Intercompany Elimination

Intercompany Elimination rules are defined for elimination scenarios where the system is expected to reconcile all the Intercompany transactions & generate the offset differences, which helps organizations to perform Intercompany matching at each entity level

Prerequisites

Dataset, Account type and Flow type field are required field to be tagged model.

Features

Eliminates transactions such as sale of goods or services from one entity to another within the group. This means that the related revenues and cost of goods sold, and profits are all eliminated. There could be P&L transactions as well as offsetting interest expense and interest income being paid and received between entities within the group. How the elimination entry is posted based on the Method of elimination as explained:

• Seller – By defining an intercompany elimination method as seller, it is assumed seller-side transaction is correct value. Hence on eliminating seller and buyer transactions any difference between amount booked by seller and buyer is posted to buyer side.

• Buyer - By defining an intercompany elimination method as Buyer, it is assumed buyer side transaction is the correct value. Hence on eliminating seller and buyer transactions any difference between amount booked by seller and buyer is posted to seller side.

• Offset – In case of Offset, neither Seller or Buyer amounts are given any priority and the difference between Buyer and Seller transactions is posted to separate offset account.

Intercompany Elimination works:

1. Relationship Filter (Entity and Intercompany) - Data filter for Intercompany Elimination follows the same approach as Automatic Journals. With difference being Method details (Relationship) is maintained at the Data action level rather than the individual rule level.

2. Data Filter details:

• Offset Method

  • Though Seller, Buyer, and Offset are maintained in one rule, these are considered as 2 separate entries.

  • Seller data is filtered and:

    • multiplied with Elimination factor * -1 based on Entity and Interco relationship and posted to Seller Account

    • multiplied with Elimination factor * +1 based on Entity and Interco relationship and posted to Offset Account

  • Buyer data is filtered and:

    • multiplied with Elimination factor * -1 based on Entity and Interco relationship and posted to Buyer Account

    • multiplied with Elimination factor * +1 based on Entity and Interco relationship and posted to Offset Account

• Seller Method

  • Seller data is filtered and

    • multiplied with Elimination factor * -1 based on Entity and Interco relationship and posted to Seller Account

    • multiplied with Elimination factor * +1 based on Entity and Interco relationship and posted to Buyer Account

• Buyer Method

  • Buyer data is filtered and

    • multiplied with Elimination factor * -1 based on Entity and Interco relationship and posted to Buyer Account

    • multiplied with Elimination factor * +1 based on Entity and Interco relationship and posted to Seller Account