Example Intercompany Adjustment Scenario

This example occurs in an account where the Intercompany Time and Expense feature is enabled and the Intercompany Expenses accounting preference is set to Allow and Auto Adjust.

Important:

When NetSuite released the Intercompany Time and Expenses feature, the first set of accounts created were named Intercompany Payable/Receivable XXX, where XXX denoted the currency ISO code. In a later release, NetSuite OneWorld introduced the Intercompany Clearing XXX account. This new account replaced the Intercompany Payable/Receivable Account for new accounts because the existing accounts were being used by the Intercompany Elimination feature. The change applied to only new accounts. Existing accounts were not renamed. Still later, NetSuite OneWorld introduced new intercompany clearing accounts for payable and receivable that are not currency locked. These new clearing accounts are used for intercompany transactions. All existing currency-locked intercompany clearing accounts (the Intercompany Payable/Receivable accounts) are now child accounts of the new clearing account. For more information, see Enabling Intercompany Time and Expenses and Intercompany Elimination Overview.

Background

Sara Peters, an employee assigned to the U.S. based subsidiary of this account provides consulting services to FinCo. Finco is a U.K. based customer associated with the U.K. subsidiary.

Original Expense Report

Sara Peters incurs the following billable expenses recorded in U.S. dollars and records them in an expense report transaction. These expenses are cross-subsidiary. They were incurred by an employee of the U.S. subsidiary during the time in which the employee worked for a customer of the U.K. subsidiary.

Employee

Employee Subsidiary

Expense Category

Memo

Amount

Currency

Customer

Customer Subsidiary

Sara Peters

U.S.

Travel

RT Airfare NY-London

1,600.00

USD

FinCo

U.K.

Sara Peters

U.S.

Lodging

2 nts Hyatt

800.00

USD

FinCo

U.K.

Sara Peters

U.S.

Meals

3 days

600.00

USD

FinCo

U.K.

Expense Report GL Impact

After the expense report is approved by Accounting, the following amounts are posted to U.S. subsidiary accounts:

Account

Amount (Debited)

Amount (Credited)

Name

Subsidiary

Accounts Payable

3,000.00

Sarah Peters

U.S.

Travel

1,600.00

FinCo

U.S.

Lodging

800.00

FinCo

U.S.

Meals

600.00

FinCo

U.S.

Automated Intercompany Adjustment

As part of the period close process in which the expenses occurred, the controller generates automated adjustments to transfer the impact of intercompany expenses. An adjustment with the following lines is generated, all amounts in U.S. dollars:

Subsidiary

Account

Amount (Debited)

Amount (Credited)

Name

U.S.

Intercompany Clearing USD

1,600.00

U.S.

Travel

1,600.00

FinCo

U.K.

Travel

1,600.00

FinCo

U.K.

Intercompany Clearing USD

1,600.00

U.S.

Intercompany Clearing USD

800.00

U.S.

Lodging

800.00

FinCo

U.K.

Lodging

800.00

FinCo

U.K.

Intercompany Clearing USD

800.00

U.S.

Intercompany Clearing USD

600.00

U.S.

Meals

600.00

FinCo

U.K.

Meals

600.00

FinCo

U.K.

Intercompany Clearing USD

600.00

Automated Adjustment GL Impact

The following lines illustrate the automated adjustment's general ledger impact on U.S. and U.K. subsidiary accounts:

An exchange rate specified on the adjustment record translates the general ledger impact for the U.K. subsidiary from the U.S. subsidiary base currency (USD) to the U.K. subsidiary base currency (GBP). This rate is based on the last day of the period in which the adjustment occurred. In this example it is 0.51056877.

Account

Amount (Debited)

Amount (Credited)

Name

Subsidiary

Intercompany Clearing USD

1,600.00

U.S.

Travel

1,600.00

FinCo

U.S.

Travel

816.91

FinCo

U.K.

Intercompany Clearing USD

816.91

U.K.

Intercompany Clearing USD

800.00

U.S.

Lodging

800.00

FinCo

U.S.

Lodging

408.46

FinCo

U.K.

Intercompany Clearing USD

408.46

U.K.

Intercompany Clearing USD

600.00

U.S.

Meals

600.00

U.S.

Meals

306.34

U.K.

Intercompany Clearing USD

306.34

U.K.

Related Topics:

Enabling Intercompany Time and Expenses
Intercompany Clearing Account
Creating Intercompany Adjustments for Time and Expenses

General Notices