Consolidating intercompany inventory

It also establishes transfer rules between company segments and netting out profits to the parent company.

Basic spreadsheet use may become ineffective as intercompany accounting becomes more complex.

This eliminates profit or mark-up on transfers to itself.

Eliminating intra-entity profits is the job of the consolidating entries for transfers of inventory, land and depreciable assets (any transfer not done at historical cost).

Address larger issues such as tax and regulatory issues that affect all or part of the company.

For example, a subsidiary company with operations in another state and county may have tax issues unique to that branch of the company.

This requires a detailed accounting of each subsidiary to address tax issues appropriately.

Ultimately, the centralized financial management team has eyes on all revenues and expenses through the vertical chain of operations.

Using software programs that assign costs and expenses automatically and allow for company segmentation assists in overall accounting management.

It also reduces potential risks to the company because the software is better capable of producing cross-entity reports.

Frequently, parent companies provide administrative functions for all operations down the supply chain.

For example, parent companies that purchase all office supplies can receive a bigger discount for quantity and establish a protocol for subsidiary needs through request forms.

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For larger companies with many subsidiaries, this might be a team that includes tax, finance and technology leads.

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