What kind of intercompany transactions needs to be eliminated at the end of year?

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  • Maria

    #1

    What kind of intercompany transactions needs to be eliminated at the end of year?

    investment?

    due to/due from?

    notes payable and notes receivable?

    what else?
  • Bees Knees
    Senior Member
    • May 2005
    • 5456

    #2
    I'm not sure what you mean, needs to be eliminated. If you are talking balance sheet items, they stay there until the account is zeroed out, and possibly for a year or two after, just to make it clear they are zeroed out.

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    • outwest
      Senior Member
      • Dec 2005
      • 455

      #3
      Some other Items..

      Intercompany sales, reimbursements, and expenses.

      Doug

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      • Maria

        #4
        When we consolidate the subsidiary, we need eliminate all of the intercompany transactions, such as investment, due from and payable.

        Yes, sales need to.

        Comment

        • Snaggletooth
          Senior Member
          • Jun 2005
          • 3314

          #5
          Accounting

          Maria, this appears to be an accounting-related question, with minimal tax consequences so long as all the subsidiaries are U.S. and you're filing a consolidated tax return.

          The only snafu I can think of is on state taxes if the subsidiaries are in different states. Obviously by altering the transfer price you can increase your profits in a low-tax state like Louisiana and decrease your profits in a high-tax state like New York. I don't know whether the states have ganged up on this practice and created a sort of "transfer price convention" to prevent this or not.

          Many of the states no longer isolate profit, but take the entire corporate profit and allocate it based on a "three-factor formula" or "four-factor formula." This makes transfer pricing a moot point.

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