Outlining Intercompany Revenue and Cost Elimination

Objectives

After completing this lesson, you will be able to:

  • Outline Intercompany Revenue and Cost Elimination

Configuring Intercompany Revenue and Cost

Regina using her mobile phone

Hi Robert, great job on the accounts payable and receivables elimination! Since ABC Corporation has intercompany transactions, the resulting intercompany revenue and cost must be eliminated. You need to configure reclassification rules to perform the intercompany revenue and cost elimination.

Eliminating Revenue and Cost

In the following video you will learn how to automate the elimination of intercompany revenue and cost.

Revenue and Cost Elimination Overview

We are 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 cost of goods sold is without trading partner in most cases.

Because 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, does not include any intercompany information.

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