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JD Edwards World General Accounting I Guide
Release A9.3.x

E21540-03
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74 Set Up Intercompany Settlements

This chapter contains these topics:

If your business enters transactions between companies, the companies will be out of balance unless you create and post intercompany balancing entries.

74.1 Overview

To use intercompany settlements, you must complete the following tasks:

  • Setting Up the Intercompany Settlement Constant

  • Setting Up Companies for Intercompany Settlements

In addition, you must complete one of the following tasks, depending on the method you use:

  • Setting Up Hub Method Y

  • Setting Up Hub Method 1

  • Setting Up Detail Method D

  • Setting Up Detail Method 2

74.1.1 Before You Begin

  • Decide whether you want to use a hub or detail method

74.2 Setting Up the Intercompany Settlement Constant

You must designate the method of intercompany settlements that you want to use. To do this:

On General Accounting Constants

Activate the intercompany settlements constant.

Options for this constant include:

Option Description
Method Y Use hub method Y with subsidiary accounts.
Method 1 Use hub method 1 with address book subledgers.
Method D Use detail method D with standard accounts and address book subledgers.
Method 2 Use detail method 2 with flex or standard accounts and address book subledgers.
No Intercompany Settlements Method N Do not use intercompany settlements. The system will not post a batch that contains intercompany transactions.
No Intercompany Settlements Method * Do not use intercompany settlements. The system will post intercompany transactions but will not create balancing entries for the companies. You must manually create the balancing entries that show on the Posting Edit Report.

74.3 Setting Up Companies for Intercompany Settlements

You must set up all companies that are involved in intercompany transactions using the Company Numbers & Names menu selection. When you do so, JD Edwards World recommends that you set up the company number to be the same as the company's address book number. If the two numbers are not the same, update the Company Address Number field using the Company Numbers & Names menu selection.

If you use hub method 1, or detail method D or 2, set up the companies in the address book. If you use hub method Y, set up a subsidiary of the company number in your chart of accounts.

74.4 Setting Up Hub Method Y

Hub method Y creates summarized journal entries for your intercompany settlements between a hub company and related companies.

Setting up hub method Y includes:

  • Setting up intercompany accounts

  • Setting Up General Accounting Constants

  • Setting up AAIs

74.4.1 Before You Begin

  • Decide which company is the hub. All other companies on the system are non-hub companies.

74.4.2 Setting Up Intercompany Accounts for Method Y

Set up intercompany accounts on Accounts by Object. For method Y, do the following:

For Do the following
For each intercompany account
  • Set up a non-posting title account for each company's balance sheet business unit. Title accounts must have a consistent level of detail across all companies involved.
  • Set up accounts where each subsidiary is equal to the company number

For each posting account Set the level of detail on the posting intercompany accounts higher than the non-posting header (title) account.
For the hub company Set up a subsidiary account referencing each non-hub company. The subsidiary account is the link that connects companies for intercompany accounting. The subsidiary number must be five digits. For example, company 100 must be coded as 00100 and company 50 must be coded as 00050.

Note: JD Edwards World recommends that you use a posting edit code of M (machine-generated only). This posting edit code only allows entries created by the system and protects the integrity of the account.

For each non-hub company Set up an intercompany settlement account. The object account for all intercompany accounts should be the same. Set up a subsidiary account that references the hub company.

Example: Intercompany Accounts for Method Y

The following example shows the setup step (described previously) and the account setup needed for companies where:

  • Company 1 is the Hub Company

  • Companies 2 and 3 are Non-Hub Companies.

  • Business Unit 1 is the balance sheet business unit for Company 00001

Business Unit Object Subsidiary (5-Digit Company #) Posting Edit Code Level of Detail
1 1291   N 5
1 1291 00002 M 6
1 1291 00003 M 6
2 1291   N 5
2 1291 00001 M 6
3 1291   N 5
3 1291 00001 M 6

74.4.3 Setting Up General Accounting Constants

Use the General Accounting Constants to control whether your organization can use configured hubs for intercompany settlements.

On General Accounting Constants (00090)

Enter Y in the following field, as needed:

  • Intercompany Settlement(Y/D/C/1/2/3/*/N)

74.4.4 Setting Up AAIs for Method Y

Set up AAIs for intercompany settlements on Single AAI Revisions or Multiple AAI Revisions.

