Outlining Intercompany Revenue and Cost Elimination

Objectives

After completing this lesson, you will be able to:

  • Outline Intercompany Revenue and Cost Elimination

Revenue and Cost Elimination Overview

We're in the process of eliminating intercompany transactions during the corporate close. In this case, we need to automatically eliminate intercompany revenue and cost of sales.

Revenue and cost elimination key points

Intercompany sales are reported with a trading partner, but the cost of goods sold is without the trading partner in most cases.

Because a trading partner only exists on the seller side, the revenue and cost elimination is typically done using a one-sided approach. Using a one-sided approach, the elimination is triggered exclusively by the sales item and posted to both the seller and the buyer.

Note
This is referred to as a one-sided approach because it only considers the sales value and not the cost of goods sold value. This scenario is commonly used when the cost of sales account is calculated (quantity sold x unit cost) and therefore, doesn't include any intercompany information.

The following is a comparison of Intercompany (IC) revenue and cost elimination and the AP/AR elimination:

  • Tasks in consolidation monitor:

    • 2011 IC Elim. Sales

    • 2041 IC Elim. Balance Sheet

  • Posting Level (PL) 20 document types:

    • 2E IC elim gross profit | PL20 | Auto reverse except at year-end

    • 2G IC elim balance sheet | PL20 | Auto reverse including at year-end

Log in to track your progress & complete quizzes