Eliminating Intercompany Payables and Receivables

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.

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 AP AR elimination log is used to:

1. Confirm the elimination method assigned to the task.
2. Identify the triggering amount in the AR FS item 121100.
3. View the elimination to FS item 121100.
4. View the offset to FS item 21110D.

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.

To report on the elimination results, follow these steps: (see the following image)

1. Run the Group Data Analysis report.
2. The original amounts are in posting level 00.
3. The AP AR elimination occurs in posting level 20.
4. The Offsetting amounts are booked into FS item 21110D.

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.