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Eliminating Intercompany Gain or Loss on Sale of Fixed Assets Guideline

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Eliminating Intercompany Gain or Loss on Sale of Fixed Assets Guideline
Guideline
Eliminating Intercompany Gain or
Loss on Sale of Fixed Assets
Product(s): Controller 8
Area of Interest: Financial Management
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
2
Copyright and Trademarks
Licensed Materials - Property of IBM.
© Copyright IBM Corp. 2009
IBM, the IBM logo, and Cognos are trademarks or registered trademarks of
International Business Machines Corp., registered in many jurisdictions worldwide.
Other product and service names might be trademarks of IBM or other companies. A
current list of IBM trademarks is available on the Web at
http://www.ibm.com/legal/copytrade.shtml
While every attempt has been made to ensure that the information in this document
is accurate and complete, some typographical errors or technical inaccuracies may
exist. IBM does not accept responsibility for any kind of loss resulting from the use of
information contained in this document. The information contained in this document
is subject to change without notice.
This document is maintained by the Best Practices, Product and Technology team.
You can send comments, suggestions, and additions to [email protected]
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
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Contents
1
INTRODUCTION ............................................................................................ 3
1.1
1.2
1.3
PURPOSE ............................................................................................................3
APPLICABILITY .....................................................................................................3
EXCLUSIONS AND EXCEPTIONS ..................................................................................3
2
ELIMINATING THE INTERCOMPANY GAIN/LOSS ON FIXED ASSET SALES.. 3
2.1
2.2
2.3
2.4
2.5
2.6
ACCOUNT DEFINITION.............................................................................................3
ACCOUNT SET UP ..................................................................................................4
CURRENCY CONVERSION .........................................................................................8
GROUP JOURNALS .................................................................................................8
COPYING GROUP JOURNALS.................................................................................... 12
REPORTING AND MONITORING ELIMINATION ................................................................ 14
1 Introduction
1.1
Purpose
This document will provide guidelines to using group journals to eliminate the
intercompany gain or loss on fixed asset sales.
1.2
Applicability
Controller 8.3 and Controller 8.4.
1.3
Exclusions and Exceptions
There are no known exceptions and exclusions at the time this document was
created.
2 Eliminating the Intercompany Gain/Loss on Fixed Asset
Sales
2.1
Account definition
In order to proper eliminate the intercompany gain/loss on fixed asset sale
the following accounts will need to be created:
• Account for the fixed asset disposal on the balance sheet
• Account for the gain/loss on the income statement
• Movement account/extensions for eliminating the gain/losses in
subsequent year (i.e. retained earnings)
• Account for Depreciation on the profit and loss
• Accumulated depreciation account on the balance sheet.
-NB- If you are using integrated accounts for your fixed assets then it would
mean adding a new movement extension for both original cost and
accumulated depreciation. You may want to look at this issue if your
company intends to move assets between your subsidiary companies,
especially at a gain or loss. I have focused on isolated these items to help
better tracked them in the system, especially if the volume increases by your
company.
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
2.2
4
Account Set up
The following information will show the account set up for each account that
is required for properly eliminating the gain/loss on fixed asset sale.
Fixed Asset Account
You should use a special account to identify the fixed gain/loss for each
applicable fixed asset type. You may need to set up a new movement
extension. The below is an example of movement extension/account for
property, plant and equipment:
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
-NB- The disposal of Intercompany Fixed Asset will be an integrated account
or will have its balance tied to the closing balances. If you are using
dimensionality then you will need to select a the appropriate division you
want to reverse the gain or loss.
Accumulated Depreciation Account
You should use a special account to identified the disposal of the fixed asset
for each applicable fixed asset account. You may be able to use the same
movement extension previously described in the fixed asset account section.
This may be the best approach, because it will help with
controlling/maintaining the account structures and the overall system.
5
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
6
Gain or loss Account
You should use a special account to identified the gain or loss on the profit an
loss statement from any other gain. The below is an example of an account
for intercompany gains or losses.
