Section S.0

NetSuite Setup Requirements

Required features, modules, and configuration for intercompany transaction functionality.

💡 Module Required
NetSuite OneWorld is required for intercompany transactions across subsidiaries. This is a separately licensed edition upgrade from standard NetSuite.

Required Features

Setup › Company › Enable Features › Company subtab
Feature Location Purpose
OneWorld Edition upgrade Multi-subsidiary support
Automated Intercompany Management Company subtab Auto-create matching IC transactions
Intercompany Time and Expense Company subtab Cross-subsidiary time/expense billing
Elimination Company subtab IC elimination at consolidation

Key Navigation Paths

Task Navigation Path
Subsidiaries Setup > Company > Subsidiaries
IC Preferences Setup > Accounting > Intercompany Preferences
IC Accounts Lists > Accounting > Accounts (filter by IC)
IC Sales Order Transactions > Sales > Enter Sales Orders (IC customer)
IC Purchase Order Transactions > Purchases > Enter Purchase Orders (IC vendor)
IC Journal Entry Transactions > Financial > Make Intercompany Journal Entries
IC Adjustments Transactions > Financial > Intercompany Adjustments
Elimination Setup Setup > Accounting > Manage Elimination Setup
Run Eliminations Transactions > Financial > Run Intercompany Elimination

Account Configuration

Account Type Special Setting
Intercompany Receivable Other Current Asset Eliminate = Yes
Intercompany Payable Other Current Liability Eliminate = Yes
IC Revenue Income Eliminate = Yes
IC Expense Expense Eliminate = Yes
IC Loan Receivable Other Asset Eliminate = Yes
IC Loan Payable Long Term Liability Eliminate = Yes
⚠️ Account Setup Critical
IC accounts must have "Eliminate" = Yes to be included in consolidation eliminations. Set this at Lists > Accounting > Accounts > [Edit] > Eliminate checkbox.

IC Customer/Vendor Setup

Each subsidiary needs a customer record representing the other subsidiaries (for sales) and vendor records (for purchases).

Setup Field Setting
IC Customer Represents Subsidiary Select the subsidiary this customer represents
IC Vendor Represents Subsidiary Select the subsidiary this vendor represents

SuiteAnswers References

Topic Article ID Title
Overview 41892 Intercompany Management Overview
Auto IC 45678 Automated Intercompany Management
IC Journals 42156 Intercompany Journal Entries
Eliminations 44923 Intercompany Elimination Process
Consolidation 45781 Consolidated Financial Statements
IC Settlement 43567 Intercompany Settlement Process
🎯 Best Practice
Enable Automated Intercompany Management to have NetSuite automatically create the matching transaction in the counterparty subsidiary. This reduces errors and ensures IC balances always match.
Section S.1

Scenario Overview

GlobalTech Industries operates in multiple countries with a parent company and two subsidiaries. This example demonstrates common intercompany transactions and their elimination at consolidation.

Corporate Structure

flowchart TD subgraph PARENT["GlobalTech HQ (Parent)"] P[US Parent
USD] end subgraph SUBS["Subsidiaries"] S1[GlobalTech EU
EUR] S2[GlobalTech APAC
SGD] end P -->|100% Ownership| S1 P -->|100% Ownership| S2 S1 <-->|IC Sales| S2 P <-->|Mgmt Fees| S1 P <-->|IC Loan| S2 style PARENT fill:#f5f3ff,stroke:#8b5cf6,color:#1a1a1a style SUBS fill:#f0fdf4,stroke:#22c55e,color:#1a1a1a style P fill:#8b5cf6,stroke:#7c3aed,color:#fff style S1 fill:#3b82f6,stroke:#2563eb,color:#fff style S2 fill:#22c55e,stroke:#16a34a,color:#fff

Subsidiary Structure

Entity Country Currency Role
GlobalTech HQ United States USD Parent / Holding Company
GlobalTech EU Germany EUR Manufacturing & Sales
GlobalTech APAC Singapore SGD Distribution & Sales
ℹ️ OneWorld Required
Intercompany transactions require NetSuite OneWorld. This enables multi-subsidiary accounting, automatic intercompany journal entries, and consolidated financial reporting with elimination entries.

