click on the link below for the PAR Approval Process Delegation Matrix:
Section 71.1 Project Appropriation Manual
I. Required Supplemental Information
In addition to correctly completing the PAR, the following is a list of documents that must be
maintained with each PAR:
• A summary of purchase quotations received on major expenditures.
o Corporate policy is to obtain at least three purchase quotations for all capital
expenditures, when practical. In cases where less than three purchase quotes
are obtained, please indicate the reason on the summary of quotations.
• For PARs that involve changes to the factory floor, please include a factory
floor layout before and after the pro`posed changes.
• Include a copy of the applicable Advance Program Review (APR). Also, please
provide a schedule reconciling any material variances between the two documents.
• Provide a timeline as to the timing of significant events related to the project, including
(but not limited to) the initial cash outlay, start of production and tooling recovery
• Include a work plan detailing the courses of action to be undertaken in the event of
any unforeseen events (i.e., significant risks or opportunities, such as project
cancellation).
•
J. Additional (Best Practice) Information
• The PAR checklist is a document the controller can use to ensure that all significant
factors that can have an impact on this PAR have been considered:
PAR Review Checklist

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14. Inventory Control
At Lear, one of the most difficult general ledger accounts to control is inventory. Ensuring the
accuracy and performing proper analysis of this account is one of the most critical functions of a
controller. The controller needs to work with the other functional areas (materials, quality,
engineering, and IT) to ensure that all financial and operational controls are operating effectively.
I. Inventory Control
The key attributes of a strong inventory management process are as follows:

• Physical Controls - Controls over the receiving, movement, storage, and shipping of
materials
• Transaction Controls - Controls to ensure proper authorization and processing of
inventory transactions (Access)
• Bills of Material (“BOM”) & Change Controls - Controls to ensure that:
o Specifications and BOM are accurate
o Changes to the BOM are implemented timely and costed accurately
• System Integrity - Controls to ensure that inventory information in the computer
system accurately matches the physical inventory on a near – real time basis (account
reconciliations)
• Cycle Counting Process - Ongoing controls to correct inventory balances includes
correcting underlying problems (Root Cause Analysis)
• Inventory Analysis - Controls that ensure proper inventory levels are maintained
(Dollar (or amount in functional currency), Inventory Turns, E&O Inventory Analysis)
A. Inventory – Checklist
Attached is a checklist of key inventory financial and operational internal controls. This list
was created based on the internal audit work program. As a controller, you need to work with
other functional areas to ensure that these controls are operating effectively. By utilizing this
checklist, and working with the applicable functional areas responsible for completing each
applicable internal control, your financial and operational inventory risks will be greatly
reduced.
Inventory Checklist
B. Physical Inventory – Checklist
Although the physical count is the responsibility of the Materials Manager at the plant, the
following checklist can be used by the Controller to ensure the accuracy of the physical count.
The attached link will take you to the best practice physical inventory checklist format:
Physical Inventory Checklist

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C. Physical Inventory – Root Cause Analysis
After performing the physical inventory and calculating the book to physical adjustment
amount, the amount should be analyzed and the cause determined. These causes should
then be quantified and categorized according to the Detailed Gain (Loss) Analysis. The
attached link provides an overview and real world example of how a root cause analysis
should be performed:
Inventory Root Cause Analysis
D. Lower of Cost or Market (“LCM”) – Inventory Analysis
Overview
• Perpetual Inventory is valued at standard cost.
• Financial statement Inventory needs to be valued at the lower of the standard cost or
current market (sales price).
• If significant price reductions occur below set standards, actual material cost should
be used for those specific parts.
Analysis Requirements
• Review sales and cost of sales reports to identify negative margin parts.
• Significant raw material increases would require use of current material costs in
calculation and not standard cost.
• Complete LCM analysis for each part with negative margin.
• Analysis result determines LCM reserve requirement.
• Future analysis updated annually at a minimum.
• If a significant impact has been made to sales (reduced pricing) or material costs
(lower material costs) LCM calculation needs to be updated and recorded.
LCM Analysis Example

• Attached is an example of a LCM inventory analysis:
Lower of Cost or Market - Example

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15. White Papers
Questions or concerns related to the white paper process, should be directed to the corporate controller’s
office.
I. White Papers
A white paper is required for all judgmental accruals > $500K and should document the
facts, circumstances and accounting conclusions related to the judgmental accrual. In
addition, controllers should consider preparing a white paper for any accounting issue >
$500K, as well as for any issue where the controller has a question or concern related to
the proper accounting under U.S. GAAP.
All white papers should be forwarded on a quarterly basis for review by the division finance
director and manager. White papers > $1M will be forwarded by the division on a quarterly
basis for review by the corporate controller’s office.
White papers should include the following information:

• Date that the white paper was prepared
• Reserve type and description (including customer or supplier, if applicable)
• Date that the reserve was first established
• Current reserve balance
• Prepared by
• Description of the issue
• Updates with respect to the issue, if applicable
• Accounting conclusion (including calculation)
Examples of white papers are attached below:
White Paper - Example 1 White Paper - Example 2

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16. Engineering Change Control Process
This section includes an overview of the ECN process including the role of the plant controller.
I. Engineering Change Notices (ECNs)
Product Engineering Changes

Production engineering change notices (ECNs) need to be controlled at the plant to ensure the
accuracy of the bill of material for each finished good inventory part number. It is very important
for the controller to work with the other functional departments (i.e., engineering, materials) at
each plant location in order to ensure the accuracy of the manufacturing bill of material.
Purchasing, Manufacturing, Sales, Suppliers and Customers are all dependent on the information
integrity of the bill of material information. Every change to the bill of material triggers activities
downstream.
Engineering changes can also have an impact on sales and/or cost of sales. It is very important
for the controller to ensure these aspects are completely understood as they represent an
opportunity for the plant to improve or deteriorate their current operating margins and may have
an impact on the plant’s forecast.
Many individuals/groups need to be solicited for input in order to process a product engineering
change. The Sales Department, Product Engineering, Tool Engineering, and the Plant may all
have key inputs, which need to be forwarded to the cost estimating group currently located either
at the division or at the plant level.
Below is an overview of the engineering change process including the role of the controller.
The Bill of Material

A bill of material (“BOM”) is a listing of parts (kits, assemblies and components) used to build a
product. There are generally two types of bill of material used at Lear Corporation.
The first is the Engineering BOM which is maintained in the Product Lifecycle Management (PLM)
system. This BOM organizes items relative to their product design or functional hierarchy and
reflects the product design intent, as manifested by CAD representations. The Engineering BOM
must include all parts specified by the product design engineer(s). This may include such items
as lubricants or adhesive, when appropriate.
NOTE: It is the responsibility of the Engineer(s) assigned to a program code to create and
manage the BOM in PLM for all parts associated with that program code.
The second type of BOM is the Manufacturing BOM which is maintained at the plant. The
Manufacturing BOM reflects the assembly process and usually contains some items not found on
the Eng. BOM or CAD models but required in production. Examples include work flow diagrams,
assembly and test fixtures, assembly tools or aids (lubricants). The Manufacturing BOM also
requires data such as color, make or buy codes, and supplier information.
Product Lifecycle Management (PLM)

