Eliminating Intercompany Transactions
Expert-defined terms from the Advanced Certificate in Consolidation Reporting (United Kingdom) course at London School of Business and Administration. Free to read, free to share, paired with a globally recognised certification pathway.
Accounting standards are the rules and guidelines that govern how financi… #
In the context of consolidation reporting, accounting standards play a crucial role in eliminating intercompany transactions. The UK GAAP and IFRS are two prominent accounting standards used in the United Kingdom.
Accounting period refers to the time frame for which financial statements… #
When eliminating intercompany transactions, it is essential to consider the accounting period to ensure that all relevant transactions are identified and eliminated.
Accumulated profits or losses arise from the consolidation process… #
When eliminating intercompany transactions, accumulated profits or losses must be considered to ensure accurate financial reporting.
Amortization is the process of allocating the cost of an intangible asset… #
In the context of consolidation reporting, amortization can impact the elimination of intercompany transactions, particularly when intangible assets are involved.
Asset valuation is critical in consolidation reporting, as it affects the… #
Assets may be valued at their historical cost or fair value, and the chosen method can significantly impact the financial statements.
Associated companies are entities over which the parent company has signi… #
When eliminating intercompany transactions, associated companies must be considered, as they may have transactions with the parent company or its subsidiaries.
Break #
even analysis is a technique used to determine the point at which an entity's revenues equal its costs. In consolidation reporting, break-even analysis can help identify the impact of eliminating intercompany transactions on an entity's financial performance.
Capital contributions refer to the investments made by the parent company… #
When eliminating intercompany transactions, capital contributions must be considered to ensure that the financial statements accurately reflect the relationships between the entities.
Cash flow statements provide information about an entity's inflows and ou… #
In consolidation reporting, cash flow statements can help identify intercompany transactions that need to be eliminated.
Consolidated financial statements are the financial statements of a paren… #
The process of eliminating intercompany transactions is critical to preparing accurate consolidated financial statements.
Control is the ability of the parent company to direct the financial and… #
In consolidation reporting, control is a crucial factor in determining which entities should be consolidated and which intercompany transactions should be eliminated.
Cost allocation is the process of assigning costs to different department… #
When eliminating intercompany transactions, cost allocation can impact the financial statements, particularly if costs are allocated between entities.
Cost of sales is the direct cost of producing and selling goods or servic… #
In consolidation reporting, the cost of sales can affect the elimination of intercompany transactions, particularly if goods or services are sold between entities.
Current assets are assets that are expected to be realized or sold within… #
When eliminating intercompany transactions, current assets must be considered, as they may be affected by intercompany transactions.
Current liabilities are liabilities that are expected to be settled withi… #
In consolidation reporting, current liabilities can be impacted by the elimination of intercompany transactions.
Deferred taxation arises from the difference between the tax base … #
When eliminating intercompany transactions, deferred taxation must be considered to ensure accurate financial reporting.
Depreciation is the systematic allocation of the cost of a tangible</i… #
In consolidation reporting, depreciation can impact the elimination of intercompany transactions, particularly when tangible assets are involved.
Direct costs are costs that can be directly attributed to the production… #
When eliminating intercompany transactions, direct costs must be considered, as they may be affected by intercompany transactions.
Eliminating entries are journal entries made to eliminate intercompany tr… #
In consolidation reporting, eliminating entries are critical to preparing accurate consolidated financial statements.
Entity #
wide disclosures provide information about an entity's financial position, performance, and cash flows. When eliminating intercompany transactions, entity-wide disclosures can help identify the impact of the elimination on the entity's financial statements.
Equity method is a method of accounting for investments in associated com… #
In consolidation reporting, the equity method can impact the elimination of intercompany transactions, particularly if the associated company has transactions with the parent company or its subsidiaries.
Fair value is the price that would be received to sell an asset or paid t… #
When eliminating intercompany transactions, fair value must be considered, as it can impact the financial statements.
