Intercompany Flow Map
Complete guide to intercompany transactions between subsidiaries in NetSuite OneWorld.
Intercompany Overview
INTERCOMPANY TRANSACTION CONCEPT
═══════════════════════════════════════════════════════════════════════════════════════════════════
PARENT COMPANY (Consolidated)
┌─────────────────────────────────────────────────────────────────────────────────────────────┐
│ │
│ ELIMINATES on consolidation │
│ ▲ │
│ │ │
│ ┌─────────────────────────────────┼─────────────────────────────────┐ │
│ │ │ │ │
│ │ SUBSIDIARY A │ SUBSIDIARY B │ │
│ │ (Seller) │ (Buyer) │ │
│ │ │ │ │
│ │ ┌─────────────────────┐ │ ┌─────────────────────┐ │ │
│ │ │ Intercompany │ │ │ Intercompany │ │ │
│ │ │ Sales Order │ ──────┼───▶│ Purchase Order │ │ │
│ │ │ │ │ │ │ │ │
│ │ │ Customer: Sub-B IC │ │ │ Vendor: Sub-A IC │ │ │
│ │ │ Revenue: $10,000 │ │ │ Expense: $10,000 │ │ │
│ │ └─────────────────────┘ │ └─────────────────────┘ │ │
│ │ │ │ │ │ │
│ │ ▼ │ ▼ │ │
│ │ IC Receivable: $10,000 │ IC Payable: $10,000 │ │
│ │ │ │ │
│ └─────────────────────────────────┼─────────────────────────────────┘ │
│ │ │
│ ▼ │
│ ┌─────────────────────┐ │
│ │ ELIMINATION │ │
│ │ │ │
│ │ IC Revenue (Dr) │ │
│ │ IC Expense (Cr) │ │
│ │ IC Recv (Cr) │ │
│ │ IC Pay (Dr) │ │
│ │ │ │
│ │ Net Impact: $0 │ │
│ └─────────────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────────────────────────────────┘
Types of Intercompany Transactions
Sales/Purchase (Inventory Transfer)
INTERCOMPANY INVENTORY TRANSFER
═══════════════════════════════════════════════════════════════════════════════
Scenario: Subsidiary A sells inventory to Subsidiary B
SUBSIDIARY A (Seller) SUBSIDIARY B (Buyer)
┌────────────────────────────┐ ┌────────────────────────────┐
│ │ │ │
│ Intercompany Sales Order │ Auto │ Intercompany PO │
│ ─────────────────────────│──creates─▶│ ──────────────── │
│ Customer: Sub-B (IC) │ │ Vendor: Sub-A (IC) │
│ Item: Widget (100) │ │ Item: Widget (100) │
│ Price: $10/unit │ │ Price: $10/unit │
│ Total: $1,000 │ │ Total: $1,000 │
│ │ │ │
└─────────────┬──────────────┘ └─────────────┬──────────────┘
│ │
▼ ▼
┌────────────────────────────┐ ┌────────────────────────────┐
│ Item Fulfillment │ │ Item Receipt │
│ ─────────────── │ Ship │ ──────────── │
│ Location: Sub-A Warehouse │────to───▶│ Location: Sub-B Warehouse │
│ Qty: 100 │ │ Qty: 100 │
└─────────────┬──────────────┘ └─────────────┬──────────────┘
│ │
▼ ▼
┌────────────────────────────┐ ┌────────────────────────────┐
│ Intercompany Invoice │ Links │ Intercompany Vendor Bill │
│ ───────────────────── │◄────────▶│ ─────────────────────── │
│ │ │ │
│ GL: │ │ GL: │
│ IC Receivable $1,000 Dr │ │ Inventory $1,000 Dr │
│ IC Revenue $1,000 Cr │ │ IC Payable $1,000 Cr │
│ │ │ │
│ COGS $600 Dr │ │ │
│ Inventory $600 Cr │ │ │
└────────────────────────────┘ └────────────────────────────┘
Service/Fee Charges
INTERCOMPANY SERVICE CHARGE
═══════════════════════════════════════════════════════════════════════════════
Scenario: Parent charges management fee to Subsidiary
PARENT COMPANY SUBSIDIARY
┌────────────────────────────┐ ┌────────────────────────────┐
│ │ │ │
│ Intercompany Invoice │ Auto │ Intercompany Vendor Bill │
│ ───────────────────── │─creates─▶│ ─────────────────────── │
│ Customer: Subsidiary (IC) │ │ Vendor: Parent (IC) │
│ Item: Management Fee │ │ Item: Management Fee │
│ Amount: $50,000/month │ │ Amount: $50,000/month │
│ │ │ │
│ GL: │ │ GL: │