PLM is a relational database that utilizes a “roles-based” system set up by individual job
responsibilities and program codes. This system, working in conjunction with the AS400 system
is how Lear currently controls the RFQ (Request for Quote)/ECN process. The three primary
PLM user groups are Engineering, Design and Consumers (Consumers include

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Platform/Program Management, Account Managers / Sales, Cost Estimators, Purchasing, Plant

Representatives and Quality).
The benefits of using the PLM system include the ability to process ECNs faster with better
documentation while providing tools to improve management of product design and information.
It also is the establishment of a common business practice used throughout Lear resulting in a
single point of access to product data (engineering BOM, CAD Data and documents). Finally,
PLM increases design knowledge sharing and product reuse.
PLM is a “roles-based” system and each user is assigned a certain role based on job function and
responsibilities. Roles are assigned in the system by program code and the basic role categories
are design, engineering and other. Examples of some PLM roles are listed below:
1. Individuals with the Design Authority role can (1) quote number of hours and resources
required to complete Design Request (“DR”), (2) provide an estimated completion date,
(3) distribute assignments to appropriate Design Leaders, (4) manage the overall DR
activity and (5) can request DR changes and cancellation. The typical individual with this
access type are CAD Design Supervisors.
2. Individuals with the Consumer role can view data or information (e.g., Parts, BOM, RFQ,
ECN) and run reports. Typical individuals with this type of access include Account
Managers / Sales, Cost Estimators, Plant Representatives, Purchasing and
Platform/Program Management
3. Individuals with the Color Release Approver role can approve quoting of color parts via
a Color RFQ or Color Release ECN. Typical users (only one per program code) are
Division Platform/Program managers.
4. Individuals with the ECN without RFQ Approver role can authorize ECNs created without
an RFQ, enter quote due dates and verify volumes (previous AS400 Level 2). Typical
users (only one per program code) are Division Account Manager/Sales.
5. Individuals with the Plant Part Number role can add Plant Part Number information that
is used as a cross-reference.
6. Individuals with the Sales role can create and maintain/view (1) end-item data for specific
program codes (pricing, take rates, volumes), (2) sales communication requests (SCR’s)
(engineering investigations), (3) quote screens (component and end-item cost sheets) and
(4) sales order screens (price roll ups for multiple quotes and P.O. recovery).
Processing ECNs and RFQs

Engineering changes may or may not begin with a Request for Quote (RFQ). The RFQ is created
in PLM and used to obtain a quote for a proposed change to any part. It is important to note that
an RFQ may or may not become an ECN and can be deleted up until the point it becomes an
ECN. An ECN without an RFQ is created in the system for all required authorized changes to a
part and cannot be deleted in the system.
Additional ECN Basic Information

 The ECN provides the authority for releasing and changing documents and the physical
items relating to the ECN must conform to their requirements.
 Once a change to a part is authorized, an ECN is required to process the change (make
it official).
 The ECN is created in PLM and passed to the AS400 system for completion.
 Only users with an Engineer Role can create an ECN that will result in the release of new
parts or a BOM/Part Change.

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Each RFQ or ECN without an RFQ created in PLM interfaces with the Engineering Change
Control System (ECCS) in the AS400 system. After the general information has been completed,
the engineer would have created an RFQ at Level -2.
After the RFQ or ECN without an RFQ has been created, the engineer must create or modify the
affected parts and product structure (as necessary) and attach the affected part(s) to the
applicable RFQ/ECN, complete a CAD Markup if the part will physically be changing and attach
any Reference Documents or Files (if applicable). All of this information is maintained in the PLM
system.
Once the RFQ/ECN is created, the Engineer submits it and the system validates the RFQ for
accuracy. The system finds other parts affected by this RFQ and has built in edit checks to ensure
that each RFQ includes all of the required information.
Once submitted, the RFQ/ECN Approver (typically an Engineering Manager) must validate the
RFQ/ECN (if one is assigned to the program). If the RFQ/ECN is rejected it is returned to the
applicable engineer to make any necessary corrections and resubmitted.
The ECN without RFQ Approver must:

1. ECNs - validate that the ECN can proceed without an RFQ
2. RFQs - enter the Quote Due Date and check the Volumes calculated based on the
program Take Rate information entered by the Sales team
Once the RFQ/ECN has been submitted and approved to the lifecycle and the Quote Due Date
and Volumes have been updated/verified (for RFQs), the RFQ/ECN would be at Level -1 in PLM
and the AS400 system.
It should be noted that sometimes there is more than one part or more than one plant affected by
an RFQ/ECN. The PLM system creates additional RFQs/ECNs if more than one plant or more
than one part/program is affected by the RFQ/ECN. In these cases, PLM copies the RFQ/ECN
and parts to the Engineering Change Control System (ECCS) on the AS400 at Level 1 and
validates the data.
If the data is not valid, the Engineer or PLM Administrator corrects any noted issues. If the data
is valid, the AS400 system creates the RFQ/ECN and Item Master in the AS400 system and
forwards the RFQ/ECN to Cost Estimating at Level 3.
The Cost Estimator (release analyst, program manager, sales, plant person or an individual in the
cost estimating group) is responsible to perform the final audit of the RFQ/ECN information. This
individual will be responsible to verify the correct parts and correct part volumes are included
on the quote sheet. In addition, this individual will estimate the internal manufacturing part
cost.
After the information is audited and approved it reaches Level 4. Purchasing then becomes
responsible to obtain supplier quotes for cost and timing. The supplier is awarded at Level 4 and
all information is forwarded to the Cost Estimator.
The Cost Estimator is responsible to review cost and timing by the division and enters any end
item quotes for parts that are not purchased. In addition, all costs obtained from Levels 3 & 4 are
consolidated for a final cost/price determination in Level 5 and forward to the Sales group.

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During Level 6, the Sales group (working in conjunction with the customer) makes the
determination whether to proceed or cancel the RFQ. If proceeding with an RFQ, an ECN is
automatically generated in PLM and cannot be canceled. If an RFQ is cancelled during Levels
3-6 it appears in the system as Level 0.
During Level 6, the Sales group authorizes cost and timing for all ECNs. In addition, if purchased
part tooling dollars exist, certain information relating to tooling must also be entered in the system
and a Sales Authorization (“SA”) number must be authorized.
ECNs are then forwarded to Purchasing at Level 7. Purchasing is responsible for creating the
applicable purchase requisitions.
Finally, the ECN is in the production stage at Level 8.
As reference, please consult the GPM 4.3 on the following link:

GPM 4.3 Engineering Change Control
Controller’s Role in the RFQ/ECN Process

The controller should ensure the following steps are included in the control environment to ensure
the proper processing of all ECNs:
1. Each ECN should be controlled numerically and an ECN change log should be maintained
by the plant.
2. All engineering change notices should be properly reviewed and approved.
3. Regular (weekly) meetings to discuss the status of ECNs should be held with operations,
materials, finance, purchasing and other applicable areas.
a. Ensure changes are being processed in a timely manner and find fixes for
roadblocks
b. Ensure BOMs have been updated accurately and on a timely basis
4. Understand if there will be any obsolete inventory as a result of the ECN, quantify loss
and determine who will be responsible.
5. Be cognizant of all changes made and determine the impact of the change on Operating
Income (“OI”), tooling and capital expenditures (changes in forecast).
6. Monitor the ECNs to ensure that the original anticipated sales price and cost assumptions
are equivalent to experienced results.

