I remember reconciling the worldwide cash balances on the books of one of my previous employers. Most of the entries weren’t recorded correctly, and part of my job became ensuring each individual subsidiary had their cash balances stated correctly on their balance sheets. I can still remember forcing the exchange rates in the intercompany entries, spending hours learning how to work with advanced intercompany journal entries in NetSuite, developing a system for helping our controller sort through all the lines of the entry, redoing the work when some extra transactions were posted after the period and then jumping on calls every month to help the unfortunate souls who took that portion of my job when I moved away from direct accounting to financial systems administration.
Those days are long past now, but whenever I’m asked how Netgain products handle intercompany entries, I am reminded that they are particularly confusing. This is because they are typically done at the end of the accounting period and require the person making the entry to summarize a lot of information in a single entry (information that this poor person had nothing to do with but now has to spend hours contacting co-workers and investigating transactions to find).
The easy way to transfer assets
Netgain’s Asset Transfer feature in NetAsset quickly moves assets between subsidiaries before running depreciation on them for the period. These assets already have depreciation calculated on them for several periods, so we have to take the accumulated-depreciation balance and the gross asset balance into account in this entry. With asset transfers, this can all be taken care of in one step without any need to dig through prior entries.
Here's our asset:
I’ve put boxes around the key things to note—we’ve already booked 14 periods of journal entries that have affected the asset balances, and the current financial information is shown on the asset. NetAsset has already made it pretty easy to see all of the relevant financial information for this asset to book an intercompany entry, but we’d still have to dig in and figure out which accounts were used to book these entries and would therefore, need to be backed out. We’d also need to take a bit of time to get the intercompany journal set up so that all the amounts zero out at the end of the entry. That’s where the Transfer button at the top of the image comes into play.
If we click Transfer, we’ll be brought to a new page where we can select a new subsidiary, class, department, location and even asset type for the asset. The intercompany accounts hit in the journal will be determined by the asset’s type, but we can even manually decide which accounts we’ll hit and what exchange rate we’ll use as part of the transfer.
Once the transfer is complete, we’re left with an asset in a new subsidiary, a new schedule line with a connected intercompany journal entry showing the transfer and an updated schedule in the currency of the subsidiary transferred to. Here’s the same asset again, but you’ll notice the numbers have dramatically changed to reflect the fact that the new subsidiary is a Euro-based subsidiary rather than USD.
If we click the journal entry on the schedule line, we can see the full effects of the intercompany transfer.
One complex journal entry has been generated, the asset has been moved into a new subsidiary and now, when we run any future depreciation entries, it’ll be booked in the new subsidiary at the currency of the subsidiary. With a few button clicks, we’ve completely transferred all current asset balances and all future journal entries.
Bottom line
Intercompany transfers don’t need to be a big pain. Simplify the accounting and automate the process with NetAsset.