Financial instruments are contracts that give rise to a financial asset o… #
In consolidation reporting, financial instruments can impact the elimination of intercompany transactions.
Financial reporting framework refers to the rules and guidelines that gov… #
In the context of consolidation reporting, the financial reporting framework plays a crucial role in eliminating intercompany transactions.
Fixed assets are assets that are not expected to be realized or sold with… #
When eliminating intercompany transactions, fixed assets must be considered, as they may be affected by intercompany transactions.
Foreign currency transactions are transactions denominated in a currency… #
In consolidation reporting, foreign currency transactions can impact the elimination of intercompany transactions, particularly if the transactions involve entities with different functional currencies.
Functional currency is the currency of the primary economic environment i… #
When eliminating intercompany transactions, the functional currency must be considered, as it can impact the financial statements.
Goodwill impairment arises when the carrying amount of goodwill exceeds i… #
In consolidation reporting, goodwill impairment can impact the elimination of intercompany transactions, particularly if the impairment affects the group's financial statements.
Group accounts refer to the financial statements of a parent company and… #
Group accounts refer to the financial statements of a parent company and its subsidiaries, presented as a single entity.
Hedging transactions are transactions that reduce or eliminate an entity'… #
In consolidation reporting, hedging transactions can impact the elimination of intercompany transactions, particularly if the transactions involve entities with different risk profiles.
Impairment losses arise when the carrying amount of an asset exceeds its… #
When eliminating intercompany transactions, impairment losses must be considered, as they can impact the financial statements.
Incorporation date refers to the date on which a subsidiary was incorpora… #
In consolidation reporting, incorporation date can impact the elimination of intercompany transactions, particularly if the subsidiary has transactions with the parent company or other subsidiaries.
Indirect costs are costs that cannot be directly attributed to the produc… #
When eliminating intercompany transactions, indirect costs must be considered, as they may be affected by intercompany transactions.
Intangible assets are assets that are not physical in nature #
In consolidation reporting, intangible assets can impact the elimination of intercompany transactions, particularly if the assets are involved in intercompany transactions.
Intercompany transactions are transactions between entities within a grou… #
Intercompany transactions are transactions between entities within a group.
Intra #
group transactions are transactions between entities within a group. When eliminating intercompany transactions, intra-group transactions must be considered, as they can impact the financial statements.
Investment income arises from investments made by the parent company in i… #
In consolidation reporting, investment income can impact the elimination of intercompany transactions, particularly if the investments involve entities with different financial profiles.
Investment properties are properties held by an entity to earn rentals or… #
When eliminating intercompany transactions, investment properties must be considered, as they may be affected by intercompany transactions.
Joint ventures are entities over which two or more parties have joint con… #
In consolidation reporting, joint ventures can impact the elimination of intercompany transactions, particularly if the joint venture has transactions with the parent company or its subsidiaries.
Lease agreements are contracts between a lessor and a lessee, where the l… #
When eliminating intercompany transactions, lease agreements must be considered, as they can impact the financial statements.
Liability valuation is critical in consolidation reporting, as it affects… #
Liabilities may be valued at their historical cost or fair value, and the chosen method can significantly impact the financial statements.
Management accounts provide information about an entity's financial posit… #
In consolidation reporting, management accounts can help identify the impact of eliminating intercompany transactions on an entity's financial statements.
Minority interest refers to the portion of a subsidiary's equity that is… #
When eliminating intercompany transactions, minority interest must be considered, as it can impact the financial statements.
Net assets are the assets of an entity that are not subject to any liabil… #
In consolidation reporting, net assets can impact the elimination of intercompany transactions, particularly if the net assets involve entities with different financial profiles.
Non #
controlling interest refers to the portion of a subsidiary's equity that is not owned by the parent company. When eliminating intercompany transactions, non-controlling interest must be considered, as it can impact the financial statements.