│ IC Receivable $50,000 Dr │ │ Mgmt Fee Exp $50,000 Dr │
│ Mgmt Fee Rev $50,000 Cr │ │ IC Payable $50,000 Cr │
└────────────────────────────┘ └────────────────────────────┘
Intercompany Journal Entry
INTERCOMPANY JOURNAL ENTRY
═══════════════════════════════════════════════════════════════════════════════
Direct GL adjustment between subsidiaries
┌──────────────────────────────────────────────────────────────────────────────┐
│ INTERCOMPANY JOURNAL ENTRY │
│ ─────────────────────────── │
│ │
│ Subsidiary A Lines: │
│ ┌──────────────────────────────────────┬────────────┬────────────┐ │
│ │ Account │ Debit │ Credit │ │
│ ├──────────────────────────────────────┼────────────┼────────────┤ │
│ │ IC Receivable - Sub B │ $25,000.00 │ │ │
│ │ Shared Services Allocation │ │ $25,000.00 │ │
│ └──────────────────────────────────────┴────────────┴────────────┘ │
│ │
│ Subsidiary B Lines (auto-created): │
│ ┌──────────────────────────────────────┬────────────┬────────────┐ │
│ │ Account │ Debit │ Credit │ │
│ ├──────────────────────────────────────┼────────────┼────────────┤ │
│ │ Shared Services Expense │ $25,000.00 │ │ │
│ │ IC Payable - Sub A │ │ $25,000.00 │ │
│ └──────────────────────────────────────┴────────────┴────────────┘ │
│ │
│ ☑ Auto Balance (creates offsetting lines in other subsidiary) │
└──────────────────────────────────────────────────────────────────────────────┘
Intercompany Accounts
Required Account Setup
INTERCOMPANY ACCOUNT STRUCTURE
═══════════════════════════════════════════════════════════════════════════════
Balance Sheet Accounts (per subsidiary pair):
┌─────────────────────────────────────────────────────────────────────────────┐
│ SUBSIDIARY A SUBSIDIARY B │
│ │
│ ASSETS LIABILITIES │
│ ────── ─────────── │
│ 1500 IC Receivable - Sub B 2500 IC Payable - Sub A │
│ │
│ LIABILITIES ASSETS │
│ ─────────── ────── │
│ 2500 IC Payable - Sub B 1500 IC Receivable - Sub A │
└─────────────────────────────────────────────────────────────────────────────┘
Income Statement Accounts:
┌─────────────────────────────────────────────────────────────────────────────┐
│ SUBSIDIARY A (Seller) SUBSIDIARY B (Buyer) │
│ │
│ REVENUE EXPENSE │
│ ─────── ─────── │
│ 4500 Intercompany Revenue 6500 Intercompany Expense │
│ (or IC Sales) (or IC Cost) │
│ │
│ COGS (if inventory) │
│ ──── │
│ 5500 Intercompany COGS │
└─────────────────────────────────────────────────────────────────────────────┘
Account Mapping
| Transaction Type | Seller Account | Buyer Account |
|---|---|---|
| IC Sale (AR side) | IC Receivable | - |
| IC Sale (Revenue) | IC Revenue | - |
| IC Purchase (AP side) | - | IC Payable |
| IC Purchase (Expense) | - | IC Expense or Inventory |
| IC COGS | IC COGS | - |
Elimination Process
How Elimination Works
ELIMINATION ON CONSOLIDATION
═══════════════════════════════════════════════════════════════════════════════
Before Elimination (Sum of Subsidiaries):
┌─────────────────────────────────────────────────────────────────────────────┐
│ │
│ Revenue: Sub A: $100,000 Sub B: $80,000 Total: $180,000 │
│ (includes IC) (IC: $10,000) (no IC rev) │
│ │
│ Expenses: Sub A: $70,000 Sub B: $60,000 Total: $130,000 │
│ (includes IC) (no IC exp) (IC: $10,000) │
│ │
│ IC Receivable: Sub A: $10,000 Sub B: $0 Total: $10,000 │
│ IC Payable: Sub A: $0 Sub B: $10,000 Total: $10,000 │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
Elimination Entry (System Generated):
┌────────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────────┼────────────┼────────────┤