There are two AAIs for intercompany settlements:

  • ICH (Intercompany Hub). This item defines the hub company.

    • There can be only one AAI item ICH.

    • You must set up AAI item ICH for company 00000.

    • You must enter a business unit. The business unit should be the business unit of the intercompany account for the hub company.

    • You must enter an object account. The object account must point to the hub company's non-posting title account for intercompany settlements.

    • Subsidiary accounts are not used and should be left blank The subsidiary account is blank because the system can extract subsidiary account numbers from the company numbers

  • ICCC (Intercompany Business Unit). This item defines the non-hub companies.

    • You can have separate AAI items for ICCC for each non-hub company (recommended), or you can have a single AAI item ICCC for company 00000.

      If you have a single AAI item ICCC for company 00000, the Business Unit field must be blank, and the business unit number on the balance sheet accounts must be the same as the company number.

    • You must enter an object account. The object account must point to the non-posting intercompany settlements account for the non-hub company.

    • Subsidiary accounts are not used and should be left blank The subsidiary account is blank because the system can extract subsidiary account numbers from the company numbers

Example: AAIs for Method Y

The following example shows the AAI setup requirements if the business unit number on the balance sheet account is the same as the company number.

AAI Item Company Business Unit Object Subsidiary
ICH 00000 1 1291  
ICCC 00002 2* 1291  
ICCC 00003 2* 1291  

Note:

* You can leave the business unit field blank for item ICCC if the business unit is equal to the company number (without leading zeros). For example, business unit 1 corresponds to company 00001.

The following example shows the AAI setup if the business unit number on the balance sheet account (550) is different from the company number (00050).

AAI Item Company Business Unit Object Subsidiary
ICH 00000 100 1291  
ICCC     1291  
ICCC 00050 550 1291  

74.5 Setting Up Hub Method 1

Hub method 1 uses subledger accounts rather than subsidiaries. Subledgers are not part of the chart of accounts, so you do not "set up" a subledger account. Method 1 creates journal entries for your intercompany settlements between a hub company and related subsidiary companies. This method uses either standard account codes with subledgers or flex-account codes. The subledger for intercompany settlements is the address number of the company.

Note:

The subledger type is A, for Address Book.

Setting up hub method 1 includes:

  • Setting up intercompany accounts

  • Setting Up General Accounting Constants

  • Setting Up Companies in Address Book

  • Setting up AAIs

74.5.1 Before You Begin

  • Decide which company is the hub. All other companies on the system are non-hub companies.

74.5.2 Setting Up Intercompany Accounts for Method 1

For Do the following
All accounts Set up intercompany accounts on Accounts by Object.
Each company For each company, you must set up an intercompany settlement account. The object account for all intercompany accounts should be the same.

Note: JD Edwards World recommends that you use a posting edit code of M (machine-generated only). This posting edit code only allows entries created by the system and protects the integrity of the account.


Note:

There is no need to set up subsidiary accounts for method 1 because this method uses subledgers. This method is designed for use with a flex chart of accounts, but can also be used with a standard chart of accounts.

Example: Intercompany Accounts for Method 1

The following example:

  • Company 1 is the Hub Company

  • Companies 2 and 3 are Non-Hub Companies

  • Business Unit 1 is the balance sheet business unit for Company 00001

Business Unit Object Posting Edit Code Level of Detail
1 1291 M (machine only) 6
2 1291 M (machine only) 6
3 1291 M (machine only) 6

74.5.3 Setting Up General Accounting Constants

Use the General Accounting Constants to control what method your organization uses for intercompany settlements.

On General Accounting Constants (P000909)

Enter 1 in the following field, as needed:

  • Intercompany Settlement(Y/D/C/1/2/3/*/N)

74.5.4 Setting Up Companies in Address Book

If possible, enter the Address Book number as the Company number. For example, Company 00001 would be set up for Address Book number 00000001. If you cannot set up the Address Book number equal to the Company number, you must identify the address book number of the company in the detail area (F4) of the Company Numbers & Names program (P00105).

For example, if the address book number for company 00001 is 00000750, you must populate the Company Address Book number field, in the detail area with 00000750. If the company address book number is equal to the company number, you may leave this field blank.

74.5.5 Setting Up AAIs for Method 1

After you set up the intercompany settlement accounts for each company, you can reference these accounts in the intercompany AAIs. This way the system knows which accounts to automatically create balancing entries for during the post.

