Eliminations

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Eliminations help you to identify, calculate, and remove intercompany transactions within your entity’s hierarchy. This ensures accurate aggregation of financial information at consolidated reporting levels. For example, a transaction that involves the sale of an item manufactured by an entity of a holding group to another entity of the same holding should be eliminated when reporting consolidated results for the holding group.

Note:
The system by default considers Eliminations when you run the consolidation process from the Org Chart or Cloud Scheduler.

Understanding Elimination Process

In Consolidation Premium, the elimination of intercompany transactions are done by the system at the common meeting point. Consider an example, where Group 1 has two entities A and B. Further, entity A has two entities C and D. Entity C sold some goods to entity D. As both entities are part of entity A, the common meeting point for elimination of intercompany transactions is A’s books of accounts.

The table below describes journal entries in books of entities A, C & D. It further shows the elimination process performed by the system with initiation of the consolidation process in A’s books.

Note:
IC Segment - Helps identify whether a transaction is an intercompany transaction.
Reference - Helps identify to which company a transaction belongs to when the data is pulled to the parent.
Consolidated - Helps identify the type of data in consolidation, like GL Data (standalone), Pulled (from another entity), IC Elimination (inter company elimination), and so on.

Elimination Process Sequence	Entity	Transaction Type	IC Segment	Transaction Amount	Reference	Consolidated	Additional Information / Description
Books of Entity C
-	C	Sale	Default	-2000	No Source	GL Data	C made sales outside of group
-	C	Sale	D	-1000	No Source	GL Data	C made an inter-group sale to D for 1000
Books of Entity D
-	D	Sale	Default	-3000	No Source	GL Data	D made sales outside of group
-	D	Purchase	C	900	No Source	GL Data	D made an inter-group purchase from C. However, D recorded purchase at 900 due to loss in transit.
Books of Entity A (as the common meeting point for Entity C and D is Entity A, the elimination process happens in A’s books) (Assumption: all books are in same currency, hence Cumulative Translation Adjustments are not considered)
1	A	Sale	Default	-2000	C	Pulled	A brings C’s sales outside of the group to its book.
2	A	Sale	D	-1000	C	Pulled	A brings C’s inter-group sale to D to its book.
3	A	Sale	Default	-3000	D	Pulled	A brings D’s sales outside of the group to its book.
4	A	Purchase	C	900	D	Pulled	A brings D’s inter-group purchase from C to its book.
5	A	RE-BS (Retained Earnings - Balance Sheet)	Default	-3000	C	Retained Earnings	A passes reverse entries for C’s total sales in its book. (Row 1 + Row 2)
6	A	RE-BS (Retained Earnings - Balance Sheet)	Default	-2100	D	Retained Earnings	A passes reverse entries for D’s net sales in its books. (Row 3 + Row 4)
7	A	Sales	D	1000	C	IC Elimination	A passes intercompany elimination entry for C’s sales in its book.
8	A	Purchase	C	-900	D	IC Elimination	A passes intercompany elimination entry for D’s purchase in its book.
9	A	Out of Balance Account	Default	-100	No Source	IC Elimination	A records transaction in its book to adjust out of balance in elimination. The value is calculated using the formula: (Credit + Debit) * -1
10	A	RE-BS	Default	1000	C	IC Elimination	In Row 7, the system reversed sales made by C to D. Hence, C’s profit must be reduced by the same amount from A’s profit.
11	A	RE-BS	Default	-900	D	IC Elimination	In Row 8, the system reversed purchases by D from C. Hence, D’s profit must be increased by the same amount from A’s profit.

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