Non #
current assets are assets that are not expected to be realized or sold within one year or within the entity's normal operating cycle. When eliminating intercompany transactions, non-current assets must be considered, as they may be affected by intercompany transactions.
Non #
current liabilities are liabilities that are not expected to be settled within one year or within the entity's normal operating cycle. In consolidation reporting, non-current liabilities can be impacted by the elimination of intercompany transactions.
Operating segments are components of an entity that engage in business ac… #
When eliminating intercompany transactions, operating segments must be considered, as they can impact the financial statements.
Overhead costs are costs that are not directly attributable to the produc… #
When eliminating intercompany transactions, overhead costs must be considered, as they may be affected by intercompany transactions.
Parent company is the entity that has control over one or more subsidiari… #
In consolidation reporting, the parent company plays a crucial role in eliminating intercompany transactions.
Provision for doubtful debts is an estimate of the amount of debts that m… #
When eliminating intercompany transactions, provision for doubtful debts must be considered, as it can impact the financial statements.
Provisions for liabilities and charges are estimates of the amount of lia… #
In consolidation reporting, provisions for liabilities and charges can impact the elimination of intercompany transactions.
Relevant transactions are transactions that are relevant to the financial… #
In consolidation reporting, relevant transactions must be considered when eliminating intercompany transactions.
Reserves and provisions are amounts set aside for future liabilities or e… #
When eliminating intercompany transactions, reserves and provisions must be considered, as they can impact the financial statements.
Revenue recognition is the process of recognizing revenue in the financia… #
In consolidation reporting, revenue recognition can impact the elimination of intercompany transactions, particularly if revenue is recognized from transactions between entities.
Significant influence is the power to participate in the financial and op… #
When eliminating intercompany transactions, significant influence must be considered, as it can impact the financial statements.
Subsidiary company is an entity that is controlled by another entity #
In consolidation reporting, subsidiary companies play a crucial role in eliminating intercompany transactions.
Tax base is the amount of an asset or liability that is subject to taxati… #
When eliminating intercompany transactions, tax base must be considered, as it can impact the financial statements.
Total comprehensive income is the change in equity of an entity during a… #
In consolidation reporting, total comprehensive income can be impacted by the elimination of intercompany transactions.
Trade payables are amounts owed by an entity to its suppliers #
When eliminating intercompany transactions, trade payables must be considered, as they may be affected by intercompany transactions.
Trade receivables are amounts owed to an entity by its customers #
In consolidation reporting, trade receivables can be impacted by the elimination of intercompany transactions.
Transaction price is the amount paid or received for a transaction #
When eliminating intercompany transactions, transaction price must be considered, as it can impact the financial statements.
Transfer pricing is the process of determining the price at which goods o… #
In consolidation reporting, transfer pricing can impact the elimination of intercompany transactions, particularly if the transfer pricing affects the financial statements.
Unrealized profits or losses arise from the consolidation process,… #
When eliminating intercompany transactions, unrealized profits or losses must be considered to ensure accurate financial reporting.
Valuation adjustments are adjustments made to the value of assets or liab… #
In consolidation reporting, valuation adjustments can impact the elimination of intercompany transactions, particularly if the adjustments affect the financial statements.
Voting power is the power to participate in the decision #
making process of an entity. When eliminating intercompany transactions, voting power must be considered, as it can impact the financial statements.
Weighted average cost is a method of valuing inventory, where the cost of… #
In consolidation reporting, weighted average cost can impact the elimination of intercompany transactions, particularly if the inventory involves entities with different financial profiles.
Working capital is the amount of capital that is required to fund an enti… #
When eliminating intercompany transactions, working capital must be considered, as it can impact the financial statements.
Year #
end adjustments are adjustments made to the financial statements at the end of a reporting period. In consolidation reporting, year-end adjustments can impact the elimination of intercompany transactions, particularly if the adjustments affect the financial statements.
