Demystifying Intercompany Accounting in Oracle Apps - Part 1
Based on our experience in providing consulting services for companies that have numerous Intercompany or interbranch transactions between entities spread across, following have been observed to be some of the issues commonly faced by the companies due to the inability of underlying applications to meet the business needs:
-- Process inconsistencies with different units following different mechanisms to account for intercompany transactions
-- Increased manual effort due to the use of suspense or clearing account for knocking off intercompany receivables and payables
-- Increased maintenance effort due to the use of multiple accounts to record intercompany receivables and payables for each division, branch, entity
-- Lack of ability to automatically balance intercompany transactions
Oracle Applications R12.1 provides various features and functionalities to address the issues mentioned above and support intercompany and interbranch transactions.
The types of intercompany transactions in Oracle can be categorized as:
• Intracompany transactions: Transactions between two branches within the same legal entity
• Intercompany transactions: Transactions between two legal entities that are accounted for in the same ledger
• Interledger transactions: Transactions between two legal entities that are accounted for in different ledgers
Oracle also provides multiple solutions as below which would be discussed in detail in Part2 of this blog
• Intercompany Segment in Chart of Accounts
• Intra Company Balancing
• Intercompany Accounting
• AGIS - Advanced Global Intercompany System
