Defining Intracompany Balancing Rules

Written by Rohit Kathuria and David Haimes

In order to take advantage of the automatic Intercompany balancing during GL posting and SLA Accounting you first need to define the accounts you want us to use.

Intercompany and Intracompany Accounts in R12 are defined in two different Set Up Pages, the Intracompany Balancing Rules are what we had in 11i for Intercompany Accounts (confusing I know) – this is where you will find the rules you had in 11i of you are upgrading from 11i. If you don’t want to take advantage of the Legal Entity Configurator product and define Legal Entities and map them to your accounting structure, you can still go ahead and use the intracompany rules. If you start to map your Legal Entities to Ledgers and/or Balancing Segment Values (BSV) then you will want to be sure you complete the job, so there is no ambiguity in your setup. Consider the example below for BSV 10, 20, 30, 40, 80 and 90 :

Alpha Enterprises

The France Ledger is mapped to the FR LE, so all BSV in that ledger are assumed to be owned by LE France. However the UK Ledger has BSV 10 and 20 mapped to the UK LE, but 80 and 90 are not mapped to anything we have no way to know what LE they are assigned to.

You will be able to set up Intracompany balancing rules

  • Between 10 and 20
  • Between 80 and 90
  • between 30 and 40

You can set up Intercompany Accounts between

  • 10 and 30 or 40
  • 20 and 30 or 40
  • LE France and LE UK

All the above are unambiguous, we know what we are dealing with. The 80 and 90 BSV are in the same ledger with no LE at Ledger or BSV level so we just assume that any transactions between 80 and 90 are intracompany.

We would not allow you to create Intracompany rules between

  • 80 and 10 or 20
  • 90 and 10 or 20

This is because we don’t know if 80 and 90 are in the UK LE or not, if they are then assign those BSV to LE UK too and you’re good to go.

If 80 and 90 aren’t in the UK LE then what LE do they belong to? Once you map them to the to the appropriate LE then you will need to define Intercompany accounts for them.

18 Responses

  1. Hi David,

    Thanks for the illustrative example. I have a question on this:
    In the article above, you said that we cannot create intracompany b/w BSV 80/90 and 10/20 as 80,90 are not attached to any LE.
    Does that mean that we cannot transact between these BSV? Or if we do transact, the Journals would be out of balance?
    They cannot be treated as intercompany as they are in the same ledger, right?

    Thanks,
    Ashish

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  2. There are two questions
    1) Can bsv 80/90 transact?
    - Yes they can transact.
    However you cannot define intercompany balancing rules for them and so we would not perform automatic balancing between these two BSV if a journal was entered with them on that was out of balance by bsv. However if you manually balance the journals with bsv 80 and 90 then they can transact – we would not prevent that balanced journal being enterd and posted.

    2) They cannot be treated as intercompany as they are in the same ledger?
    - No not true. Those BSV could each be mapped ot a different LEgal Entity and then anything between them in intercompany.

    It is possible to model more than one BSV in a Ledger as I detail in this post.
    http://davidhaimes.wordpress.com/2007/11/21/how-do-i-define-my-legal-entities/

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  3. [...] Defining Intracompany Balancing Rules From Dave Blog. [...]

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  4. Clarification Needed.

    In one of your replies you mention that you cannot setup balancing entries between 80 and 90. However you also mention that you can setup Intracompany rules using the Accounting setup manager. What would you setup in intra-company rules, if the system cannot balance as we can do currently in 11.5.10

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  5. What if there is only one BSV and many Cost Centres or Depts that needs to inter-trade?
    Example only BSV10 with Dept 102, 105, 106 & 108 all trading separately and inter-trading?

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  6. Hello,

    I need one clarification on the Intra Company Transaction .

    I have defined one ledger , attached to & seven legal Entity . If i do the transaction in between the Legal entity whether i have to go for Intera company or Intercompany setup.

    Kindly clarify .

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  7. Hi David,

    I am hugely impressed with your documents about Intercompany and Intracompany Balancing . Thanks heaps for this.

    Can I ask you a question on the example illustrated about the Intracompany Balancing rules,please ?

