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Using Intercompany Accounts Payable

You can use intercompany to operate an intercompany accounts payable (A/P) function for businesses with multiple companies. When goods or services are purchased from a third-party supplier, you can recharge the costs to other companies in the group. Each receiving company can analyze the costs by supplier, making prompt settlement of costs more likely.

In this intercompany scenario, the source companyCompany that initiates an intercompany transaction. is the company in which the intercompany A/P function is raising payable invoices or payable credit notes, and a destination companyCompany that receives the costs during an intercompany transaction. is one of the companies to which costs are being recharged.

Operating an Intercompany A/P Function

When the intercompany A/P function raises a payable invoice or payable credit note, the destination company must be specified in the Destination Company field on payable expense lines and payable product lines. When a payable line has a destination company, that line becomes an intercompany line.

If you don't want to recharge the full amount of the intercompany line to the destination company, you can adjust an expense line's Destination Net Value, and a product line's Destination Unit Price and Destination Quantity, to the preferred amounts. Any unallocated amount remains with the source company.

When the intercompany A/P function posts a payable invoice or payable credit note with intercompany lines, a transaction and intercompany transferObject used as a staging location for data used when transferring costs to other companies in the same organization. record are created in the source company. Note that:

• A transaction line generated from a payable intercompany line derives its accounts receivable GLA and dimensions from the source details on the intercompany definition between the source company and the destination company.
• An intercompany transfer line derives its dimensions, GLA (expense lines only), and product details (product lines only) from the payable intercompany line.

When the intercompany transfer record is processed in the destination company it generates a journal. Note that:

• The vendor account on the payable invoice or payable credit note in the source company is identified in the External Counterparty field on the journal header.
• A journal line item generated for a payable intercompany line derives its dimensions and GLA (expense lines only) from the intercompany transfer line. For product lines, the GLA is derived from the product.
• The journal line item for the balancing entry derives its accounts payable GLA and dimensions from the destination details on the intercompany definition between the destination company and the source company.

If you add lines for different destination companies on the same payable invoice or payable credit note, a separate intercompany transfer record is created for each destination company when you post the document.

For more information about how to create payable invoices or payable credit notes, see Creating Payable Invoices or Creating Payable Credit Notes as appropriate.

Note:

Note

When posting the payable document in the source company, if only part of a payable intercompany line has been recharged to the destination company, a second transaction line is created for the amount that remains with the source company. Tax lines are unchanged.

If you apply exchange rate overrides on the payable document in the source company, the overrides are only applied on the destination journal when the source and destination companies have the same home and dual currencies.

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