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White Paper On Fusion Intercompany Accounting V 1.0
White Paper On Fusion Intercompany Accounting V 1.0
B) SCOPE/OUT OF SCOPE................................................................................................................................................3
C) TERMS USED...............................................................................................................................................................3
D) CONCEPT....................................................................................................................................................................4
BUSINESS CASE............................................................................................................................ 6
E) BUSINESS EXAMPLE....................................................................................................................................................6
SETUP............................................................................................................................................ 8
F) SETUP..........................................................................................................................................................................8
A) Objective
This document is useful to understand following in Fusion financials:
B) Scope/Out of Scope
We are going to detail below in this paper:
C) Terms Used
Below are terms specifically used in Intercompany accounting feature of fusion financials:
a) Provider Organization: The organization which provides some service to another Internal
Organization.
b) Recipient Organization: The organization which receives the service from provider organization
c) Inbound Transaction
d) Outbound Transaction
e) Intercompany Receivable Account
f) Intercompany Payables Account
All the above mentioned terms can be understood by referring to following example:
Let’s say Legal entity “Y” performs some business activity (e.g. Consultancy, Miscellaneous expenses
etc.) for Legal entity “Z”. To record the business activity in books, Legal entity “Y” will create an
Intercompany Transaction. On submitting intercompany transaction, System creates outbound
transaction for legal entity “Y”. Additionally system creates Inbound Transaction for Legal entity “Z”.
Legal entity “Y” is providing business value to legal entity “Z”, so it (“Y”) will be receiving some monetary
value back in future from legal entity “Z”. To make this reflected in accounting, the value which is going
Legal entity “Z” is getting business value from legal entity “Y”, it’s a liability for Legal entity “Z”. To make
this reflected in accounting, the offset of Liability is parked in “Intercompany Payable account” of legal
entity “Z”.
D) Concept
Many a times in real business there are business transactions between different legal entities, such as
intercompany sales, doing expenses on behalf of another legal entity etc. The respective legal entities
can be part of same Ledger or different ledger. Intercompany accounting feature of fusion financials is
designed to process transactions (which needs to be accounted) between different legal entities. In
respect to organization structure broadly there are below two different scenarios for intercompany
transactions:
a) Ledger : “A”
a. Ledger “A” has following Legal entities assigned:
i. Legal entity: X
1. Legal entity “X” has following balancing segments assigned:
a. 01
b. 02
ii. Legal entity: Y
1. Legal entity “Y” has following balancing segments assigned:
a. 03
b. 04
b) Ledger: “B”
a. Ledger “B” has following Legal entities assigned:
i. Z
1. Legal entity “Z” has following balancing segments assigned:
a. 05
b. 06
To implement the Intercompany business scenario, we need to use Intercompany Accounting feature in
Fusion Financials. Intercompany transaction processing gets integrated with following modules:
A legal entity attached with Ledger “Vision Services” performs two different types of business activities
on behalf of legal entity of ledger “Vision Operations”. After completion of the business activity, the
activity need to be recorded in system.
The business activity is recorded as Intercompany transaction as the transaction is across legal entities.
In this example Vision services provides business related service to Vision operation, hence Vision
Services is “Provider” and Vision Operations” is “Receiver” in this example. After providing the service,
Provider Organization i.e. Vision Services records Intercompany Transaction in System. The transaction
created, becomes as Outbound Intercompany transaction for Vision Services and Inbound Intercompany
Transaction for Vision Operations.
Vision services is providing service to Vision operations, so Expected Accounting entry for Vision service
is:
Intercompany Receivables Dr
Revenue Cr
Above is generic accounting entry, in our case as there are two different business activities for Vision
operation so Vision operation would like to book the activity in two different account, so in this case
expected accounting for Vision Operations is as below:
Expense/Service (1) Dr
Expense/Service (2) Dr
Intercompany Payables Cr
If invoicing is required across the legal entities (in our case we are going to test the scenario where
invoicing is needed), then for tracking purpose:
a) Vision services needs an Intercompany Receivable Invoice and
F) Setup
Before transaction flow, setup need to be completed. Setup for Intercompany is related from General
ledger and Intercompany accounting. Before setting up Intercompany Accounting, few setups in general
ledger need to be done if it does not exist already. Setup need to be performed with user having
implementation project assigned to.