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17. Non-Production Purchasing (Maintenance, Repairs & Operating

Supplies (“MRO”), Tooling & Capital)
Scope/Purpose
This procedure defines the requirements to manage the purchase of non-production goods
(indirect) or services. Please refer to Global Procedure 6.12 and the attachments for the full
procedure.
I. Non-Production Purchasing – Responsibilities and Definitions
Responsibility
▪ Controller – monitors the purchasing process to ensure Lear Accounting Practices (LEAP
manual) and local policies are adhered to and that fiscal resources are adequately applied
and controlled. In some cases, (e.g., plant level) the Controller is also responsible for
reviewing and approving purchase requisitions for goods or services to be purchased.
▪ Corporate Non-Production Purchasing – ensure that suppliers requested to be added to
the Shared Service database are approved sources. This group also reviews all requests
for new suppliers to determine if the product/service can be provided by an existing
supplier, and manages the Non-Production supplier contracts and e-Procurement system.
▪ Plant Manager – (if purchase is at the plant level) ensures Lear policy and procedure is
enforced and that all parties are faithfully completing their respective responsibilities for
reviewing and approving purchase requisitions for goods or services and ensures that a
PAR is generated (if required) and approved prior to items being purchased.
▪ Requestor - ensures that all required documentation is completed to process a purchase
request and through the proper mechanism (e-Procurement, P-Card or B-Req), including
the request to add a non-production supplier if they are not available within central/local
systems.
Definitions
▪ B-Requisition – Represents the initial stages of generating a Purchase Order – this may
be via an electronic or manual process. Once a B-Requisition (B-Req)
is approved typically a Purchase Order is generated.
▪ CPS – Central Payable System which provides wire payment transfers to
certain suppliers once authorized for payment
▪ Capital – Money spent to build or acquire new plant and equipment, improve
facilities, or to maintain and/or replace plant equipment if the
maintenance extends the life of the original asset
▪ e-Procurement – A web-based, automated procurement system for the purchase of
indirect or MRO goods or services. The e-Procurement system is a
web-based system to manage RFQs, REQs and POs. This system
also houses analytical data on non-production purchases for reporting
purposes.
▪ MRO – Maintenance, Repairs and Operating Supplies (e.g., office supplies,
spare parts for capital equipment, plant safety supplies)
▪ Non-Production – Any indirect good or service that is not found on finished goods shipped
to a Lear customer (e.g., tooling, capital equipment, leases)
▪ P-Card – A plastic credit card that can be used to purchase approved business-
related products and services that are unavailable through the e-

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Procurement system, refer to: Lear Corporate PCard for additional

information, as well as Section 17.1 of the LEAP manual
▪ PAR – Project Authorization Request – required for any non-production
expenditure over $5,000 – refer to Section 71.1 of the LEAP manual for
additional direction and information
▪ Freeform Request – A process within the e-Procurement system that allows an employee
to make a purchase of an item not normally found within the various
catalogs, but still purchased from an e-Procurement supplier.
Availability and information about the item is generally obtained from
the supplier through a quote. These purchases are designed to be one-
time purchases.

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II. Non-Production Purchasing – Procedures
Procedure
The intent of this procedure is to outline the steps/process to be followed when purchasing a non-
production good or service and is intended to be the minimum baseline requirements for
purchasing non-production goods or services. Local (e.g., plant level) procedures must at least
adhere to the minimum requirements identified in the procedure. There are many more steps
required from an accounting/payable perspective that are not addressed in this procedure and
each location will need to develop its own procedure to ensure receipt/reconciliation of the good
or service is completed according to the requirements in the LEAP manual and correct payment
is made to the supplier.
There are many types of non-production goods and services from local lawn cutting to purchasing
equipment for a facility. The type/cost of the item(s) to be purchased/leased will determine the
level of approval required and how the item is to be purchased. Outlined below are the steps
necessary to proceed with the acquisition of a non-production good or service.
1. Project Authorization Request – PAR (if required)

It is necessary to obtain the proper approvals for specific types of purchases such as capital
expenditures, maintenance work on existing assets which add value to the asset or extend the
life of the asset, cost of changing the manufacturing process or engineering facilities. In general,
asset purchases over $5,000 will require some type of PAR approval. Refer to the LEAP manual
Section 71.1 for further information on PAR’s and the process to be followed.
2. Vendor Add and Catalog Items

If a vendor is not in the e-Procurement system, the supplier will need to be added and items
should be added as a catalog item(s) where possible. To request that a supplier be added to the
system, the Non-Production Supplier request form, W-9 or W-8 (as applicable), EFT and banking
verification must be completed and submitted to Non-Production Purchasing for review and
approval. Once approved, Shared Services will add the supplier to the Lear Vendor Management
system of record. The vendor information will then be sent via integration to the e-Procurement
system, if available. Non-Production Purchasing must lead any request for a catalog set-up, price
agreement and all negotiations. To add an item as a catalog item, a tender analysis must be
performed and a contract is recommended for annual spend >$100,000.
3. e-Procurement Purchase
Assuming PAR approval has been obtained (if required) a purchase request must go through the
e-Procurement system, if available, or local PO system until the e-Procurement system is
available. Lear’s best interest is served through leveraged purchases made through this system.
• If an item is not available on the e-Procurement system, but can be supplied by an e-
Procurement supplier, then the requester needs to process a Freeform Request through
the e-Procurement system which is a mechanism allowing the supplier to quote on the
requested item(s). The item(s) will then go out for a 3-quote bid.
• When a purchase requisition is created within the system, the automated approval routing
begins. These purchases are managed through a delegation of authority requiring various
levels of approval depending upon how the individual facility has been structured within
the system. Approval routings are tied to the Commodity, and include Finance, Plant
Manager and divisional approvals as required according to global and local DOAs. This
authority is established in the e-Procurement system and can be modified by the e-
Procurement Admin upon a valid request.

