Define Control Tables for Intercompany Profit - the Standard Tab

You can use this tab to define how you want the intercompany sales accounts to be reconciled against the internal inventory accounts.

The selling company reports intercompany profit margins from intercompany sales, and the buying company reports how much is left in the internal inventory. These values are reconciled for each company, counter company, account and, where applicable, dimension and counter dimension. As a result, the internal profit in inventory can be calculated and presented in reports, or eliminated either manually or automatically in the selling and the buying company.

You can define a number of control tables with separate journal numbers, each combining different intercompany sales and intercompany inventory accounts used for the calculation. You can also choose to include all intercompany sales and intercompany profit accounts in the same journal. The system will then consider the sales account together with the inventory account located on the same row in the control table. However, the posting of the intercompany profit has to be the same for all the reconciliation made in the same journal.

The relevant intercompany sales accounts must be defined in the account structure, using the intercompany code M, intercompany profit margin. The buyer’s intercompany inventory accounts should be defined with intercompany code I. The accounts for intercompany sales and intercompany inventory should be defined using the same dimensions and the same levels for each dimension.

The posting of the deferred tax should be made in the same automatic journals as the elimination of internal profit. When you define the IC Profit Posting in the Control Table, extra rows should be used for the tax accounts. In the Tax column, you define whether the tax part or the other part of the amount should be booked on the defined account. The column includes the B/T/N options, where B (blank) = Total, T = (tax) - The Tax Share and N = (B-T) = Total Minus Tax.

Since it is optional to use the automatic tax function as well as the posting of the deferred tax items on either seller or buyer, this has to be directed in the control table. By entering B (buyer) or S (seller) in the B/S columns in the IC Profit Postings table, the postings of the deferred tax will be made on the buyer or the seller.

To be able to run the deferred tax calculation, it is mandatory to activate and define tax rates for the countries or regions where a calculation should be done. Use the tax table HT01 - Taxes to catch the percentage of the tax for each country or region of the buying company and, if applicable, each account. When no tax rate is defined for the country or region of the buying company, no calculation will be performed. You find the tax table in the Maintain/Configuration/Automatic Journals/Control Tables/Acquisition Calculations menu.

Every company has to be defined with a country or region code. You define the country or region codes in the Maintain/Company Structure/Define menu, in the Country or Region field.

The deferred tax will be calculated by using the tax rate that is valid by the balance sheet date in the buying company, according to IFRS.

Notes:

  • Instead of each company entering profit margins for calculating intercompany profit, it is possible to use a general profit margin table in Group/Data Entry/Intercompany Profit Margin.
  • The Automatic Journal for Intercompany Profit is activated on Maintain/Configuration/Automatic Journals/Define.
  • If dimensions and linked structures are used, IBM® Cognos Controller validates that the dimension is valid for the company according to the linked structures. If it is not valid, the transactions will be posted on the first valid dimension for the company.

Procedure

  1. On the Maintain menu, click Configuration/Automatic Journals/Control Tables/Acquisition Calculations. The Control Tables - Intercompany Profit window opens.
  2. Select journal number. The journal number is also the report number when running the reconciliation. The number series begins with 1 and continues in numerical order to 99.
  3. Select Non-active to create a reconciliation report only or Active to create a reconciliation report and to use the control table to automatically create automatic journals when performing intercompany profit eliminations.
  4. Enter a description of the control table in the local and group language.
  5. You have to define an Offset Account to be used when posting the automatic journal in order to balance the booking. The account can also be defined on the dimensions 1-4.
  6. In the I/C Sales Acc column, add the sales accounts you want to reconcile against the inventory accounts. These accounts must be defined with the intercompany code M in the Define Accounts function. The dimension levels for sales accounts should be the same as the dimension levels for the inventory accounts.
  7. In the I/C Inventory Accounts column, add the inventory accounts you want to reconcile against the sales accounts. The buyer's intercompany inventory accounts should be defined with intercompany code I. The dimension levels for inventory accounts should be the same as the dimension levels for the sales accounts.
  8. In the B/S (Buyer/Seller) column, add the company to which the elimination should be posted, the buyer or the seller.
  9. In the Account column, add the account from which the intercompany profit should be eliminated.
  10. In the Sign +/- columns, select the sign with which to book the elimination.
  11. In the Tax column, select if the posting of the calculated internal profit should include deferred tax and include extra rows in the control table, where you define the tax accounts. These accounts should be defined with Tax code T. The tax percentage of the buying company, defined in subcontrol table HT01, will be used to calculate the deferred tax on the internal profit. If you leave this field blank, the whole amount will be posted on the defined account.
  12. The Change Type column determines if the posting should be booked as
    • this years difference (C) or
    • closing balance - year to date (Y).
  13. In the Dimensions columns, you can add the dimensions to book the profit eliminations to. If intercompany profit is divided into dimensions that will be eliminated against each other, the sales and inventory accounts should be on the same dimension level.
  14. Click Save.