Note:
Chart of Accounts: Services Accounting Flex
Retained Earning Account: From here we can see that this ledger has 4 segments
Note:
Organization Name: IC Vision Services
Receivabales Business Unit: Vision Services , System will create receivable invoice with this BU,
for any Intercompany Transaction for IC Vision Services
Payables Business Unit: Vision Services , System will create payable invoice with this BU, for
any Intercompany Transaction for IC Vision Services
Create or Verify intercompany organization for second legal entity of our example, “Vision Operations”
Note:
Organization Name: SSC Operations 01, we are going to use this Intercompany Organization in
our test case.
Next Step: Provide data access for the Intercompany organization defined to user.
Next Step: Define Intercompany customer supplier association. This we need to perform to configure
respective Customer or supplier for which intercompany receivable or payable invoice to be cretaed by
system.
Prerequistie:
Customer and supplier defined for business units related to intercompany transaction.
Navigate: Financials>Define and Maintain Intercompany Processing Rules> Define Invoicing Options
Manage Intercompany Customer Supplier Association
Note:
For legal entity “Vision Services” System would create intercomopany receivable invoice with
customer account number 1627320
For legal entity “Vision Services” System would create intercomopany payable invoice with
Supplier number 7402
Similarly check customer supplier association for Vision Operations legal entity
To create receivable invoice Transaction Type and Memo line are required.
Next Step: Configure Intercompany Receivables Assignment
Prerequisties: Transaction type and Memo line is defined in Receivable for respective Business unit
Navigate: Financials>Define and Maintain Intercompany Processing Rules> Define Invoicing Options
Manage Intercompany Customer Supplier Association
System will pick transaction type and memo line from above configuration to cretae intercompany
receivable invoice. If its not defined for speciffic business unit then system would select values for
default assignment.
Refer the rule defined for Intercompany Transaction Type “I/C sales” we are going to use in this test
case.
Note:
Recivables account: 01-000-1810-0000-000, as per above configuration this account will be
taken by system to record any intercompany receivable amount for Vision Operation generated
for “To Ledger” and other parameters shown above.
G) Transaction Flow
Let’s recall the business scenario we started with. Vision services performs some business activity for
Vision Operations. Expectation is below from system:
Log in to application
Navigate to Book symbol In right. This displays all the activities we can perform.
Next step: Click on Plus symbol in Transactions region to create Intercompany transaction in the batch.
Enter account and amount for Receiver intercompany organization. As per our business example there 2
different business activity for Vision Operation the Receiver intercompany organization so enter 2
distributions with Account and Amount.
Note:
Amount entered “Debit” side in in Receiver tab
Amount entered “Credit” side in in Provider tab
Run “Transfer Intercompany Transactions to Receivables“to get receivable invoice created for the
Intercompany transaction.
Navigate: Navigator> Intercompany Accounting>Transactions
Click on “Book” icon at upper right corner.
Note:
Bill-to Name: Internal-Vision Operations, its same which is configured in “Manage Intercompany
Customer and Supplier Assignments”
To check accounts in Receivable Invoice, Navigate Actions>Review Distribution
Note:
Receivable Account: Its taken from “Manage Intercompany Balancing Rules” configuration
Revenue Account: Its taken from the Account enetered in “Provider” tab while creating
Intercompany transaction
Rounding Account: Its derived as per applicable Receivable configuration
The receivable invoice to be accounted and accounting to be trsnaferred to general ledger as standard
process.
As per business requirement, Vision Operation must have Payable invoice to track its Intercompany
payable liability.
Note:
Invoice amount:160
Supplier: Internal-Vision Services, its same which is configured in “Manage Intercompany
Customer and Supplier Assignments”
Lines: There are 2 Lines. This in in consistent to the business example where 2 different business
activities were done for Vision Operations
Next Step: Verify Liability account, it should be same as intercompany payable account defined while
configuring “Manage Intercompany Balancing Rules”
Click on “Show More” link in Invoice Header Region
The payable invoice to be validated, accounted and accounting to be trsnaferred to general ledger as
standard process.