Intercompany Elimination
Intercompany Elimination rules are defined for elimination scenarios where the system is expected to reconcile all the Intercompany transactions & generate the offset differences, which helps organizations to perform Intercompany matching at each entity level
Prerequisites
Dataset, Account type, and Flow type fields are required to be tagged in the model.
Features
Eliminates transactions such as the sale of goods or services from one entity to another within the group. This means that the related revenues, cost of goods sold, and profits are all eliminated. There could be P&L transactions as well as offsetting interest expense and interest income being paid and received between entities within the group. How the elimination entry is posted is based on the method of elimination as explained:
Seller: By defining an intercompany elimination method as seller, it is assumed the seller-side transaction is the correct value. Hence, on eliminating seller and buyer transactions, any difference between the amount booked by the seller and buyer is posted to the buyer side.
Buyer: By defining an intercompany elimination method as buyer, it is assumed the buyer-side transaction is the correct value. Hence, on eliminating seller and buyer transactions, any difference between the amount booked by the seller and buyer is posted to the seller side.
Offset: In case of offset, neither seller nor buyer amounts are given any priority, and the difference between buyer and seller transactions is posted to a separate offset account.
Intercompany Elimination works:
Relationship Filter (Entity and Intercompany): Data filter for Intercompany Elimination follows the same approach as Automatic Journals. With difference being Method details (Relationship) is maintained at the Data action level rather than the individual rule level.
Data Filter details
Offset Method
Though seller, buyer, and offset are maintained in one rule, these are considered as two separate entries:
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Seller data is filtered and:
Multiplied by the Elimination factor * -1 based on entity and intercompany relationship and posted to the seller account.
Multiplied by the Elimination factor * +1 based on entity and intercompany relationship and posted to the offset account.
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Buyer data is filtered and:
Multiplied by the Elimination factor * -1 based on entity and intercompany relationship and posted to the buyer account.
Multiplied by the Elimination factor * +1 based on entity and intercompany relationship and posted to the offset account.
Seller Method
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Seller data is filtered and:
Multiplied by the Elimination factor * -1 based on entity and intercompany relationship and posted to the seller account.
Multiplied by the Elimination factor * +1 based on entity and intercompany relationship and posted to the buyer account.
Buyer Method
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Buyer data is filtered and:
Multiplied by the Elimination factor * -1 based on entity and intercompany relationship and posted to the buyer account.
Multiplied by the Elimination factor * +1 based on entity and intercompany relationship and posted to the seller account.