Intercompany Segments in the Vision Demo

One of the most common questions I get asked is

‘Do we need to define an Intercompany segment in our chart of accounts?’

The answer is:

‘We do not require an Intercompany Segment, but we still recommend defining one’.

Even if you do not have a great deal of intercompany activity at the moment, it is worth having one defined now as it is difficult to add one later.

Another question I have been asked is

‘Can I define the same segment to be my balancing segment (aka Company Code) and my Intercompany segment?’

The answer I give here is

‘I would very strongly advise against this, you will not get the benefits of an Intercompany segment by doing this’

For example, if we have a chart of accounts structure with 3 segments:

Company – Natural Account – Intercompany

Company Segment has the Balancing Segment qualifier and Intercompany has the Intercompany Qualifier.

We have three values for the company segment, 01, 02, 03 – they represent the Legal Entities. We have set up the natural account 555555 as our Intercompany payables and receivables account.

So if we have a journal like this entered in GL

01.789789.00 Dr $1,000

02.978978.00 Cr $1,000

Intercompany balancing will be called during posting and we will get two extra intercompany balancing lines added to balance the journal by balancing segment.

01.555555.02 Cr $1,000
02.555555.01 Dr $1,000

Balancing populates the Intercompany segment with the value of the trading partner to show who this intercompany activity is between, we can now easily run segment based reports and determin the intercompany activity between 01 and 02 and 02 and 01, ensure they eliminate and all that good stuff.

So what happens if you set the same segment to be both your balancing segment and your intercompany segment? Essentially nothing, intercompany balancing would detect this situation and not try to insert the value of the trading partner into the intercompany segment.

You may notice that in the Vision demo instances there are some chart of accounts with the same segment as both the Intercompany and Balancing segment(Vision Operations is one example!), this does not mean it is recommended. For R12, the Apps Demo Services team (Max Melbin and Günter Wemhöner) did a great job creating new chart of accounts, ledgers in the Vision database which are used in the R12 financials demo flows. The Ledger names they created start with ‘SSC’ if you want to take a look.

15 Responses

  1. […] secondary.  However I would always recommend having an Intercompany segment in both ledgers, the benefits for reporting it gives you apply equally to a secondary ledger as a primary. If you are using primary as your local ledger and secondary for corporate ledger, the intercompany […]

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  2. how to define the accounting key flex field in GL?

    (in vision we will chose accounting flex field from list of values but in new sever how to define accounting key flex field for GL)

    Like

  3. Hi David,

    This article is informative.

    It would be great if you could eloborate on “…intercompany balancing would detect this situation and not try to insert the value of the trading partner into the intercompany segment….”

    If the system does not insert the value then what values does the intercompany segment carry ?

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  4. In the situation where the balancing segment is the same as the Balancing Segment then we preserve the balancing segment value, rather than overwrite it with the Intercompany value as this would be wrong.

    The point is having the same segmetn marked as blancing and intercompany makes no funcitonal sense

    Like

  5. Hi David,

    Can I have some useful tips while defining the chart of account structure for a commercial bank. How, to handle the Central Monetary Agency reporting through Oracle? Is it advisible to have CMA code as a segment value?

    Raman A V

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  6. Make that a couple of customers….

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  7. Hi David,

    You mention that the most important reason for having an intercompany segment defined is for reconciliation, but doesn’t AGIS have functionality for reconciliation that would make the segment unnecessary?

    Thanks

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    • AGIS does have reconciliation reports. However, if you want to see the activity between each pair of trading partners (in my exammple above 01 to 02, 01 to 03, 02 to 01, etc.) then you either need to define a specific and unique natural account for each pair of LE / Company codes OR use the intercompany segment.

      Like

  8. Good way of explaining, and nice post to get data on
    the topic of my presentation subject, which i am going to
    convey in institution of higher education.

    Like

  9. If you add an additional field (ie Division) and make that the balancing segment can you still have the company values as the Intercompany value set?
    01.102.789789.00 Dr $1,000

    01.103.978978.00 Cr $1,000 with these being your balancing entries?

    01.102.555555.01 Cr $1,000

    01.103.555555.01 Dr $1,000
    Thanks

    Like

  10. Hi

    Thank you for sharing the information. We have a scenario where we are going to have over 20 ledgers, implementation in a large group of companies, while keeping the same COA for all ledgers. In this scenario, what are the pros and cons of having an intercompany segment, or will it be mandatory?

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    • An Intercompany segment is always advisable. It will help you easily track the trading activity between the trading partners, weather is is within a ledger or across a ledger. You need to track this for reconciliation and eliminations.

      Like

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