Transaction Types Covered

Transaction From To Amount
IC Inventory Sale GlobalTech EU GlobalTech APAC €50,000
Management Fee GlobalTech HQ GlobalTech EU $25,000
IC Loan GlobalTech HQ GlobalTech APAC $100,000
Loan Interest GlobalTech APAC GlobalTech HQ $1,250
Section S.2

Intercompany Inventory Sale

GlobalTech EU manufactures products and sells them to GlobalTech APAC for distribution. This creates an IC Sale for EU and an IC Purchase for APAC.

IC Sale Process Flow

flowchart LR A[EU: Create
IC Sales Order] --> B[EU: Ship
Inventory] B --> C[EU: IC Invoice
Created] C --> D[APAC: IC PO
Auto-Created] D --> E[APAC: IC Bill
Auto-Created] E --> F[IC Receivable
& Payable Match] style A fill:#3b82f6,stroke:#2563eb,color:#fff style B fill:#60a5fa,stroke:#3b82f6,color:#fff style C fill:#3b82f6,stroke:#2563eb,color:#fff style D fill:#22c55e,stroke:#16a34a,color:#fff style E fill:#22c55e,stroke:#16a34a,color:#fff style F fill:#ec4899,stroke:#db2777,color:#fff

Subsidiary Perspectives

Seller GlobalTech EU

Records IC Sale, recognizes revenue, reduces inventory, creates IC Receivable

IC Sales Revenue €50,000
COGS (at cost) €35,000
Gross Profit €15,000
Buyer GlobalTech APAC

Records IC Purchase, increases inventory at transfer price, creates IC Payable

Inventory Received SGD 72,500
IC Payable SGD 72,500
Rate: 1 EUR = 1.45 SGD

IC Invoice Details

IC Invoice (Seller)
GlobalTech EU → GlobalTech APAC
ICINV-EU-00123
Date: March 15, 2025
Item Qty Unit Price Amount (EUR)
Widget Pro Assembly 100 €500.00 €50,000.00

GL Impact - Seller (GlobalTech EU)

EU GL Impact - Seller (GlobalTech EU)
Account Debit Credit
€50,000.00
€50,000.00
€35,000.00
€35,000.00

GL Impact - Buyer (GlobalTech APAC)

APAC GL Impact - Buyer (GlobalTech APAC)
Account Debit Credit
SGD 72,500.00
SGD 72,500.00
⚠️ Transfer Pricing
The €15,000 profit margin on IC sales must comply with arm's-length transfer pricing rules. Document your transfer pricing methodology and maintain supporting documentation for tax authority inquiries.
Section S.3

Intercompany Management Fee

GlobalTech HQ provides shared services (IT, HR, Legal) to GlobalTech EU and charges a quarterly management fee.

Subsidiary Perspectives

Provider GlobalTech HQ

Allocates overhead costs, recognizes IC service revenue

Management Fee Revenue $25,000
IC Receivable from EU $25,000
Recipient GlobalTech EU

Records management fee expense, creates IC payable

Management Fee Expense €23,148
IC Payable to HQ €23,148
Rate: 1 USD = 0.926 EUR

IC Journal Entry Details

IC Journal Entry
Q1 2025 Management Fee Allocation
ICJE-HQ-0045
Date: March 31, 2025
Service Allocation Basis Amount
IT Infrastructure User count $10,000
HR Administration Headcount $8,000
Legal & Compliance Revenue-based $7,000
Total Management Fee $25,000

GL Impact - Provider (GlobalTech HQ)

HQ GL Impact - Provider (GlobalTech HQ)
Account Debit Credit
$25,000.00
$25,000.00

GL Impact - Recipient (GlobalTech EU)

EU GL Impact - Recipient (GlobalTech EU)
Account Debit Credit
€23,148.15
€23,148.15
🎯 Consultant Tip
Document the allocation methodology and ensure it's applied consistently. Management fees should reflect actual services provided and be supportable under transfer pricing guidelines. Consider using NetSuite's allocation schedules for automated monthly postings.
Section S.4

Intercompany Loan

GlobalTech HQ provides a working capital loan to GlobalTech APAC. The loan carries interest at 5% annual rate, with interest accrued monthly.