    If in this example none of the LE’S are associated with BSV , what does that mean ? Will the setup assume that all the BSV used in that ledger are subject to Intracompany rules ?

    I am just trying to understand the object of associating BSV with LE’s . If you have any thoughts on this, do let me know.

    thanks,
    Latha Jaganathan

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    • Correct assigning no BSV to LE means I want to use Intracompany rules for all BSV. THis means I may know myself what LE they represent but I am chosing not to map them in the system, as this is a new feature we wanted to make it optional so as not to force people to do set up they may not need/want to take advantage of.

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  8. Hi Latha

    .. objective of associating BSV with LE’s
    Legal entities are like real world registered companies under law. These companies have to maintain accounts statutorily , balance their accounts and report. So there is a necessity of maintaining BSV to legal entity.

    .. none of the LE’S are associated with BSV , what does that mean ?
    In other words having BSV’s only attached to the Ledgers. This scenario happens for the non-profit organisations like Charity foundation, Children welfare association etc. They are not legal entities and they can share same ledger with different BSVs.

    Above is my opinion, people can correct me if i am wrong.

    Regards

    Venkatakrishnan S

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    • Venkatakrishnan S

      As far as I am aware, a non profit is a Legal Entity too, we do not provide anything special for them.

      The point of mapping an LE to a ledger is to say all transactions in that ledger are owned by that single LE.

      The point of not mapping is to minimize set up we force users to do, maybe they maintain that mapping in other reporting systems they run, Oracle or non-Oracle – we want to make LE-BSV mapping a choice, it is not mandatory.

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  9. How can we eliminate Intracompany Transaction before generating final Trial Balance for Auditors

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  10. [...] Defining Intracompany Balancing Rules January 200812 comments [...]

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  11. Thanks a lot on your small informative write up on Intraco and Interco thanks a lot may David and Rohit post many more of such write ups !!!

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  12. Hi David,
    I reach out to you for a solution to one of the intracompany issue:

    Overview: Client is a project oriented company.

    Two Ledgers exist

    1. South Africa ZAR ledger (BSV 0007), Legal Entity defined and BSV assigned, enabled intracompany and defined intercompany accounts as well as intracompany balancing rules

    2. UK GBP Ledger, (BSV 0009), Legal Entity defined and BSV assigned, enabled intracompany and defined intercompany accounts as well as intracompany balancing rules.

    Created a Project owned by UK. Created two task one owned by the UK and the other owned by the South Africa. UK employee enters timecard against the UK task (BSV 0009), and South Africa employee enters timecard against the south africa task (BSV 0007).

    In the UK ledger intracompany balancing entry generated from Projects and transferred to GL for example the following Source: Projects and the Categor: Revenue journal entry generated:

    0007.000.000.1150.000.0009 Debit. 357.27 GBP
    0009.000.000.4000.000.0000 Credit 1,600.00 GBP
    0007.712.037.4000.000.0000 Credit 357.27 GBP
    0009.910.039.1205.000.0000 Debit 1,957.27 GBP
    0009.910.039.2260.000.0000 Debit 0.00 GBP
    0009.000.000.2050.009.0007 Credit 357.27 GBP

    Total Dr. 2,314.54 Cr. 2,314.54

    I’m able to eliminate the journal entry for company 0007 from the UK ledger company 0009 and hence the GL Balances for company 0007 in the UK ledger would be zero.

    Now my question is how will I make this 0007 company journal to hit the ZAR ledger in South Africa?

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  13. Great Article David ,
    Thanks a lot for sharing this valuable information

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  14. Thanks for the article, David.
    In Oracle EBS R121.1.3 we have done set ups for Internal Requisitions/Internal Sales Order. Items are being sent from Inventory in the US Legal Entity to France legal entity at Cost. However, creation of Interco A/R and A/P is failing because it is going to an Expense account in France.

    Oracle Support is insisting that it is Interco Invoicing is not supported in this release. But all the documentation and user guides say that interco A/R and A/P should be created.

    Please provide some guidance. Thank you

    Like

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