Intercompany matching with transactions

In intercompany reconciliation, differences typically arise between two partners. The reasons for those differences must be identified. Examining transactions can help determine whether a difference arises because of a usual currency fluctuation or is a real discrepancy such as a timing difference in the transaction currency.

The use of transaction currencies is optional. If used, you can distinguish between currency and transaction differences for consolidation debts (D processes) and consolidation expenditure/revenue (R processes). This distinction is possible only for rules that do not use segmentation and segmentation elimination elements. The formula is total difference - other difference = currency difference.

This method applies only to the D and R processes and is not used for the HD, HDE, HR, and HRE processes.

Activation of transaction currencies

As a transaction currency, you can use any currency that is configured as an entity currency in Business Modeling.

Transaction data

To provide transaction data, use one of these options:

  • Specify transaction data on the Intercompany Matching Detail Consolidation Debts or Intercompany Matching Detail Consolidation Expenditure/Revenue page. Alternatively, on the Transactions Data Entry Detail Cons. Debts or Transactions Data Entry Detail – Cons. Expenditure / Revenue page. To specify transaction data, you must select the HB I manual - Data Entry Manual level in the context.

    See "Intercompany Matching Detail Consolidation Debts", "Intercompany Matching Detail Consolidation Expenditure/Revenue", "Transactions Data Entry Detail Cons. Debts", and "Transactions Data Entry Detail – Cons. Expenditure / Revenue".

  • Upload transaction data from the integration tables. To view uploaded data, you must select the HB I - Imported Data level in the context.

Differences in the Intercompany Matching Detail reports

In the Intercompany Matching Detail reports, the total difference in a group currency between two entities is broken down into a transaction difference and a currency difference. As long as no transaction data is specified, the total difference is displayed in the Other Differences column. However, the journals post the total difference as other differences.

Deleting specified transaction values manually

To delete already specified values in a transaction currency from the database, you must press Ctrl + Del or specify #delete.

Caution: 
If you specify 0 or press Del, then 0 is written back in the cube and is treated as a number. This causes an incorrect currency difference calculation. That is, the difference is identified as a currency difference instead of other differences because 0 is explained as other differences. In the user interface, 0 is displayed regardless of if it is a 0 value or a deleted (empty) value.

Business Modeling elimination setup

If no transaction data is specified, the D and R rules post differences to the Other Differences Account that has been set in Business Modeling. See ""Managing eliminations".

If you specify transaction values manually or upload them from the integration tables, the total difference is split into these differences:

  • Transaction difference: Booked as other differences
  • Currency difference: Considered in the Intercompany Matching Detail Consolidation Debts and Intercompany Matching Detail Consolidation Expenditure/Revenue reports and by the D and R processes in journals

The HD, HDE, HR, and HRE rules always post differences to the Other Differences Account. Those rules do not differentiate between currency differences.

Specifying transaction data, example

In this example, entities RU0001 and RU0002 have EUR as the local and group currency.

This table shows amounts that are displayed in the Intercompany Matching Detail Consolidation Debts report:

Consolidation Process Group Currency (EUR)
D2 - Short term intragroup payables RU0001

RU0002

 RU0002

RU0001
A220210 - Trade Receivables (Fair Value) 320,050 460,000
A220100 - Advance Payments on Purchase of Current Assets 0 0
Sum 320,050 460,000
L300100 - Trade Payables 460,000 330,050
Sum 460,000 330,050
Difference -10,000

The reconciliation of sums is always performed crisscross, which results in a difference of -10,000 EUR.

This calculation shows how the difference is calculated crisscross:

(320,050 EUR - 330,050 EUR) + (460,000 EUR - 460,000 EUR) = -10,000 EUR

Optionally, you can split the Total Difference into the Transaction and Currency Difference and explain the local values in transaction currencies.

When you click the difference in the Intercompany Matching Detail report, the Transaction Data Entry Detail report is displayed. The RU0001's account value is 320,050 EUR in the local currency. You must explain this value in the currencies in which the transactions took place. Even if EUR is the local currency of a company, transactions can be performed in other currencies, for example, USD.

You can specify appropriate amounts in the Transaction Currency column in the dialog box that is displayed after you click a value in the Group Currency (currency ISO code) column in the Intercompany Matching Detail reports. Alternatively, you can specify those amounts in the Value in Transaction Currency column in the Transaction Data Entry Detail reports. All available transaction currencies are displayed. Each value that you specify is automatically calculated into the group currency based on the closing rate and displayed in the Transaction in Group Currency column in the dialog box and in the Value of Transaction in Group Currency column in the Transaction Data Entry Detail report.