│ Intercompany Revenue │ $10,000.00 │ │
│ Intercompany Expense │ │ $10,000.00 │
│ Intercompany Payable │ $10,000.00 │ │
│ Intercompany Receivable │ │ $10,000.00 │
└────────────────────────────────────┴────────────┴────────────┘
After Elimination (Consolidated View):
┌─────────────────────────────────────────────────────────────────────────────┐
│ │
│ Revenue: $180,000 - $10,000 (elim) = $170,000 │
│ (external only) │
│ │
│ Expenses: $130,000 - $10,000 (elim) = $120,000 │
│ (external only) │
│ │
│ IC Receivable: $10,000 - $10,000 (elim) = $0 │
│ IC Payable: $10,000 - $10,000 (elim) = $0 │
│ │
│ Net Income: $170,000 - $120,000 = $50,000 (same as before elim) │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
Elimination Timing
| Report Type | Elimination Applied | View |
|---|---|---|
| Subsidiary Report | No | Individual subsidiary |
| Consolidated Report | Yes | Parent + all subs eliminated |
| Combined Report | Optional | Subs added, elim optional |
Intercompany Pricing
Transfer Pricing Methods
TRANSFER PRICING OPTIONS
═══════════════════════════════════════════════════════════════════════════════
Method 1: Cost Plus Markup
┌─────────────────────────────────────────────────────────────────────────────┐
│ Item Cost: $100 │
│ Markup: 10% │
│ IC Price: $110 │
│ │
│ Sub A Profit: $10 (on IC sale) │
│ Sub B Cost: $110 (inventory value) │
└─────────────────────────────────────────────────────────────────────────────┘
Method 2: Market Price
┌─────────────────────────────────────────────────────────────────────────────┐
│ External Market Price: $150 │
│ IC Price: $150 (same as market) │
│ │
│ Arm's length transaction │
│ Compliant with transfer pricing rules │
└─────────────────────────────────────────────────────────────────────────────┘
Method 3: Negotiated Price
┌─────────────────────────────────────────────────────────────────────────────┐
│ Cost: $100 │
│ Market: $150 │
│ IC Price: $125 (negotiated between subs) │
│ │
│ Sub A Profit: $25 │
│ Sub B Savings: $25 vs market │
└─────────────────────────────────────────────────────────────────────────────┘
Price Lists for IC
| Setup | Description |
|---|---|
| IC Price Level | Dedicated price level for intercompany |
| IC Customer/Vendor | IC entity with special pricing |
| Item IC Price | Per-item intercompany price |
Intercompany Settlement
Payment Process
INTERCOMPANY SETTLEMENT
═══════════════════════════════════════════════════════════════════════════════
Option 1: Cash Settlement (Actual Payment)
┌─────────────────────────────────────────────────────────────────────────────┐
│ │
│ Sub B pays Sub A for IC balance: │
│ │
│ Sub B: Sub A: │
│ IC Payable $10,000 Dr Bank Account $10,000 Dr │
│ Bank Account $10,000 Cr IC Receivable $10,000 Cr │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
Option 2: Netting (Net Settlement)
┌─────────────────────────────────────────────────────────────────────────────┐
│ │
│ Multiple IC balances netted: │
│ │
│ Sub A owes Sub B: $5,000 │
│ Sub B owes Sub A: $12,000 │
│ Net: Sub B pays Sub A $7,000 │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
Option 3: No Cash (Journal Entry)
┌─────────────────────────────────────────────────────────────────────────────┐
│ │
│ Clear via IC Journal (no actual cash moves): │
│ │
│ Sub A: Sub B: │
│ Investment in Sub B $10,000 Dr Equity - Parent $10,000 Dr │
│ IC Receivable $10,000 Cr IC Payable $10,000 Cr │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
