Automated Intercompany Management feature and Elimination subsidiary

The Automated Intercompany Management feature in NetSuite OneWorld enables us to manage intercompany transactions and automatically generate elimination journal entries. Previously known as Intercompany Auto Elimination, the feature was enhanced to include intercompany sales and purchases and intercompany inventory transfers. 

With this feature enabled, NetSuite automatically generates elimination journal entries based on the intercompany transaction lines and intercompany journal lines marked to be eliminated. As part of the period close process, NetSuite evaluates the activity in our intercompany accounts. It then creates journal entries to eliminate artificial profit and loss amounts. Without this feature enabled, we must manually create and track all intercompany transactions, and then manually create and post elimination journal entries. 

The Automated Intercompany Management process involves the following activities: 

• Create intercompany purchase orders per subsidiary, as needed. 
• Generate intercompany sales orders from intercompany purchase orders. 
• Manage intercompany inventory transfers.  
• Enter advanced intercompany journal entries for other intercompany transactions. 
• Reconcile intercompany transactions.  
• Run Intercompany Elimination from the Period Close Checklist. 
• View the Intercompany Elimination report.  

Prerequisites: 

1. NetSuite OneWorld account 
2. Elimination subsidiary 
3. Automated Intercompany management feature – Setup → Company → Enable features: Accounting subtab → Advanced features section 

Note: The Automated Intercompany Management feature cannot be disabled after it is enabled. This is true even if we have not created any intercompany entities or transactions. 

When this feature is enabled, NetSuite adds the following fields, accounts, and more: 

1. NetSuite adds the system-generated Cumulative Translation Adjustment-Elimination (CTA-E) account to our chart of accounts after a user enters a qualifying transaction. For example, a user must first run the elimination process so that NetSuite creates an elimination journal entry that uses this account.  
2. NetSuite adds the Eliminate Intercompany Transactions task as the last task in the Period Close Checklist. 
3. An Eliminate box displays for journal lines on standard and advanced intercompany journal entries. 
   Note: We can use journal entries rather than advanced intercompany journal entries to record intercompany transactions. However, we must customize the standard journal entry form to display the Eliminate box.  
4. NetSuite creates the Standard Intercompany Vendor Form and the Standard Intercompany Customer Form records. These records include the Represents Subsidiary field, which does not display on the standard vendor and customer records. 
5. NetSuite adds the Intercompany Status and Paired Intercompany Transactions fields to the Sales Order, Purchase Order, Return Authorization, and Vendor Return Authorization pages. 
6. NetSuite adds the Eliminate Intercompany Transactions box to the Account record. 
7. Create intercompany accounts. 
   If our account meets the prerequisites, NetSuite can automatically generate and maintain intercompany entities to represent all non-elimination subsidiaries. 
8. If our account does not meet the prerequisites, we can continue to create intercompany customers and vendors that represent our non-elimination subsidiaries.  
9. Review the guidelines for inventory items for intercompany transfers. 
10. For arm’s length intercompany inventory transfers, verify that the Use Item Cost as Transfer Cost preference is not enabled. Go to Setup > Accounting > Preferences >Accounting Preferences. Click the Order Management subtab. Under the Transfer Orders section, ensure the preference is not enabled. 
11. Optionally, enable the Automated Intercompany Drop Ship feature to manage intercompany drop ship orders. An administrator must go to Setup > Company > Enable Features. Click the Accounting subtab. Under the Advanced Features section, check the Automated Intercompany Drop Ship box, and then save.  

When we enter intercompany transactions and advanced intercompany journal entries to record business activity between subsidiaries, the system identifies transaction lines that require elimination. 

• Intercompany sales and billing transaction lines are identified by default, based on the intercompany account with which the line is associated. An intercompany sales order is a non-posting transaction, a transaction that has no general ledger impact. However, when the sales order is invoiced, the system identifies the transaction lines that require elimination for posting to intercompany accounts. The same is true for intercompany purchase orders. An intercompany purchase order is a non-posting transaction. However, when the purchase order is billed, the system identifies transaction lines that require elimination for posting to intercompany accounts. 

• Intercompany inventory transfers and intercompany drop shipments are identified by default. They are based on the intercompany account associated with the line on related purchase orders and sales orders. 
• Journal lines that require elimination at the period end are identified either by default. They are based on the intercompany account entered for the line, or by manually checking the line for elimination. 

At the end of the accounting period, complete the tasks in our Period Close Checklist. The last task on the checklist is to Eliminate Intercompany Transactions. We can complete this task only after completing the Revalue Open Foreign Currency Balances and Calculate Consolidated Balances tasks. We must complete these two tasks first to ensure that foreign currency adjustment amounts have been calculated for transactions in the period.  

When we run intercompany elimination, NetSuite creates elimination journal entries for all intercompany transaction journal lines that have the Elimination box checked. Adjustments that result from the difference in the foreign currency exchange rates post to the Cumulative Translation Adjustment-Elimination (CTA-E) account. These differences occur from the originating intercompany journal entry and the elimination journal entry. NetSuite also creates a reversing journal entry for all intercompany journal lines that post to Intercompany Receivables and Intercompany Payables. 

If we use Multi-Book Accounting, we can run intercompany elimination on any accounting book. 

There are two steps to eliminate intercompany transactions with Automated Intercompany Management: 

1. Enter intercompany transactions as intercompany sales invoices and vendor bills. These transactions automatically post to intercompany accounts and have transaction lines marked as candidates for intercompany elimination. 
   We can also enter advanced intercompany journal entries (AICJE) for transactions during a period, and identify the journal lines that require elimination. 

2. Run intercompany elimination during the period close to automatically generate elimination journal entries. NetSuite creates elimination journal entries for all flagged transactions and journal entry lines. NetSuite also creates auto-reversing journal entries in the next period for all flagged journal lines posted to the Intercompany Receivables and Intercompany Payables accounts.