Note: In the TFINANC cube, there can be several transactions in different currencies for each value in the local currency. You can specify only one transaction value for each transaction currency. If several transactions in one transaction currency exist, you must aggregate them into one transaction value.

Ensure that you explain the whole account and contra account local currency value in the relevant transaction currencies.

This table shows the explanation of local values in EUR (460,000 EUR on the RU0001 account and 330,050 EUR on the intercompany RU0002 contra account) into the USD transaction currency and the conversion of the amounts into the group currency (EUR):

Currency Transaction Currency Transaction in Group Currency Transaction Currency Transaction in Group Currency
USD - United States Dollar Value of RU0001 vs. RU0002 Value of RU0002 vs. RU0001
A220100 - Advance Payments on Purchase of Current Assets 380,000 316,667 560,0000 466,667
A220210 - Trade Receivables (Fair Value) 0 0 0 0
L300100 - Trade Payables 550,000 458,333 400,000 333,333

When values are specified in transaction currencies on both sides (RU0001 towards intercompany RU0002 and intercompany RU0002 towards RU0001), a split of the Total Difference into Other Differences and Currency Differences is possible.

The Total Difference is calculated in the group currency in this way: (Sum Accounts of Entity (RU0001) vs Intercompany (RU0002) minus Sum Contra Accounts of Intercompany (RU0002) vs Entity (RU0001)) plus (Sum Accounts of Intercompany (RU0002) vs Entity (RU0001) minus Sum Contra Accounts Entity (RU0001) vs Intercompany (RU0002)) = Total Difference

(320,050 EUR - 330,050 EUR) + (460,000 EUR - 460,000 EUR) = -10,000 EUR

The Transaction Difference is calculated in the group currency in this way: (Sum Accounts of Entity (RU0001) vs. Intercompany (RU0002) minus Sum Contra Accounts of Intercompany (RU0002) vs Entity (RU0001)) plus (Sum Accounts of Intercompany (RU0002) vs Entity (RU0001) minus Sum Contra Accounts of Entity (RU0001) vs Intercompany (RU0002)) = Transaction Difference

(316,667 EUR - 333,333 EUR) + (466,667 EUR - 458,333 EUR) = -8,333 EUR

The Currency Difference is calculated in this way:

Total Difference in Group Currency minus Transaction Difference in Group Currency = Currency Difference

-10,000 EUR - (-8,333 EUR) = 1,667 EUR

This table shows use cases of how the Total Difference, Transaction Difference, Other Differences, and Currency Difference are calculated:

Use case Total Difference Transaction Difference Other Differences Currency Difference
Total Difference = 100. No corrections were made manually or through import. Therefore, the Transaction Difference = 0.

Other Differences = 100 (Total Difference value). Currency Difference = 0, which results from subtracting the Total Difference value from the Other Differences value (100 - 100 = 0).

 100 0 100 0
Total Difference = 100. Corrections were made or the values were explained fully. Therefore, the Transaction Difference = 0.

Other Differences = 0 (Transaction Difference value). Currency Difference = 100, which results from subtracting the Total Difference value from the Other Differences value (100 - 0 = 100).

 100 0 0 100
Total Difference = 100. Corrections were partially made, which resulted in the Transaction Difference value = 20.

Other Differences = 20 (Transaction Difference value). Currency Difference = 80, which results from subtracting the Total Difference value from the Other Differences value (100 - 20 = 80).

 100 20 20 80
Total Difference = 100. Corrections were made, which resulted in the Transaction Difference value = 200.

Other Differences = 200 (Transaction Difference value). Currency Difference = -100, which results from subtracting the Total Difference value from the Other Differences value (100 - 200 = -100).

 100 200 200 -100
Total Difference = 100. Corrections were made, which resulted in the Transaction Difference value = 100.

Other Differences = 100 (Transaction Difference value). Currency Difference = 0, which results from subtracting the Total Difference value from the Other Differences value (100 - 100 = 0).

 100 100 100 0
Note: Other Differences has the same value as Total Difference under the Group Currency (ABC) column in these cases:
  • No correction is made.
  • No transaction values have been entered manually.
  • No transaction values have been imported.

Otherwise, it has the same value as the Transaction Difference under Group Currency Based on Transactions column. In the user interface, 0 is displayed regardless of if it is a 0 value or a deleted (empty) value.