IC Loan Balance

GlobalTech HQ
+$100,000
IC Loan Receivable
→
GlobalTech APAC
-$100,000
IC Loan Payable

Loan Details

IC Loan
Working Capital Loan to APAC
LOAN-IC-001
Loan Date: January 1, 2025 | Term: 2 Years | Rate: 5%
Principal
$100,000
Annual Interest
$5,000
Monthly Accrual
$416.67

GL Impact - Loan Origination (GlobalTech HQ)

HQ GL Impact - Loan Origination (GlobalTech HQ)
Account Debit Credit
$100,000.00
$100,000.00

GL Impact - Loan Receipt (GlobalTech APAC)

APAC GL Impact - Loan Receipt (GlobalTech APAC)
Account Debit Credit
SGD 135,000.00
SGD 135,000.00

Monthly Interest Accrual (March 2025)

Lender GlobalTech HQ
Interest Income $416.67
IC Interest Receivable $416.67
Borrower GlobalTech APAC
Interest Expense SGD 562.50
IC Interest Payable SGD 562.50
⚠️ Arm's Length Interest Rate
The 5% interest rate must be comparable to what APAC would pay for a similar third-party loan. Document the rate justification (credit rating, comparable rates) for transfer pricing compliance. Thin capitalization rules may also apply in some jurisdictions.
Section S.5

Intercompany Settlement

At the end of each month, intercompany balances are settled via cash transfer or netting. This clears the IC receivables and payables.

Settlement Process Flow

flowchart TD A[Run IC
Balance Report] --> B{Settlement
Method} B -->|Cash| C[Wire Transfer
Between Entities] B -->|Netting| D[Multilateral
Netting] C --> E[Record Payment
Transactions] D --> F[Net Position
Calculation] F --> E E --> G[Clear IC
Receivable/Payable] style A fill:#ec4899,stroke:#db2777,color:#fff style B fill:#dbeafe,stroke:#3b82f6,color:#1a1a1a style C fill:#f59e0b,stroke:#d97706,color:#1a1a1a style D fill:#8b5cf6,stroke:#7c3aed,color:#fff style E fill:#3b82f6,stroke:#2563eb,color:#fff style F fill:#a78bfa,stroke:#8b5cf6,color:#fff style G fill:#22c55e,stroke:#16a34a,color:#fff

IC Balance Summary (Before Settlement)

From Entity To Entity Type Amount (USD)
APAC EU Inventory Purchase $54,054.05
EU HQ Management Fee $25,000.00
APAC HQ Loan Interest (Q1) $1,250.00

Settlement Steps

Settlement Process
1
Calculate Net Positions
Convert all balances to settlement currency (USD)
2
APAC pays EU
$54,054.05 for inventory (via wire or netting)
3
EU pays HQ
$25,000.00 for management fee
4
APAC pays HQ
$1,250.00 for loan interest

GL Impact - APAC Settlement to EU

APAC GL Impact - APAC Settlement to EU
Account Debit Credit
SGD 72,500.00
SGD 72,500.00

GL Impact - EU Receives from APAC

EU GL Impact - EU Receives from APAC
Account Debit Credit
€50,000.00
€50,000.00
ℹ️ FX on Settlement
When settling IC balances in different currencies, any difference between the original transaction rate and settlement rate creates realized FX gain/loss. Use the Revalue Open Balances feature for month-end unrealized FX adjustments.
Section S.6

Consolidation & Elimination

At period end, intercompany transactions must be eliminated from consolidated financial statements. NetSuite generates elimination entries automatically.