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• Once the requisition is approved, the e-Procurement system converts the requisition into
an approved Purchase Order, assigns a Purchase Order Number, places the approved
order with the e-Procurement supplier, and notifies the requestor that the approval process
has been completed and the item has been ordered electronically through the supplier.
• If the e-Procurement system is not available, the requisition must follow a local a process
according to the agreed global and local DOAs.
4. Tooling and Capital Equipment

• Once a PAR is approved, a requisition may be issued for a Purchase Order. If the
requisition is electronic, various levels of approval will be required depending upon the
dollar value of the purchase and the program affected. This electronic approval is tied to
a budget and work order maintained by Finance and ensures spending is managed.
• Three quotes are required prior to source selection. These quotes are to be maintained
per the Records Management Policy (Link: Lear Records Management) and referenced
on all approval documents. If the requisition is electronic, these quotes can be uploaded
and stored in the system as an internal attachment only viewable by Lear employees. If
the supplier selected is not the lowest cost alternative, an explanation of selection is
required.
• In some cases, an agreement may need to be signed between Lear and the Supplier.
Only Non-Production Purchasing may sign agreements with a supplier following the ePAD
procedure or the GPM 3.1 Global Customer and Corporate Contracting Policy.
5. Purchase Order Generation

• Once approved, a Purchase Order will be generated either electronically or manually and
is the only commitment to the supplier along with any applicable contract.
• All purchases of goods and services require an approved requisition PRIOR to the
purchase.
• Additionally, once a Purchase Order is approved, material changes to goods or service
require a revision (amendment) to the Purchase Order, with approvals of the revision
identical to the approval of the original Purchase Order.
• The Purchase Order and/or contract is the only document that authorizes a supplier to
proceed on a project.
Note: All Purchase Orders generated must reference Lear’s Terms and Conditions.
6. Regional Exceptions
P-Card Purchase – NA region only

If an item cannot be purchased through the e-Procurement system, the next course of action is
to purchase the item(s) through the P-Card process, within certain limits. P-Cards can be used
generally for non-capitalized and capital assets under $3,000. To request a P-Card and/or obtain
more information of allowable purchases see: Corporate PCard Application and the LEAP manual
Section
Note: P-Card transactions are sent to Non-Production Purchasing for review. If item(s) can be
purchased via e-Procurement system, a block may be placed on the vendor.
Non-North American Locations

Non-Production Purchasing in non-North American locations maintains a list of approved
suppliers (Europe’s is located on Purchasing SharePoint portal). Any other supplier
selected at a local level must be maintained on a local master vendor list.

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Reference
• Lear Accounting Practices Manual (LEAP) Sections 17.1 and 71.1
• P-Card Process: Purchasing Card Program
• Records Management Policy: Lear Records Management
• GPM 6.3.1 Production Supplier Request Forms Process
• GPM 3.1 Corporate Contracting Policy

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18. Audit Services
Information included in this section presents the Lear Audit Services (LAS) philosophy, services and
processes. Questions related to this section should be directed to Jim Murawski, VP – Audit Services or
his regional Directors:
• Asia – Christopher Kim
• Europe – Fiona Gietzmann
• Mexico / South America – Hector Sandoval
• U.S. & Canada – Serena Shi
I. Audit Services Philosophy, Services and Processes
A. Mission / Independence / Management’s Role
Audit Services is as an independent, objective and cooperative source of assurance and

assistance in managing risks, maintaining effective internal control and governance and achieving
business objectives.
To provide for the independence of Audit Services, its staff reports to the Chief Audit Executive,
who reports functionally to the Chairman of the Audit Committee of the Board of Directors and
administratively to the Executive Vice President.
Management supports Audit Services’ role by providing Audit Services with timely access to
records, personnel, and physical properties; responding timely to Audit Services’ observations
and ensuring that appropriate corrective actions are taken to address control deficiencies.
B. Services Performed
Audit Services can be grouped into two broad categories: (1) Assurance Services and (2)
Consulting Services.
Assurance Services are objective assessments of evidence to provide an independent opinion or

conclusion regarding a process, system or other subject matter. The nature and scope of these
engagements are determined by Audit Services.
Consulting Services are advisory in nature and are generally performed at the specific request of
an engagement client. The nature and scope of the consulting engagement are subject to
agreement with the engagement client.
Following is a high level description of engagements performed by Audit Services.
Note that most of the activities below are components of management’s testing for purposes of
its assessment of the effectiveness of internal controls over financial reporting.
• Financial/Operational Audits (FOA) - integrated audits, encompassing testing

controls (including IT general controls, if applicable), accounts, other risks and
certain operational processes at plants and other locations (e.g., engineering
centers)
• Process Reviews - evaluation of processes, including IT security and other IT
processes, for purposes of a) assessing the design and operation of related controls
(including IT general and application controls, if applicable), b) assessing the efficiency

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and effectiveness of the process, and/or c) providing information or assistance to

management
• IT Data and Support Center Audits – assessing the design and operating effectiveness
of IT general and application controls at Lear and third-party centers
• SOX Monitoring / Balance Sheet Reviews
o Stand-alone monitoring of self-assessments and certain key controls
o Specific-scope testing of certain key controls or accounts
• Assistance to the independent auditor
o Testing, as set forth above, is generally relied upon or considered by EY in
their assessment of our controls and control environment
o Additionally, Audit Services provides direct assistance to EY for their annual
audit
• Investigations related to allegations of impropriety involving financial matters
• Review the design and operation of controls pre-implementation and post-
implementation
C. Reporting and Wrap-up
The audit team should hold periodic meetings throughout an engagement to review in detail all of
the issues with the auditee. The goal is to eliminate any surprises or creation of open items at
the closing meeting, which should be as close as possible to the last day of field work with the
audit team, the auditee, the Audit Director, the CAE and other management participants as
appropriate. If not provided at the closing meeting, a draft report should be issued to the auditee
within five business days of the closing meeting.
D. Rating Individual Audit Observations
Individual audit observations are rated based on internal guidance and generally consider:
• Intent
• Importance to the control environment
• Impact on operating income or captions on the balance sheet
• Responsibilities of, and number of, individuals involved
• Number and nature of instances of non-compliance
• Importance to the prevention or detection of fraud
• Reputational impact
• Importance to achieving SOX compliance requirements, COBIT control objectives,
and/or operating efficiency and effectiveness
• Degree to which the issue is addressed in Lear policies
Each audit comment includes an observation, risk or issue and recommendation to correct the
problem from occurring in the future. Each documented audit comment will be discussed and
agreed with the location management prior to inclusion in the report to ensure the factual accuracy
of the comment.
In addition to the observation, risk and recommendation, each audit observation will receive a
rating of Minor, Moderate and Significant based on the potential impact to the locations. Each
report comment is rated based on two criteria. The first criteria in the rating relates to the
significance of the finding. The significance of the audit findings is defined as follows:

