Now that we have 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 will 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 utilizes 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 does not require specific intercompany accounts because the internal criteria used is based in part on the partner unit dimension.