I am working for a publicly traded company that has a couple of subsidiaries internationally. We charge items to entities that keep their books in another currency and vice versa on monthly basis. Our monthly intercompany cross-charge process has become an issue, in terms of P&L items eliminating, intercompany balances eliminating after conversion. What is the best way of treating the above transactions in the books of the two companies? Can someone share best practices (checklist/template) to follow in this case?
Intercompany cross-charging options
Answers
Anon
What software packages are in use:
-at the holding company?
-at each subsidiary?
Do you book transactions in each company in both the transaction and reporting currency (e.g. is an US$ interco charge to a EU subsidiary recorded in the EU company in both US$ and EU)?
Do you raise invoices for these charges?
Are you using a multi currency consolidation reporting package that can help manage interco balances?
The software in use may influence the way you manage the interco process.
Process design means a lot if you want to reduce reconciliation conflicts:
How many interco transactions occur each month?
How do you make sure both sides book the transaction in the same period?
How do you prevent/resolve disputes about the charges?
Your feedback may help others answer in a more targeted way.
Regards
At HQ, we do use multi currency reporting software called EPM for consolidation. Each company record the transcation in local currency and raises invoices on monthly basis. They all use different systems. Thanks