Set up AAIs for intercompany settlements on Single AAI Revisions or Multiple AAI Revisions.

There are two AAIs for intercompany settlements:

  • ICH (Intercompany Hub). This item defines the hub company.

    • There can be only one AAI item ICH.

    • You must set up AAI item ICH for company 00000.

    • You must enter the hub company's business unit balance sheet number.

    • You must enter an object account. The object account must point to the hub company's non-posting title account for intercompany settlements.

    • Subsidiary accounts are not used and should be left blank The subsidiary account is blank because the system can extract subsidiary account numbers from the company numbers

  • ICCC (Intercompany Business Unit). This item defines the non-hub companies.

    • You must have a separate AAI item ICCC for each non-hub company.

    • You must enter an object account. The object account must point to the machine-generated posting account for the non-hub company.

    • Subsidiary accounts are not used and should be left blank. The subsidiary account is blank because the system can extract subsidiary account numbers from the company numbers.

Example: AAIs for Method 1

The following example shows the AAIs for items ICH and ICCC with separate items for ICCC, instead of a blank company and business unit.

Item Company Business Unit Object Subsidiary
ICH 00000 1 1291  
ICCC 00002* 2* 1291  
ICCC 00003* 3* 1291  

Note:

* You can leave the business unit field blank for item ICCC if the business unit is equal to the company number (without leading zeros). For example, business unit 1 corresponds to company 00001.

74.5.6 What You Should Know About

Topic Description
Setting up companies If you use method 1, you must set up each company in the Address Book system. For example, if you set up company 00007, you must set up address book record 7 describing this company.

74.6 Setting Up Detail Method D

Detail method D creates detailed journal entries for your intercompany settlements. Because there is no designated hub company, this method uses the company on the first line of a transaction as the hub company. Method D uses standard account codes and subledgers.

Method D requires your balance sheet business unit number to be the same as the company number (excluding leading zeros). For example, Company 00001 must have a corresponding balance sheet business unit of 1, in order for this method to be used. If the balance sheet business unit does not use the same numbering designation as your company, you must use Method 2 for intercompany settlements.

Note:

Method D may not be used with a Flex Chart of Accounts. A Flex Chart of Accounts deviates from the following account structure BU (12 digits) Obj (4, 5, or 6 digits) Subsidiary (8 digits).

Setting up detail method D includes:

  • Setting up intercompany accounts

  • Setting Up General Accounting Constants

  • Setting Up Companies in Address Book

  • Setting up AAIs

74.6.1 Before You Begin

  • Decide whether you have set up standard accounts or flex accounts

74.6.2 Setting Up Intercompany Accounts for Method D

Set up intercompany accounts on Accounts by Object. For method D, do the following:

For Do the following
For the business unit on each company's balance sheet Set up an intercompany settlement account. The object account for all intercompany accounts should be the same.

Note: JD Edwards World recommends that you use a posting edit code of M (machine-generated only). This posting edit codes only allows entries created by the system and protects the integrity of this account.

For each intercompany account Assign a business unit number equal to the company number. If this deviates from your naming conventions for business units, consider using method 2.

There are no rules for setting up subsidiary accounts for method D because it uses subledgers. This method is designed for use with a flex chart of accounts, but can also be used with a standard chart of accounts.

All companies must be set up in the address book, and the address book number must be the same as the company number.

Example: Intercompany Accounts for Method D

The following example shows the setup requirements for intercompany object accounts for each company. Note that methods D and 1 have the same setup requirements.

Business Unit Object Subsidiary Posting Edit Code Level of Detail
1 1291 Not Used M (machine only) 6
2 1291 Not Used M (machine only) 6
3 1291 Not Used M (machine only) 6

74.6.3 Setting Up General Accounting Constants

Use the General Accounting Constants to control what method your organization uses for intercompany settlements.

On General Accounting Constants (P000909)

Enter D in the following field, as needed:

  • Intercompany Settlement(Y/D/C/1/2/3/*/N)

74.6.4 Setting Up Companies in Address Book

If possible, enter the Address Book number as the Company number. For example, Company 00001 would be set up for Address Book number 00000001. If you cannot set up the Address Book number equal to the Company number, you must identify the address book number of the company in the detail area (F4) of the Company Numbers & Names program (P00105).