Zero #
coupon bonds are bonds that do not pay interest until maturity. When eliminating intercompany transactions, zero-coupon bonds must be considered, as they can impact the financial statements.
Accruals are expenses or revenues that have been incurred or earned but n… #
In consolidation reporting, accruals can impact the elimination of intercompany transactions, particularly if the accruals involve entities with different financial profiles.
Amortizable assets are assets that have a limited useful life and are amo… #
When eliminating intercompany transactions, amortizable assets must be considered, as they can impact the financial statements.
Consolidated financial statements are the financial statements of a paren… #
Consolidated financial statements are the financial statements of a parent company and its subsidiaries, presented as a single entity.
Depreciable assets are assets that have a limited useful life and are dep… #
In consolidation reporting, depreciable assets can impact the elimination of intercompany transactions, particularly if the depreciable assets involve entities with different financial profiles.
Financial reporting framework refers to the rules and guidelines that gov… #
Financial reporting framework refers to the rules and guidelines that govern how financial transactions are recorded and reported.
Generally accepted accounting principles (GAAP) are the rules and guideli… #
In the context of consolidation reporting, GAAP plays a crucial role in eliminating intercompany transactions.
Group structure refers to the organizational structure of a group of enti… #
In consolidation reporting, the group structure can impact the elimination of intercompany transactions, particularly if the group structure involves entities with different financial profiles.
Historical cost is the original cost of an asset or liability #
When eliminating intercompany transactions, historical cost must be considered, as it can impact the financial statements.
International Financial Reporting Standards (IFRS) are the rules and guid… #
In the context of consolidation reporting, IFRS plays a crucial role in eliminating intercompany transactions.
Investment properties are properties held by an entity to earn rentals or… #
Investment properties are properties held by an entity to earn rentals or for capital appreciation.
Lease agreements are contracts between a lessor and a lessee, where the l… #
Lease agreements are contracts between a lessor and a lessee, where the lessor grants the lessee the right to use an asset for a specified period.
Minority interest refers to the portion of a subsidiary's equity that is… #
Minority interest refers to the portion of a subsidiary's equity that is not owned by the parent company.
Non #
current assets are assets that are not expected to be realized or sold within one year or within the entity's normal operating cycle.
Non #
current liabilities are liabilities that are not expected to be settled within one year or within the entity's normal operating cycle.
Parent company is the entity that has control over one or more subsidiari… #
Parent company is the entity that has control over one or more subsidiaries.
Pro forma financial statements are financial statements that are prepared… #
When eliminating intercompany transactions, pro forma financial statements can help identify the impact of the elimination on the financial statements.
Residual value is the estimated amount that an entity expects to obtain f… #
When eliminating intercompany transactions, residual value must be considered, as it can impact the financial statements.
Revaluation reserve is an account that records changes in the value of as… #
In consolidation reporting, revaluation reserve can impact the elimination of intercompany transactions, particularly if the revaluation reserve involves entities with different financial profiles.
Significant influence is the power to participate in the financial and op… #
Significant influence is the power to participate in the financial and operating policy decisions of an entity.
Subsidiary company is an entity that is controlled by another entity #
Subsidiary company is an entity that is controlled by another entity.
Trade payables are amounts owed by an entity to its suppliers #
Trade payables are amounts owed by an entity to its suppliers.
Trade receivables are amounts owed to an entity by its customers #
Trade receivables are amounts owed to an entity by its customers.
Acknowledging intercompany transactions is the process of recognizing int… #
In consolidation reporting, acknowledging intercompany transactions is critical to eliminating them.
Accounting policies are the rules and guidelines that govern how financia… #
In the context of consolidation reporting, accounting policies play a crucial role in eliminating intercompany transactions.
Accumulated profits or losses arise from the consolidation process… #
Accumulated profits or losses arise from the consolidation process, where the parent company's share of profits or losses from its subsidiaries is recognized.
