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Good afternoon,

 

I’m seeking an IFS solution for a recurring issue that my company sees - out of balance intercompany accounts after consolidation. We have many legal entites in the group, many of these trade with one another (one may purchase goods on behalf of another, or may pay salaries for employees that are seconded to projects completed by other entities etc). 

When accounting entries are posted, to move costs from one entity to another, this is done via two journal entries (or one, if combined into one upload)

E.g. Company A incurred expenses that should be borne by Company B

Company A:

Cr Expense ($100)

Dr Intercompany AR/AP $100 - with counterparty B

Company B:

Dr Expense $100

Cr Intercompany AR/AP ($100) - with counterparty A

 

Often, we see manual entry errors like the following:

Company A:

Cr Expense ($100)

Dr Intercompany AR/AP $100 - with counterparty B

Company B:

Dr Expense $100

Cr Intercompany AR/AP ($100) - with counterparty C

The counterparty “C” was entered in error, and should have been “A”

 

IFS accepts the journals when posted, even when they are booked to the wrong intercompany trading partners. It doesn't seem to recognise that the journal entries booked result in an intercompany out-of-balance situation.

 

So, to my questions:

  1. Is there a way for IFS to validate journal entries, and block journal uploads that have intercompany matching errors? 
  2. Or can IFS prepopulate/auto generate the intercompany entries, based on defined relationships in the system, and based on where the costs are going to/from? E.g.
  1. Cr Expense in Company A
  2. Dr Expense in Company B
  3. IFS auto-generates the Intercompany DR in Company A ledger, and the equal and offsetting Intercompany CR in Company B’s ledger?

 

Many thanks in advance,

 

Chris

 

 

Hi,

The functionality you are looking for in generating auto intercompany entries is available for the Multi-Company Voucher window in Application 10.

In this window, you can opt for the auto-balance option and enter the transactions belonging to individual companies. The system is capable of creating intercompany entries for the relevant companies automatically so that it will eliminate the errors that you could end up by selecting the companies manually.

There are certain conditions that should be satisfied for creating such a journal, for example, the entries of company A and company B should be in the same row group.. etc.

I hope you would find out more details when you start to use the functionality.

Best Regards,

Chirantha.

Thanks @Chirantha ,

Do you have any guidance that you could show, that can walk me through how to do this?

Also, can you please explain if there is a way to enter an AP invoice directly to a second company, thereby automatically generating the intercompany entries, without the need to first book the entries to the paying company, and manually reallocating the cost via Multi-Company voucher?

 

Thanks

 

Chris

Hi,

I hope you have access to the released materials in App 10.  This had been included under the topic-Multi-Company Voucher and Analysis in App 10 released materials. You can find a webcast, demo doc and ppt.

If you want to directly enter and pay AP invoices in the second company, of course, you can use one of the payment windows. The Mixed Payment would be ideal for this purpose. You need to select the company and invoices only. The system will take care of inter-company entries.

 

Best Regards,

Chirantha.

 

 

I have a few questions. I appreciate any input.

Intercompany AR/AP/Inc/Exp is eliminated at the parent company consolidation level. Subsidiaries maintain their own sets of books. At the subsidiary level intercompany AR/AP/Inc/Exp should exist on the financial statements, correct? (Sub FS)

They are later eliminated when consolidating by the parent. (Parent consolidated FS)

Let's say the sub has an AR balance with both the parent and laterally with another sub. They learn they will only receive reimbursement of 50% from each intercompany AR. What is the JE to record the reduction of AR balances(write off/net asset transfer) on the Sub FS?

Hi @Chirantha ,

 

I have just realised it’s not Apps 10, but Apps 9 that we have. Can you please advise in respect of functionality that can give me what I need, in Apps 9?

 

@Wallace - 

Intercompany AR/AP/Inc/Exp is eliminated at the parent company consolidation level. Subsidiaries maintain their own sets of books. At the subsidiary level intercompany AR/AP/Inc/Exp should exist on the financial statements, correct? (Sub FS) Yes

They are later eliminated when consolidating by the parent. (Parent consolidated FS) Yes

Let's say the sub has an AR balance with both the parent and laterally with another sub. They learn they will only receive reimbursement of 50% from each intercompany AR. What is the JE to record the reduction of AR balances(write off/net asset transfer) on the Sub FS?

 

The entries in the sub would be 

Cr Intercompany AR 100 (you would need to note the trading partner - parent -  on the journal)

Dr Intercompany Expense 100 “the write off” (you would need to note the trading partner - parent -  on the journal)

 

And in the parent:

Dr Intercompany AR 100 ((you would need to note the trading partner - sub - on the journal)

Cr Intercompany Expense 100 “the gain” ((you would need to note the trading partner - sub - on the journal)

 

On consolidation, all this would net out, because all intercompany trade gets net to zero.

 

 

Thanks

 

Chris

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