For example, if the address book number for company 00001 is 00000750, you must populate the Company Address Book number field, in the detail area with 00000750. If the company address book number is equal to the company number, you may leave this field blank.

74.6.5 Setting Up AAIs for Method D

Set up AAIs for intercompany settlements on Single AAI Revisions or Multiple AAI Revisions.

While there are two AAIs for intercompany settlements, for method D, define AAI item ICH (Intercompany Hub) only. This item defines the object account.

  • There can be only one AAI item ICH.

  • You must set up AAI item ICH for company 00000.

  • The business unit must be blank. The system requires that the business unit number be the same as the company number.

  • You must enter an object account. The object account points to the intercompany settlement account.

  • Subsidiary accounts are not used and should be left blank The subsidiary account is blank because the system can extract subsidiary account numbers from the company numbers

Example: AAIs for Method D

The following example shows the relationship between the AAI item and company and object account. This is the required AAI setup for method D.

AAI Item Company Business Unit Object Subsidiary
ICH 00000   1291  

74.7 Setting Up Detail Method 2

Detail method 2 is an enhanced detail method that can be used with a Flex Chart of Accounts. It creates detailed journal entries for your intercompany settlements. Because there is no designated hub company, this method uses the company on the first line of a transaction as the hub company.

Setting up detail method 2 includes:

  • Setting up intercompany accounts

  • Setting Up General Accounting Constants

  • Setting Up Companies in Address Book

  • Setting up AAIs

74.7.1 Before You Begin

  • Decide whether to use standard accounts or flex accounts

74.7.2 Setting Up Intercompany Accounts for Method 2

Set up intercompany accounts on Accounts by Object.

For method 2, set up an intercompany settlement account for the business unit on each company's balance sheet. You must use the same object account and level of detail for all companies.

Note:

JD Edwards World recommends that you use a posting edit code of M (machine-generated only). This posting edit codes only allows entries created by the system and protects the integrity of this account.

Method 2 gives you the ability to process intercompany settlements when the company number is not reflected in its associated balance sheet business unit.

There are no rules for setting up subsidiary accounts for method 2 because it uses subledgers. This method is designed for use with a flex chart of accounts, but can also be used with a standard chart of accounts.

Example: Intercompany Accounts for Method 2

The following example shows the setup requirements for intercompany settlements account when the company number (00001) is different from the balance sheet (10).

Business Unit Object Subsidiary Posting Edit Level of Detail
1 1291 Not Used M (machine generated) 6
2 1291 Not Used M (machine generated) 6
3 1291 Not Used M (machine generated) 6

74.7.3 Setting Up General Accounting Constants

Use the General Accounting Constants to control what method your organization uses for intercompany settlements.

On General Accounting Constants (P000909)

Enter 2 in the following field, as needed:

  • Intercompany Settlement(Y/D/C/1/2/3/*/N)

74.7.4 Setting Up Companies in Address Book

If possible, enter the Address Book number as the Company number. For example, Company 00001 would be set up for Address Book number 00000001. If you cannot set up the Address Book number equal to the Company number, you must identify the address book number of the company in the detail area (F4) of the Company Numbers & Names program (P00105).

For example, if the address book number for company 00001 is 00000750, you must populate the Company Address Book number field, in the detail area with 00000750. If the company address book number is equal to the company number, you may leave this field blank.

74.7.5 Setting Up AAIs for Method 2

Set up AAIs for intercompany settlements on Single AAI Revisions or Multiple AAI Revisions.

While there are two AAIs for intercompany settlements, for method 2, define AAI item ICCC (Intercompany Business Unit) only. This item defines the companies involved in intercompany settlements.

  • You must have separate AAI items for ICCC for every company that will be involved in intercompany settlements.

  • For each AAI item ICCC, you must enter a business unit. The business unit does not need to match the company number.

  • For each AAI item ICCC, you must enter an object account. The object account for all ICCC AAI items is the intercompany transaction account.

  • Subsidiary accounts are not used and should be left blank The subsidiary account is blank because the system can extract subsidiary account numbers from the company numbers

Example: AAIs for Method 2

The following example shows the setup requirements for AAI item ICCC.

AAI Item Company Business Unit Object Subsidiary
ICCC 00001 10 1291 Not Used
ICCC 00002 20 1291 Not Used
ICCC 00003 3 1291 Not Used