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Minor – There is a remote likelihood that the identified control issue and associated risks
will have more than an inconsequential impact on the effectiveness and efficiency of
operations, reliability of financial reporting, or compliance with applicable laws and
regulations. An inconsequential impact is one that could result in a loss or accounting
adjustment of less than or equal to $100,000. Compensating controls may be present
which are effective in mitigating the identified control risks.
Moderate - There is more than a remote likelihood that the identified control issue and
associated risks will have more than an inconsequential exposure to loss of assets and/or
negative impact on the effectiveness and efficiency of operations, reliability of financial
reporting, or compliance with applicable laws and regulations. A more than
inconsequential impact is one that could result in a loss or accounting adjustment in
excess of $100,000, but less than $500,000. Compensating controls may be present but
are only partially effective in mitigating the identified control risks.
Significant – There is a high likelihood that the identified control issue and associated
risks will result in a significant exposure to loss of assets and/or have a material negative
impact on the effectiveness and efficiency of operations, reliability of financial reporting,
or compliance with applicable laws and regulations. A significant exposure is one that
could result in a loss or accounting adjustment in excess of $500,000. Compensating
controls are either not present or are ineffective in mitigating the identified control risks.
The second criteria in the rating relates to the anticipated difficulty in implementing the
Management Action Plan. The difficulty in implementing the management action plan is defined
as follows:
1. Corrected during audit and no further action is required.

2. Routine corrective action required and such action is not expected to be
difficult.
3. Significant, difficult or time consuming corrective action is required.
E. Management’s Action Plans
Management’s action plans are to be returned within 10 business days of receiving the draft
report. Management’s action plans should not include explanations on why the circumstances
exist. The Audit Director will review management’s responses, incorporate them as appropriate
in the report and submit the final draft report to the CAE for issuance.
It is required that the location create an action plan for each audit observation included in the
report and include the name of the individual(s) responsible for the implementation of the action
plan and the date the action plan will be implemented.
F. Consideration of Management’s Self-Identified Exceptions
Audit Services considers exceptions reported in the SOX Portal, including both open and closed
items and whether open self-identified exceptions would have an impact on the report ratings.
Self-identified items will generally be attached as an exhibit, and the report will clearly state if the
self-identified exceptions were included in our evaluation of the location.

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G. Rating Engagements Overall
The issue ratings are a very important part of the audit process because based on the number
and significance of issues noted for each audit area reviewed an area rating is established.
Based on the area ratings, an overall audit rating is determined based on the number, significance
and pervasiveness of control issues noted during the review.
It should also be noted that while they may or may not be part of the area or overall audit rating,
an audit report may include observations and related management responses on issues related
to operating processes, exceptions not controlled by the location (i.e., Division Office) and
compliance with laws and regulations.
All reports should receive an overall rating, unless unrated for the reasons discussed below.
All audit reports are made available to external auditors. Unsatisfactory audit reports are
forwarded to all Audit Committee members.
Overall audit report ratings, colors and definitions are as follows:
Satisfactory (Green): Effective internal control systems and compliance with company
policies and procedures to reasonably ensure effectiveness and efficiency of operations,
reliability of financial reporting, and compliance with applicable laws and regulations.
Internal audit testing did not note any control issues resulting in a more than an
inconsequential loss or accounting adjustment.
Requires Improvement (Yellow): Mostly effective internal control systems and

compliance with company policies and procedures to reasonably ensure effectiveness and
efficiency of operations, reliability of financial reporting, and compliance with applicable
laws and regulations. The possibility exists that the control issues noted could result in a
more than inconsequential loss or accounting adjustment. Permanent corrective actions
should be timely implemented to achieve satisfactory status.
Unsatisfactory (Red): Internal control systems and compliance with company policies
and procedures are not functioning as intended to reasonably ensure effectiveness and
efficiency of operations, reliability of financial reporting, and compliance with applicable
laws and regulations. Significant control issues were noted that resulted in or could result
in a material loss or accounting adjustment. More than usual management involvement
and monitoring required until controls are improved.
H. Unrated Reports
Reports may be unrated for a number of reasons:

• When Audit Services evaluated only a limited part of a process or location, such that
a rating of the part audited could be erroneously extrapolated to the whole (e.g.,
specific-scope audits)
• When a location or process is not yet mature (e.g., a recently acquired location, a plant
that has recently started production, or an application in the development stage)
• When a third party is involved who may not understand or appreciate the rating system
(e.g., a nonconsolidated joint venture)

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Individual audit observations may or may not be rated when an unrated report is issued.
The CAE must approve issuing reports without an overall rating.
I. Closed Loop
Audit Services maintains a “closed loop” monitoring system for audit issues reported, other than
SOX related comments, which are tracked in the SOX portal.
Quarterly, Audit Services is responsible for obtaining updates to previously reported

recommendations not being tracked in the SOX portal.

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II. Keys to a Successful Audit
Internal auditing is a service performed to help make our organization more successful, improve
our operations and identify problems before they become significant. We are working together to
put Lear first and identify areas for improvement together. The quality of our audits and their
results depends on many factors. Several of the factors that will lead to a successful audit are
discussed below:
A. Planning is the Key to Success
• Audits take a great deal of planning, coordination and dialogue between the auditors
and auditees
• Hold a planning meeting (or more) with the auditors, set expectations, timing and
communication protocols (i.e., schedule meetings ahead of time)
• Consider setting brief status meetings or times to obtain an open items list at logical
intervals during the engagement to track progress
• Ensure the auditors have a room big enough to comfortably accommodate the size of
the team that is situated near to the main Finance and Operational people (not hidden
away in the back of the factory).
B. Gather and Organize Data (Controllers can’t do it all)
• Review the list of work papers and schedules requested by the auditors
• If an item requested by the auditor is unclear, ask for clarification prior to the start of
fieldwork to avoid potential delays
• Develop a timeline and assign each item from the list to a responsible person and
include a due date
• Schedules, work papers or other items requested by the auditor should be available
on or before the first day of audit fieldwork
• Create a repository of audit schedules that can be easily accessed by or provided to
the auditors. A well-organized close binder and SOX permanent file gives a positive
impression
C. Perform a Self-review / Assess Changes in Activities / Learn from the Past
• Devote additional time prior to the audit to communicate with those involved in the
audit process, supervisors as well as employees
• Review requested schedules and work papers to ensure amounts agree or reconcile
to the trial balance or supporting schedules
• Take a step back and assess the financial results of the entity. Be prepared to explain
variances year-over-year, from budget-to-actual or unusual accounting matters or
events (e.g., complex accruals)
• Were any activities discontinued, or were there any impairments?
• Were there significant changes in internal control, IT systems or processes?
• Review prior audit results, internal control recommendations, or struggles encountered
during prior audits
• Review any open SOX deficiencies and deficiencies close within the last 12 months.
Be prepared to demonstrate that robust action plans are in place to mitigate and close
out control weaknesses.