Amortization is the process of allocating the cost of an intangible</i… #
In consolidation reporting, amortization can impact the elimination of intercompany transactions, particularly when intangible assets are involved.
Annual reports are reports that provide information about an entity's fin… #
In consolidation reporting, annual reports can help identify the impact of eliminating intercompany transactions on an entity's financial statements.
Asset valuation is critical in consolidation reporting, as it affects the… #
Asset valuation is critical in consolidation reporting, as it affects the elimination of intercompany transactions.
Associated companies are entities over which the parent company has signi… #
Associated companies are entities over which the parent company has significant influence but not control.
Break #
even analysis is a technique used to determine the point at which an entity's revenues equal its costs.
Business combinations are transactions where one entity acquires control… #
In consolidation reporting, business combinations can impact the elimination of intercompany transactions, particularly if the business combination involves entities with different financial profiles.
Capital contributions refer to the investments made by the parent company… #
Capital contributions refer to the investments made by the parent company in its subsidiaries.
Cash flow statements provide information about an entity's inflows and ou… #
Cash flow statements provide information about an entity's inflows and outflows of cash.
Consolidated financial statements are the financial statements of a paren… #
Consolidated financial statements are the financial statements of a parent company and its subsidiaries, presented as a single entity.
Control is the ability of the parent company to direct the financi… #
Control is the ability of the parent company to direct the financial and operating policies of its subsidiaries.
Current assets are assets that are expected to be realized or sold within… #
Current assets are assets that are expected to be realized or sold within one year or within the entity's normal operating cycle.
Current liabilities are liabilities that are expected to be settled withi… #
Current liabilities are liabilities that are expected to be settled within one year or within the entity's normal operating cycle.
Deferred taxation arises from the difference between the tax base … #
Deferred taxation arises from the difference between the tax base and the financial reporting base of assets and liabilities.
Depreciation is the systematic allocation of the cost of a tang… #
Depreciation is the systematic allocation of the cost of a tangible asset over its useful life.
Direct costs are costs that can be directly attributed to the production… #
Direct costs are costs that can be directly attributed to the production of goods or services.
Eliminating entries are journal entries made to eliminate intercompany tr… #
Eliminating entries are journal entries made to eliminate intercompany transactions.
Entity #
wide disclosures provide information about an entity's financial position, performance, and cash flows.
Equity method is a method of accounting for investments in associated com… #
Equity method is a method of accounting for investments in associated companies.
Foreign currency transactions are transactions denominated in a currency… #
Foreign currency transactions are transactions denominated in a currency other than the entity's functional currency.
Functional currency is the currency of the primary economic environment i… #
Functional currency is the currency of the primary economic environment in which an entity operates.
Goodwill impairment arises when the carrying amount of goodwill exceeds i… #
Goodwill impairment arises when the carrying amount of goodwill exceeds its recoverable amount.
Group accounts refer to the financial statements of a parent company and… #
Group accounts refer to the financial statements of a parent company and its subsidiaries, presented as a single entity.
Hedging transactions are transactions that reduce or eliminate an entity'… #
Hedging transactions are transactions that reduce or eliminate an entity's exposure to risks.
Impairment losses arise when the carrying amount of an asset exceeds its… #
Impairment losses arise when the carrying amount of an asset exceeds its recoverable amount.
Incorporation date refers to the date on which a subsidiary was incorpora… #
Incorporation date refers to the date on which a subsidiary was incorporated.
Indirect costs are costs that cannot be directly attributed to the produc… #
Indirect costs are costs that cannot be directly attributed to the production of goods or services.
Intangible assets are assets that are not physical in nature #
Intangible assets are assets that are not physical in nature.
Intercompany transactions are transactions between entities within a grou… #
Intercompany transactions are transactions between entities within a group.
Intra #
group transactions are transactions between entities within a group.
