1. Using General Ledger
  2. Intercompany Agreement

Intercompany Agreement

Intercompany agreement is the main parent document that authorizes the transfer using a specific financial route.

This can be a living document until the identified financial route and its purpose is no longer active. For example, this can be the annual line of credit released by treasury department to its one of LOB entities.

The key attributes of an agreement include these elements:

  • Intercompany Transaction Type: Select a suitable transaction type that is appropriate to define the purpose of the transfer. Also, it determines the onward flow of transactions, that is, whether it requires invoicing, or it will be sent directly to the general ledger.
  • Transaction Currency: This is the currency in which the transfer of funds using a transfer authorization are initiated.
  • Settlement Currency Basis: The funds transfer or a transfer authorization can be settled at the receiver organization in a currency other than the transaction currency. The settlement can take place in the ledger currency of any of the route organizations, that is, provider ledger currency, first or second clearing organization’s ledger currency, or receiver ledger currency. If the settlement involves no conversion, then transaction currency will be the settlement basis.
  • Conversion Rate Type: The conversion rate type defined at the agreement is used for any conversion of funds from the transaction currency to the settlement currency. The conversion rate type defined for an agreement can be modified at the transaction level.
  • Status: An agreement must be in the active status to initiate transfers. You can have the agreement in the draft status while you define the components of the agreement.
  • Route Information: This includes defining the provider, receiver, and clearing organizations. You can define up to two clearing organizations.
Note: Clearing organizations are not mandatory for the transfer.

Scenario

  • Your company, InFusion Corporation, is a multinational conglomerate that operates in many geographies that include the United States (US), the United Kingdom (UK), and Singapore (SG).
  • Infusion headquarter is located in the US and the subsidiaries are here:
    • InFusion UK Services
    • InFusion Singapore
  • Infusion headquarter and the subsidiaries uses Oracle General Ledger and the Oracle Payables and Oracle Receivables subledgers.
  • Infusion US Services are funding a working capital loan from the US to Singapore, and to optimize the currency exposure, the funds are routed through Infusion UK Services.
  • The intercompany agreement is defined with transaction type to generate invoicing. Transaction currency for the agreement is USD as funds will be remitted in USD. The following financial route organizations are also defined.
  • Provider Organization – US Services
  • First Clearing Organization – UK Operations
  • Receiver organization – Singapore Operations
  • The intercompany agreement may be created as soon as the purpose of the transfers is determined. An agreement can remain active as long as the transfers are intended or planned between the route organizations.
  • User who will create and manage agreement should be granted these duty roles namely - Intercompany Agreement Processing Duty and Intercompany Agreement Management Duty. See the security section for more details.