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• Issues identified in preparation of an audit should be self-reported, discussed with the

auditors during the planning process and not modified (i.e., no back dating of
signatures)
• These practices (above) are also good to perform on a periodic basis (1-2 times per
year)
D. Key Personnel Must Be Present During the Audit
• Avoid key personnel scheduling time off during the audit, and consider rescheduling
or postponing non-critical meetings for finance and accounting staff heavily involved
with the audit
• Although most of the schedules and work papers will have been requested by the
auditors prior to the start of audit fieldwork, understand that the auditors will be asking
for additional information, including supporting documents and explanations,
throughout fieldwork
• Be available during audit fieldwork and meet informally with the auditors at least daily
• Be open and transparent. Always doing the right thing!
• Note: any request to reschedule an audit should be escalated to the division finance
V.P., who will discuss with the Corporate Controller
E. Communicate until the Audit Wraps Up and Evaluate Results
• Maintain communication with the auditors during the time between fieldwork and the
issuance of the audit report
• If there are any open items at the end of fieldwork, establish agreed upon dates for the
information to be provided to the auditors whenever possible
• Ensure that all facts are provided to the audit team and consult with division finance
on complex issues
• Be proactive in sending back your management responses, action plans and timing
for inclusion in the final report before the 10 business days required.
• Ensure your responses address all the issues and recommendations raised in the
audit report and that your actions are robust and the appropriate people responsible
for their implementation have been identified
• Focus on identifying a clear action plan to improve the control environment, not on
overall rating of report before the final version is released
• Consider holding a post-audit closing meeting with employees involved in the audit to
communicate results and solicit feedback

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19. Unclaimed Property - Identification, Mitigation and Reporting
Mike Groce, Director of Global Shared Services, is responsible for the accounting practices and processes
and questions related to this section should be directed to him or his regional team members.
I. Unclaimed Property
Unclaimed property consists of any funds or tangible or intangible personal property that a person
holds for, or owes, to another in the ordinary course of business that has remained unclaimed by
the owner for a certain number of years (the “statutory dormancy period”).
All fifty states, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands have laws
requiring holders to report and remit unclaimed property to the jurisdiction.
Unclaimed property held by Lear Corporation may include un-cashed payroll or accounts payable
checks, accounts receivable credit balances, un-matched remittances, unclaimed worker’s
compensation or insurance benefits, customer overpayments, and un-cashed customer rebate or
rapid refund checks, to name a few. This section focuses on un-cashed checks.
Lear’s primary obligation is to locate the owner to absolve the debt. If unable to do so, the items
of unclaimed property that are in the possession of Lear for the statutory dormancy period must
be reported and remitted to the state of the owner’s last known address. If no address is available,
or if the owner is unknown, or the law of state of last known address does not cover the property,
the unclaimed property must be remitted to Lear’s state of incorporation (Delaware).
Lear follows a process to ensure that abandoned property is identified and reported to states as
unclaimed property in compliance with all states regulations. The secondary goal of this process
is to maintain current and clean bank reconciliations and reunite owners with lost checks. There
are three sub processes that impact unclaimed property reporting
• Identification – Review of outstanding check lists for older, potentially abandoned
items. (Quarterly)
• Mitigation (and documentation) – Internal research to identify bookkeeping errors,
followed by communication campaign to the owner if necessary. (Quarterly)
• Reporting – Providing Corporate with information to complete state reporting and
accounting updates required based on reporting status. (Semi Annually)
The LEAP manual contains detailed explanations and examples related to Lear’s policies and
procedures with respect to the identification, mitigation and reporting of unclaimed property.
To view the LEAP manual, select the following link:

Section: 70.2 Identification, Mitigation and Reporting of Abandoned and Unclaimed Property

Page 89 of 98
A. Glossary of Lear Terminology
The following is a list of key acronyms and abbreviations commonly used at Lear Corporation.
The attached link will take you to a more complete listing of Lear acronyms/abbreviations:
(Link: Lear Acronyms List)
I. Glossary of Lear Terminology
Number-Prefix Description
5S Sort-Set In Order-Shine-Standardize-Sustain
A
AAR Appearance Approval Report
ADN Advanced Delivery Note
AIAG Automotive Industry Action Group
AOEM Asian OEM
APD Advanced Product Development
APD Asia Pacific Division
APO Asian Pacific Operations
APQP Advanced Product Quality Planning
APR Advance Program Review
AQP Advanced Quality Planning
ASN Advanced Shipment Notice
ATR Average Inventory Turnover Rate
B
BB Six Sigma Black Belt
BOM Bill of Material
BOP Business Opportunity Proposal
BSR Buzz, Squeak, Rattle
BTS Built To Schedule
C
C&E Cause and Effect
CAD Computer Aided Design
CAE Computer Aided Engineering
CAPX Capital Expenditures
CARF Computer Access Request Form
CASP College Advantage Saving Plan
CC Change Cut-off
CC Continuing Conformance
CC Critical Characteristic
CEG Cost Estimating Group
CFD Customer Focus Division
CFT Cross Functional Team
CN Change Notice
COPQ Cost of Poor Quality
CP Confirmation Prototype
CPV Capacity Planning Volume
CPV Content Per Vehicle

Page 90 of 98
CQS Corporate Quality Systems

CR Change Request
CT Cycle Time
CTC Critical to Cost
CTD Critical to Delivery
CTQ Critical to Quality
CTS Critical to Satisfaction
D
DCM Discriminative Change Management
DCX DaimlerChrysler
DF Design Freeze
DFA Design for Assembly
DFM Design for Manufacturability
DFMEA Design Failure Mode & Effects Analysis
DFSS Design for Six Sigma
DMAIC Define, Measure, Analyze, Improve, Control
DMO Accounts Payable Days Material Outstanding
DOE Design of Experiments
DPMO Defects Per Million Opportunities
DPU Defect Per Unit
DR Design Request
DR Design Review
DSO Accounts Receivable-Days Sales Outstanding
DT Downtime
DTD Dock To Dock Time
DTR Data Transfer & Release
DV Design Verification
DVP&R Design Verification Plan & Report
E
ECC Engineering Change Control
ECI Engineering Change Instruction
ECN Engineering Change Notice
ED Engineering Development
EEO Equal Employment Opportunity
EMS Environmental Management System
EOP End of Production
EPI Engineering Process Improvement
ER&D Engineering Research & Development
ERA Emergency Response Actions
ESD Electrical Systems Division
ESTA Early Sourcing Target Agreement
EVOP Evolutionary Operations
EWO Engineering Work Order
F
FAP Ford Asian Pacific
FAQ Frequently Asked Questions
FCF Free Cash Flow
FEA Finite Element Analysis