Depreciation Account
You should use a special account to identify the intercompany depreciation as
part of your depreciation/amortization expenses. The below is an example of
depreciation account:
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
Retained Earnings
7
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
8
You should use a special account to identified the gain or losses to adjust the
value after year-end. The below is an example of an account:
2.3
Currency Conversion
Since, I am using group journals then the transaction should be recorded at
the group level currency in the journals. This can make handling currency
differences much simpler to handle and less confusion to analyzing any
variances.
2.4
Group Journals
The automatic journals do not work very well will the eliminating of the gains
or losses, especially around handling the depreciation adjustment for each
period. It is recommended that you used group journals as the work around
to eliminated the gains or losses as well as making the period depreciation
adjustment.
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
9
Group Journal #1 – Eliminating the gain or loss in the year
incurred/earned
The first group journal created is eliminated the actual gain or loss on the
profit and loss and inflated value of the cost on fixed assets
-NB•
•
•
•
•
The group journal was entered in the group currency, which should
minimize any currency issues.
The group journal requires division and for profit and loss division and
profit group. You may want to assigned it to a default division or
product or if you can identified it to the proper division or profit.
You can include a description about the journal entry. I have included
the actual gain value and period of the item.
I am using “F” or fixed rules to copy over year-end.
I have also assigned specific journal type and in this case I have used
Intercompany (IC).
Group Journal #2 – Amortizing the Depreciation over the remaining
life of the Asset.
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
10
The second group entry was created to adjust both the depreciation and
accumulated depreciation over the remaining life of the asset.
-NB•
•
•
•
•
•
The group journal was entered in the group currency, which should
minimize any currency issues.
The group journal requires division and for profit and loss division and
profit group. You may want to assigned it to a default division or
product or if you can identified it to the proper division or profit.
You can include a description about the journal entry. I have included
the actual gain value and period of the item.
I am using “F” or fixed rules to copy over year-end.
I have also assigned specific journal type and in this case I have used
Intercompany (IC).
You will need to keep track of this journal along with any other
journals that related to eliminated of gains and losses on fixed assets
sales (This will be discussed further in the document on how to
monitor the process)
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
11
Group Journal #3 – Eliminating the gain or loss subsequent to yearend
The third group entry was created to adjust to adjust the gain or loss out of
retained earnings after a subsequent year-end
-NB•
•
•
•
•
•
The group journal was entered in the group currency, which should
minimize any currency issues.
The group journal requires division and for profit and loss division and
profit group. You may want to assigned it to a default division or
product or if you can identified it to the proper division or profit.
You can include a description about the journal entry. I have included
the actual gain value and period of the item.
I am using “F” or fixed rules to copy over year-end.
I have also assigned specific journal type and in this case I have used
Intercompany (IC).
You will need to keep track of this journal along with any other
journals that related to eliminated of gains and losses on fixed assets
sales (This will be discussed further in the document on how to
monitor the process)
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
2.5
12
Copying Group Journals
You will need to copy the journals between periods. It is important that you
review the copying journals after your year-end to ensure that has the correct
accounts defined.
•
•
You have different options around how you want to copy the journals,
i.e. selecting all or specific journal types, from/to copying periods and
what journals you want to copy.
It is important to review the group journals after each is copied to
ensure they are correct. You may need to make changes to the
accounts (see below example)
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
•
13
There was account change on the original gain or loss from profit and
loss account to retained earnings account. The gain would have been
reflected in the closing retained earnings and thus needs to be
eliminated out of retained earnings or until the equipment is sold
outside the company.
Eliminating Intercompany Gain or Loss on Sale of Fixed Assets
2.6
14
Reporting and monitoring elimination
It could get confusing around the eliminating of the gain or loss, especially if
you have more of this type of transaction. The account structure as discussed
earlier will help, but you may need to create a specific form to keep track of
these items. The below is example of a couple of forms that can be used to
help with controlling and monitoring the process.
The above was only one example, so it was easy to keep track of the item.
However, if you had more of these items, then you would need a way to keep
track of these items.
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