Intercompany Eliminations using Oracle Financial Consolidation and Close (FCC)

Intercompany Eliminations using Oracle Financial Consolidation and Close (FCC)

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Oracle FCC provides out-of-the-box intercompany elimination process. Consolidation process eliminates intercompany balances at the first common entity.

Let’s see how amazingly easy it is to set it up and leverage FCC out-of-the-box consolidation business rule to perform eliminations.

Quick guide to FCC intercompany setup

  1. Create Intercompany hierarchy

FCC comes with out of the box Intercompany dimension. All entities tagged as intercompany will be populated in this dimension. In Entity dimension, Entities are tagged “ICP_Entity_Yes”

Those entities will be automatically listed in Intercompany dimension.

2. Create plug accounts

Plug accounts are created to hold the difference between the intercompany balances, If any, thus eliminating difference at first common parent between the entities. This amount is calculated during the consolidation process. Plug account must have the attribute “Plug_Acc_Yes”

3. Create Intercompany Account

Identify the Intercompany accounts in the hierarchy and 

a. Tag those accounts with attribute “IC_Acc-Yes”

b. Assign appropriate Plug account to each intercompany account

That’s it! It’s that simple.

Elimination Process

Now that we have understood how to setup for Intercompany Elimination in FCC, Let’s understand how the Elimination process works with a simple example.

Let’s say we have above entity hierarchy, there was transaction of $100 between two intercompany entity under Pennsylvania, Harrisburg & Philadelphia. Each entity records its transaction as below.

HarrisburgAcc PayableICP_Philadelphia100
PhiladelphiaAcc ReceivableICP_Harrisburg100

After running the out-of-the-box consolidation, FCC eliminates $100 at its first common parent Pennsylvania. Data in FCC looks like below.

EntityAccountIntercompanyData SourceConsolidationAmount
HarrisburgAcc PayableICP_PhiladelphiaFCCS_TotalInputAndAdjustedFCCS_Entity Total100
PhiladelphiaAcc ReceivableICP_HarrisburgFCCS_TotalInputAndAdjustedFCCS_Entity Total100
HarrisburgAcc PayableICP_PhiladelphiaFCCS_Intercompany EliminationsFCCS_Elimination-100
PhiladelphiaAcc ReceivableICP_HarrisburgFCCS_Intercompany EliminationsFCCS_Elimination-100
PennsylvaniaAcc PayableICP_PhiladelphiaFCCS_Total Data SourceFCCS_Entity Total0
PennsylvaniaAcc ReceivableICP_HarrisburgFCCS_Total Data SourceFCCS_Entity Total0

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