Page 91 of 98
FEU Field Evaluation Unit

FGI Finished Goods Inventory
FIFO First In First Out (Inventory)
FIST Financial Information Systems Team
FMEA Failure Mode and Effects Analysis
FMVSS Federal Motor Vehicle Safety Standards
FOB Free on Board
FPV Financial Planning Volume
FRG Ford Reliability Guide
FSA Flexible Spending Account
FTQ First Time Quality
FTT First Time Through Capability
FTY First Time Yield = YFT
G
GEMS Global Employee Management System
GLL Global Lessons Learned
GM General Motors
GMAO General Motors Automotive Operations
GPM Global Procedure Manual
GQRS Global Quality Research System
GQSP Global Quality System Procedure
GR&R Gage Repeatability and Reproducibility
H
H0 Null Hypothesis
HA Alternate Hypothesis
I
ICA Interim Containment Action
ICD Interface Control Document
IMDS International Material Data System
ISD Interior Systems Division
J
J1 Job #1 Achieved
JV Joint Venture
K
KO Kick-Off
KPIV Key Process Input Variable = X
KPOV Key Process Output Variable = Y
L
LASER Lear Accounts & Enterprise Resource
LBO Leveraged Buy Out
LCL Lower Control Limit
LEAP Lear Accounting Practices Manual
LEED Lear Electrical & Electronics Division
LEEM Low End Emerging Market
LEPP Lear Engineering Policy & Procedure

Page 92 of 98
LEV Low Emissions Vehicle

LGPN Lear Global Part Number
LLAO Lear Latin American Operations
LMO Lear Mexican Operations
LOIS Lockbox Online Information Service
LPMP Lear Program Management Process
LQTS Lear Quality Tracking System
LR Launch Readiness
LS Launch Sign-off
LSL Lower Spec. (Specification) Limit
LTA Long Term Agreement
M
MCR Maximum Capacity Requirement
MetaVPDM Application to View and Markup CAD data
MFE Manufacturing Expenses (Overhead expenses)
MFD Metal Fabrication Division
MGR Management Gateway Review
MIS Months in Service
MOR Management Operating Report
MOS Management Operating Systems
MOST* Maynard Operation Sequence Technique
MRD Material Requirement Date
MRO Maintenance, Repair & Office
MRP Materials Requirement Planning
MSA Measurement Systems Analysis
MSE Measurement System Evaluation
MSI Market Segment Information
MTO Mexican Trim Operations
N
N.A. North America
NOCF Net Operating Cash Flow
NOD Notice Of Decision
NORA Notification of Required Action
NPV Net Present Value
NRE Non-Recurring Engineering
NY Normalized Yield = Yn
O
OEM Original Equipment Manufacturer
OFAT One Factor At A Time
OI Operating Income
P
PA Program Approval
PAP Product Approval Process
PAR Project Appropriation Request
PASDS Power and Signal Distribution System
PCA Permanent Containment Action
PCB Printed Circuit Board

Page 93 of 98
PCE Product Change Evaluation

PCR Product Change Request
PDL Product Development and Launch
PDM Product Data Management
PDR Problem Description Report
PETC Philippine Engineering & Technical Center
PFD Product Focus Division
PFMEA Process Failure Mode & Effects Analysis
PH Proportions & Hardpoints
PIMS Performance Improvement Measurement System
PLEX Plant Experimentation
PMI Product and Manufacturing Information
PMO Program Management Office
PMST Program Module Sub-Team
PMT Program Module Team
PMTS* Predetermined Motion Time System
PNC Probability of Non-Compliance
P.O. Purchase Order
PPAP Production Part Approval Process
PPM Parts per Million
PPM Plant Performance Matrix
PR Plant Review
PR Problem Reports (aka Problem Resolution)
PR Product Readiness
Pre<SI> #1 Pre-Strategic Intent #1
Pre<SI> #2 Pre-Strategic Intent #2
PRS Problem Resolution System
PST Program Steering Team
PSW Part Submission Warrant
P/T Precision To Tolerance Ratio
P/TV Precision To Total Variation
PV Production Validation
PVI People Vehicle Interface
PVS Product Verification Specification
Q
QA Quality Assurance
QC Quality Control
QFD Quality Function Deployment
QOS Quality Operating System
QRT Quality Responsible Team
R
RA Risk Assessment
RDD Requirement Driven Development
RFP Request for Proposal
RFQ Request for Quote
RGV Return Goods to Vendor
RONA Return on Net Assets
RPN Risk Priority Number
RPPM Returned Parts per Million

Page 94 of 98
RSM Response Surface Methods

RSP Retirement Savings Plan
RTY Rolled Throughput Yield = YRT
S
SAO South American Operations
SC Special Characteristic
SC Strategic Confirmation
SCR System Change Request
SDRC Structural Dynamics Research Corporation
SDS System/Subsystem Design Specification
SG&A Selling, General & Administration
SI Strategic Intent
SIPOC Suppliers, Inputs, Process, Outputs, Customers
S/N Signal To Noise Ratio
SOP Standard Operating Process / Procedure
SOP Start of Production
SOR Statement of Requirements
SOW Statement of Work
SP Structural Prototype
SPC Statistical Process Control
SPF Summary Plan Description
SPS Seat Position Sensor
SPSS Supplier Projects In Six Sigma
SQAM Supplier Quality Assurance Manual
SQI Supplier Quality Improvement
SR Supplier Review
SREA Supplier Request For Engineering Approval
SRP Seat Reference Point
SSD Seating Systems Division
SSE Six Sigma Express
SSSSS (5S) Sort-Set In Order-Shine-Standardize-Sustain
ST Surface Transfer
SWOT Strengths, Weaknesses, Opportunities & Threats
T
TBF Time Between Failures
TC Team Confirmation
TCE Thermal Coefficient of Expansion
TDM Team Data Management
T.E.A.M. Employee Assistance Program
TGR Things Gone Right
TGW Things Gone Wrong
TIFF Tagged Image File Format
TIR Test Incident Reports
TM Trademark
TOPS Team Oriented Problem Solving
TPM Technical Performance Measure (Method)
TPM Total Preventative Maintenance
TPMS Tire Pressure Monitoring System
TPS Toyota Production System

Page 95 of 98
TQE Total Quality Excellence

T/S Target and Status
TS 16949 Quality Management System
TSWI Toyota Supplier Warranty Parts & Information (Request)
U
UCS Unified Cutting System
UG Unigraphics
UOM Unit Of Measure
URL Universal Resource Locator / Location
V
VACS Visual Access Control System
VAG Volkswagen Audi Gesellschaft
VAR Value-Added Ratio
VAVE Value Analysis Value Engineering
VCC Volvo Cars Corporation
VDT Video Display Terminal
VIN Vehicle Identification Number
VIS Vehicle Information Service
VOC Voice of the Customer
VPP Vehicle Program [Timing] Plan
VQR Vehicle Quality Review
VSM Value Stream Mapping
W
WACC Weighted Average Cost of Capital
WBS Work Breakdown Structure
WC Written Concerns
WCT World Class Timing
WERS Worldwide Engineering Release System
WIP Work in Process
WISE Worldwide Integrated Standards for Engineering
WRA Warranty Response Activity
WRAP Warranty Reduction Action Plan
WWP Worldwide Purchasing
WYS/WYG What You See is What You Get
X
XCV transceiver/transmitter-receiver
XML eXtensible Markup Language
Y
YIS Years In Service
YTD Year To Date
Z
ZEV Zero Emissions Vehicle
ZPR Zero Power Resistance
ZRE Zero Rate Error