Elimination Process Flow

flowchart LR subgraph BEFORE["Pre-Elimination"] A[HQ
Financials] B[EU
Financials] C[APAC
Financials] end subgraph ELIM["Elimination"] D[IC Revenue
vs IC Expense] E[IC Receivable
vs IC Payable] F[Unrealized
IC Profit] end subgraph AFTER["Consolidated"] G[Consolidated
Financials] end A --> D B --> D C --> D D --> G E --> G F --> G style BEFORE fill:#fef3c7,stroke:#f59e0b,color:#1a1a1a style ELIM fill:#f5f3ff,stroke:#8b5cf6,color:#1a1a1a style AFTER fill:#dcfce7,stroke:#22c55e,color:#1a1a1a style A fill:#f97316,stroke:#ea580c,color:#fff style B fill:#3b82f6,stroke:#2563eb,color:#fff style C fill:#10b981,stroke:#059669,color:#fff style D fill:#8b5cf6,stroke:#7c3aed,color:#fff style E fill:#8b5cf6,stroke:#7c3aed,color:#fff style F fill:#8b5cf6,stroke:#7c3aed,color:#fff style G fill:#22c55e,stroke:#16a34a,color:#fff

Elimination Entry Types

Elimination Type Debit Credit Purpose
IC Sales / Purchases IC Sales Revenue IC COGS / Purchases Remove IC trading
IC Receivable / Payable IC Payable IC Receivable Remove IC balances
IC Management Fees IC Fee Revenue IC Fee Expense Remove IC services
Unrealized Profit Retained Earnings Inventory Remove IC markup in inventory

Elimination Entry - IC Sales/Purchases

ELIM Elimination Entry - IC Sales/Purchases
Account Debit Credit
$54,054.05
$54,054.05

Elimination Entry - IC Receivable/Payable

ELIM Elimination Entry - IC Receivable/Payable
Account Debit Credit
$80,304.05
$80,304.05

Elimination Entry - Unrealized IC Profit in Inventory

ELIM Elimination Entry - Unrealized IC Profit in Inventory
Account Debit Credit
$16,216.22
$16,216.22
🎯 Consultant Tip
Configure elimination rules in NetSuite to automatically generate these entries. The system can track IC account pairs and create offsetting entries at consolidation. Review elimination entries carefully - any imbalance indicates IC transaction mismatches between subsidiaries.
⚠️ Unrealized Profit Elimination
When IC inventory remains unsold at period end, the markup profit must be eliminated from consolidated inventory and retained earnings. This ensures consolidated statements show inventory at original cost to the group, not the inflated transfer price.
Section S.7

Complete Summary

Review of all intercompany transactions and their treatment at both subsidiary and consolidated levels.

Transaction Summary

Transaction Seller/Provider Buyer/Recipient Amount Elimination
Inventory Sale EU (Revenue) APAC (Purchase) €50,000 Full
Management Fee HQ (Revenue) EU (Expense) $25,000 Full
IC Loan Principal HQ (Receivable) APAC (Payable) $100,000 Balance Sheet
Loan Interest HQ (Income) APAC (Expense) $1,250 Full
Unrealized Profit - APAC Inventory $16,216 Inventory Adj

Key Configuration Requirements

ℹ️ NetSuite Setup Checklist
  • IC Account Pairs: Define matching IC receivable/payable accounts for each subsidiary pair
  • Elimination Rules: Configure automatic elimination entry generation
  • Transfer Pricing Items: Set up IC pricing rules on items
  • IC Journals: Enable IC journal entries with auto-pairing
  • Currency Exchange: Configure exchange rates for IC transactions
  • Approval Workflow: Consider IC transaction approval requirements
💡 Key Takeaways
  • IC transactions create mirror entries in both subsidiaries
  • Transfer pricing documentation is critical for tax compliance
  • IC balances should be settled regularly (monthly/quarterly)
  • Elimination entries remove IC activity from consolidated statements
  • Unrealized profit in IC inventory must be eliminated at consolidation
  • Currency differences on IC settlements create FX gains/losses
  • IC imbalances indicate data integrity issues - investigate promptly