Professional scope: This edition is written for working accountants and finance teams. It explains how the issue appears in ledgers, processes, controls and financial reporting—not how to answer an examination question.
The accounting question
Can the group identify every related party, reconcile every intercompany balance and explain every disclosure classification?
Four application principles
Practical corporate example
One entity records a management fee in March while the counterparty records it in April after invoice approval. The intercompany difference requires cut-off analysis, not merely a consolidation elimination entry.
Typical accounting pattern
Intercompany correctionPost the underlying transaction or cut-off correction in the relevant entity before consolidation where appropriate.
Consolidation eliminationEliminate intercompany income, expense, receivables and payables in the consolidation layer.
The exact entry depends on the entity’s facts, chart of accounts and applicable reporting framework. Review the complete standard and professional advice where necessary.
Close and control checklist
- Quarterly related-party declaration and master update.
- Counterparty balance confirmation and transaction matching.
- Common intercompany chart-of-accounts mapping.
- Difference ageing with named owners.
- Disclosure pack reconciled to ledgers and agreements.
Questions for the reviewer
- Has the relationship list changed during the year?
- Which differences are older than one close cycle?
- Do disclosed terms agree with agreements and actual practice?
Use this in the next close: Assign one owner to the issue, document the conclusion, preserve the evidence and identify the financial-statement line and disclosure affected.