Page 96 of 98
B. Information System Support & Key Websites
This section includes links to key websites, a listing of phone numbers/email addresses in order
to provide technical support related to each system as well as the applicable general I/T help desk
numbers.
I. Global Service Desk and Support Center
The Global Service Desk and Global Support Center (GSC) work closely together to assist Lear
users globally with any IT related issues. The Teams are broken down as follows:
• Global Service Desk – The 1st level of support for any IT issues that Lear users or
vendors may experience. If the Global Service Desk is not able to resolve your issue
utilizing their online knowledge base, they will be able to contact the appropriate 2nd
or 3rd level support team to assist with the resolution. Contact us:
SCustomer@Lear.com or +1 248 447 1008
• Global Support Center (GSC) – The GSC acts as 2nd level support for IT
administrators for all Lear facilities globally. The GSC is able to assist IT
administrators with any IT related issues that they may be having problems with or
have questions on.
The Global Service Desk and Global Support Center have different functions, but share a
common goal; to provide the best service possible to Lear users and IT administrators
globally. The two teams work closely together and are able to keep each other informed of any
issues that may be affecting Lear users to ensure a quick resolution.
This site will link you to the Heat Self Service portal, allowing you to submit a Heat ticket for any
IT related issue, as well as other links that may assist with your IT needs.
If you have any questions regarding Global Service Desk or Global Support Center and would
like additional information on either of the teams, please contact the Business Support Manager.
(Link: Global Service Desk)
II. Employee Directory
Employee Directory on everyONE.lear.com (Link: Employee Directory). The directory application

provides the ability to search easily for people by name, location, department and more. A phone
number update page provides a convenient means for employees to modify their office or mobile
phone numbers and keep their contact information current.
In addition to the application on everyONE.lear.com, the same employee contact information is

also accessible through Lync, Outlook email and from your corporate smart phone.

Page 97 of 98
C. Additional Helpful Information
This section includes links to templates for key accounting areas that will provide consistent
application and presentation (best practice examples).
I. Internal Control Checklists
Attached you will find various checklists being used to help ensure SOX compliance by the various
Divisions. The use of any checklist is not required for SOX compliance. Division SOX Champions
may establish their own requirements. The documents are not meant to be all-inclusive. More
specific, overall requirements are included in the SOX monitoring plan, which has been noted
above.
A list of the different checklists follows:

• Plant Controller Responsibilities
• Ten Basic Controls
• Sarbanes Oxley Monthly Checklist
• Sarbanes Oxley Calendar Review
II. Account Reconciliations
Monthly account reconciliations that have been completed, supported and reviewed by the
appropriate personnel on a timely basis are a corner stone to an effective internal control
environment.
A. Expectations for Account Reconciliations
• All balance sheet accounts must be reconciled monthly.

• Reconciliations for each month of the current year will be kept on hand.
• Accounts reconciled must be kept in the same order as your Balance Sheet.
• Include an index (checklist) of accounts reconciled and who is responsible for each
reconciliation in the reconciliation binder.
• Include a final copy of the balance sheet and income statement with reconciliations.
• Accounting Staff who work on reconciliations must understand what is expected in a
reconciliation.

Page 98 of 98
B. Timing
• Account reconciliation's from the prior month end need to be reviewed before the
current month end to assure all actions have been made.
• Do not wait for month end to make correcting entries, write the journal entry at the time
of the reconciliation.
• Strive to have all reconciliations completed during the month end closing
process.
C. Content
• Supportable items that represent what the account balance on the general ledger
should total.
• Compare supportable items to the general ledger balance.
• Variances need to be itemized and an explanation/action item needs to be written for
each variance.
• Each reconciliation must have the printed name of the preparer and their signature
included.
• Each reconciliation must have the printed name of the controller and their signature
included.
The attached link will take you to best practice account reconciliations formats:
66.1 Appendix A Sample Reconciliations

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Finance Handbook

Section Topic Page

1. Introduction to Lear Corporation 4 - 10

2. Lear Accounting Practices (LEAP) Manual 11

3. Internal Control Over Financial Reporting 12 - 21

5. Month-end Plant Close Process 24 - 26

Finance Handbook – June 30, 2017

6. Financial Statement Analysis and Forecasting 27 - 35

9. Financial Risk Management 45 - 51

10. Hedge Forecasting 52 - 55

11. Value Added Tax (VAT) and Other Indirect Taxes 56 - 59

12. Restructuring - Authoritative Guidance 60 - 64

13. PAR Process - ePAR System 65 - 68

14. Inventory Control 69 - 70

15. White Papers 71

16. Engineering Change Control Process 72 - 75

17. Non-Production Purchasing (MRO, Tooling & Capital) 76 - 80

18. Audit Services 81 - 87

Finance Handbook – June 30, 2017

19. Unclaimed Property - Identification, Mitigation and Reporting 88

A. Glossary of Lear Terminology 89 - 95

B. Information Systems Support & Key Websites 96

C. Additional Helpful Information 97 - 98

Finance Handbook – June 30, 2017

1. Introduction to Lear Corporation

I. Lear Global Finance Team Philosophy

Our role in finance includes:

We are keenly focused on:

Finance Handbook – June 30, 2017

II. High Level Overview of Lear Corporation

Lear’s Vision is to consistently be recognized as:

Finance Handbook – June 30, 2017

Key 2016 Seating Statistics:

Key 2016 E-Systems Statistics:

Finance Handbook – June 30, 2017

B. SEC Filings, Annual Reports and Earnings Releases

C. Corporate Compliance Program

Lear Corporation is committed to:

Why is an effective Compliance Program important?

Finance Handbook – June 30, 2017

• Other potential benefits include:

D. Code of Business Conduct and Ethics (the “Code”)

Selected Topics under the Code:

Finance Handbook – June 30, 2017

Anti-Bribery (Foreign Corrupt Practices Act)

Gifts and Entertainment

Finance Handbook – June 30, 2017

Finance Handbook – June 30, 2017

2. Lear Accounting Practices (LEAP) Manual

Finance Handbook – June 30, 2017

3. Internal Control Over Financial Reporting

I. Sarbanes-Oxley Act (SOX)

B. Financial Reporting Cycles

Finance Handbook – June 30, 2017

Finance Handbook – June 30, 2017

updated for changes in risks, processes and/or systems as necessary in

Finance Handbook – June 30, 2017

• Certifications – On a quarterly basis, the finance, IT and operations leaders

We represent that the financial statements had no significant misstatements

In connection with our internal controls, we represent the following:

E. Corporate Functions Responsibilities

Finally, each function should complete a quarterly SOX certification.

Finance Handbook – June 30, 2017

G. Lear Audit Services (LAS)