Intercompany Reports
Key Reports
| Report | Purpose | Shows |
|---|---|---|
| Intercompany Balances | Outstanding IC amounts | Receivable/Payable by sub pair |
| IC Transaction Register | All IC transactions | Detail of IC activity |
| Consolidated P&L | Eliminated results | External revenue/expense only |
| Consolidated Balance Sheet | Eliminated balances | No IC receivable/payable |
| Elimination Report | Elimination detail | What was eliminated |
Balance Query
-- Intercompany account balances
SELECT
a.acctnumber,
a.accountsearchdisplayname AS account_name,
a.accttype,
SUM(tal.amount) AS balance
FROM
transactionaccountingline tal
JOIN
account a ON tal.account = a.id
WHERE
LOWER(a.accountsearchdisplayname) LIKE '%intercompany%'
OR LOWER(a.accountsearchdisplayname) LIKE '%ic %'
GROUP BY
a.acctnumber,
a.accountsearchdisplayname,
a.accttype
HAVING
SUM(tal.amount) <> 0
ORDER BY
a.accttype, a.acctnumber
Common IC Scenarios
Shared Services Center
SHARED SERVICES ALLOCATION
═══════════════════════════════════════════════════════════════════════════════
Parent Company (Shared Services)
┌─────────────────────────────────────────────────────────────────────────────┐
│ IT Department: $100,000/month │
│ HR Department: $50,000/month │
│ Finance Department: $75,000/month │
│ Total Shared Costs: $225,000/month │
└─────────────────────────────────────────────────────────────────────────────┘
│
Allocate based on headcount/revenue
│
┌────────────────────────┼────────────────────────┐
▼ ▼ ▼
┌─────────────┐ ┌─────────────┐ ┌─────────────┐
│ Subsidiary A│ │ Subsidiary B│ │ Subsidiary C│
│ │ │ │ │ │
│ 40% share │ │ 35% share │ │ 25% share │
│ $90,000 │ │ $78,750 │ │ $56,250 │
└─────────────┘ └─────────────┘ └─────────────┘
IC Invoice from Parent to each Subsidiary
Cross-Border Sale
CROSS-BORDER INTERCOMPANY
═══════════════════════════════════════════════════════════════════════════════
US Subsidiary (Manufacturer) UK Subsidiary (Distributor)
┌────────────────────────────┐ ┌────────────────────────────┐
│ │ │ │
│ Manufactures Widget │ │ Sells to UK customers │
│ Cost: $50 │ │ External Price: £100 │
│ │ │ │
│ IC Sale to UK: │ │ IC Purchase from US: │
│ Price: $75 (cost + 50%) │ │ Price: $75 = £60 │
│ │ │ │
│ Currency: USD │ │ Currency: GBP │
│ │ │ FX Rate at transaction │
│ │ │ │
│ GL (USD): │ │ GL (GBP): │
│ IC Recv $75 Dr │ │ Inventory £60 Dr │
│ IC Revenue $75 Cr │ │ IC Payable £60 Cr │
│ COGS $50 Dr │ │ │
│ Inventory $50 Cr │ │ │
└────────────────────────────┘ └────────────────────────────┘
Note: FX differences may arise on settlement
Best Practices
Setup
| Practice | Benefit |
|---|---|
| Consistent IC account naming | Easy identification |
| Separate IC price level | Clear transfer pricing |
| IC customer/vendor per sub | Organized records |
| Document transfer pricing policy | Compliance |
Operations
| Practice | Benefit |
|---|---|
| Regular IC reconciliation | Catch discrepancies |
| Monthly netting | Reduce cash movements |
| Clear approval for IC transactions | Control |
| Track IC separately in reports | Visibility |
Compliance
| Practice | Benefit |
|---|---|
| Arm's length pricing | Transfer pricing compliance |
| Documentation | Audit trail |
| Consistent methodology | Defensible position |
| Annual review | Stay current |
Next Steps
- GL Flow Map - See all GL entries
- Currency Flow Map - Multi-currency handling
- Financial Flow - Journal entries