The Basis of Reconciliation and Elimination of Intercompany Profit
In the control tables you define which internal sales accounts and internal inventory accounts you want to reconcile. You also define how you want the calculated intercompany profit to be posted. The elimination is then carried out according to the control tables.
The selling company reports the margins of the intercompany sales per counter company and the buying company reports the intercompany inventory per counter company. When you run the reconciliation report, the two values are matched with each other according to your control tables, and the intercompany profit is calculated. You can choose to eliminate the internal profit automatically or manually.
In order to use the process for calculation of intercompany profit, intercompany sales and intercompany inventory must be reported on intercompany accounts defined for this purpose. The intercompany sales account is coded with intercompany code M and the intercompany inventory account is coded with intercompany code I.
When you enter intercompany profit margins, you always have to enter a counter company, the percentage profit margin and, if applicable, the dimension and counter dimension in addition to the sales amount. When you enter intercompany inventory values, you also enter a counter company, the inventory value and, if applicable, the dimension and counter dimension.
As an alternative to the procedure where each selling company enters profit margins for the calculation of intercompany profit, it is possible to use a default profit margin table. This table can also be set to overrun the reported profit margin.
For more information, see Intercompany Profit Margins.
If you divide the sales account and inventory account into dimensions, they must be set at the same dimensions and the same level in each dimension.
If the selling or buying company, or both, are consolidated according to the proportional method, the intercompany profit is calculated and eliminated according to that method.