Investment properties are properties held by an entity to earn rentals or… #
Investment properties are properties held by an entity to earn rentals or for capital appreciation.
Investments in associated companies are investments made by the parent co… #
In consolidation reporting, investments in associated companies can impact the elimination of intercompany transactions.
Joint ventures are entities over which two or more parties have joint con… #
Joint ventures are entities over which two or more parties have joint control.
Lease agreements are contracts between a lessor and a lessee, where the l… #
Lease agreements are contracts between a lessor and a lessee, where the lessor grants the lessee the right to use an asset for a specified period.
Liability valuation is critical in consolidation reporting, as it affects… #
Liability valuation is critical in consolidation reporting, as it affects the elimination of intercompany transactions.
Management accounts provide information about an entity's financial posit… #
Management accounts provide information about an entity's financial position, performance, and cash flows.
Minority interest refers to the portion of a subsidiary's equity that is… #
Minority interest refers to the portion of a subsidiary's equity that is not owned by the parent company.
Net assets are the assets of an entity that are not subject to any liabil… #
Net assets are the assets of an entity that are not subject to any liabilities.
Non #
controlling interest refers to the portion of a subsidiary's equity that is not owned by the parent company.
Non #
current assets are assets that are not expected to be realized or sold within one year or within the entity's normal operating cycle.
Non #
current liabilities are liabilities that are not expected to be settled within one year or within the entity's normal operating cycle.
Operating segments are components of an entity that engage in business ac… #
Operating segments are components of an entity that engage in business activities from which they may earn revenues and incur expenses.
Overhead costs are costs that are not directly attributable to the produc… #
Overhead costs are costs that are not directly attributable to the production of goods or services.
Parent company is the entity that has control over one or more subsidiari… #
Parent company is the entity that has control over one or more subsidiaries.
Pro forma financial statements are financial statements that are prepared… #
Pro forma financial statements are financial statements that are prepared as if a transaction had occurred at an earlier date.
Provision for doubtful debts is an estimate of the amount of debts that m… #
Provision for doubtful debts is an estimate of the amount of debts that may not be recoverable.
Provisions for liabilities and charges are estimates of the amount of lia… #
Provisions for liabilities and charges are estimates of the amount of liabilities or charges that may arise in the future.
Relevant transactions are transactions that are relevant to the financial… #
Relevant transactions are transactions that are relevant to the financial statements of the reporting entity.
Reserves and provisions are amounts set aside for future liabilities or e… #
Reserves and provisions are amounts set aside for future liabilities or expenses.
Revenue recognition is the process of recognizing revenue in the financia… #
Revenue recognition is the process of recognizing revenue in the financial statements.
Significant influence is the power to participate in the financial and op… #
Significant influence is the power to participate in the financial and operating policy decisions of an entity.
Subsidiary company is an entity that is controlled by another entity #
Subsidiary company is an entity that is controlled by another entity.
Tax base is the amount of an asset or liability that is subject to taxati… #
Tax base is the amount of an asset or liability that is subject to taxation.
Total comprehensive income is the change in equity of an entity during a… #
Total comprehensive income is the change in equity of an entity during a period, resulting from recognized income and expenses.
Trade payables are amounts owed by an entity to its suppliers #
Trade payables are amounts owed by an entity to its suppliers.
Trade receivables are amounts owed to an entity by its customers #
Trade receivables are amounts owed to an entity by its customers.
Transaction price is the amount paid or received for a transaction #
Transaction price is the amount paid or received for a transaction.
Transfer pricing is the process of determining the price at which goods o… #
Transfer pricing is the process of determining the price at which goods or services are transferred between entities.
Unrealized profits or losses arise from the consolidation process,… #
Unrealized profits or losses arise from the consolidation process, where the parent company's share of profits or losses from its subsidiaries is recognized.
Valuation adjustments are adjustments made to the value of assets or liab… #
Valuation adjustments are adjustments made to the value of assets or liabilities.