Eliminating Intercompany Payables and Receivables

Objectives
After completing this lesson, you will be able to:

After completing this lesson, you will be able to:

  • Eliminate intercompany payables and receivables

Intercompany Elimination Overview

Now that we've run currency translation and completed the matching and reconciliation process, we can eliminate intercompany transactions. In our course scenario, there are several types of intercompany transactions between the legal subsidiaries. Because intercompany transactions are internal to the corporation they'll need to be eliminated. In general, transactions that need to be eliminated include intercompany accounts payable and receivable, intercompany sales and cost, and intercompany profit in inventory (to name a few).

  • Objective: Eliminate any transactions between the consolidation units so that only transactions with third parties remain.

  • Before running eliminations, you should analyze and resolve intercompany differences.

Intercompany elimination uses as its source data the reported data in group currency. Intercompany data reported by both entities (two-sided elimination) is used to trigger the elimination.

Intercompany elimination doesn’t require specific intercompany accounts because the internal criteria used are based in part on the partner unit dimension.

Accounts Payable and Receivable Elimination

Elimination tasks are run from the consolidation monitor. In our scenario, we're using the IC Elim Balance Sheet RB task, which uses a reclassification rule and only identifies total differences.

The following animation explains how to use the intercompany elimination log.

When the elimination task is run, what does the system do?

  • The task runs a method.
  • The method performs the following:
    • Selects transactions for the specified FS items that contain partner units
    • Determines the consolidation unit or partner unit to receive the variance posting
    • Determines the account assignments
  • In configuration, the task is assigned to a document type.
  • The document type is assigned to a posting level and is set-up to auto-reverse.
Note
The elimination task performs eliminations for profit center and partner profit center simultaneously.

The following animation describes how to use a report to analyze an intercompany elimination.

In reports, the document type dimension can be added to the row or column axis if needed.

The group reporting document for intercompany accounts payable / accounts receivable eliminations provides the following key values:

  • The Document Type is used to identify what task generated the document.

  • The Text field displays the task id, reclassification method, and sequence that was used by the system.

  • Reversed with: Because this a balance sheet elimination, it’s reversed in the following year (in our use case, we’re running eliminations for the last period of 2022).

From a report, you can drill down into the intercompany elimination document.

Note
When the elimination is run in an interim period, the reversal occurs in the subsequent period immediately. As of edition 2022, when the elimination is run in the last period of the year, the reversal into the subsequent year occurs when balance carryforward is run.

Eliminate and Report Intercompany Payables and Receivables

Business Scenario

You are in the process of eliminating intercompany payables and receivables at ABC Corporation.

What skills will you develop in this practice exercise?

  • Run the intercompany balance sheet elimination task
  • Report on the eliminated data
  • Review the elimination document

Task 1: Run the Intercompany Balance Sheet Elimination Task

Task 2: Report on the Eliminated Data

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