{"id":1196,"date":"2013-09-25T17:13:18","date_gmt":"2013-09-25T17:13:18","guid":{"rendered":"https:\/\/www.peeriosity.com\/shared-services\/articles\/?p=1196"},"modified":"2022-06-30T20:07:40","modified_gmt":"2022-06-30T20:07:40","slug":"making-the-case-for-materiality-thresholds-in-intercompany-accounting","status":"publish","type":"post","link":"https:\/\/www.peeriosity.com\/shared-services\/articles\/2013\/09\/making-the-case-for-materiality-thresholds-in-intercompany-accounting\/","title":{"rendered":"Making the Case for Materiality Thresholds in Intercompany Accounting"},"content":{"rendered":"

For many, Intercompany Accounting processes have improved dramatically over the past decade, with the introduction of large-scale accounting systems capable of booking all sides of a transaction for business units within the same legal entity, in multiple currencies, with highly automated processes for any remaining Intercompany Accounting transactions<\/a> required for legal and tax purposes.\u00a0 For many, the days of embarrassing large out-of-balance in Intercompany are distant memories.<\/p>\n

More than improvements in technology, the ability to have all sides of a transaction processed within the scope of a single global Shared Services organization has created opportunities for coordination and efficiency<\/a> that were not previously possible.\u00a0\u00a0 Yet, for many, significant challenges remain in streamlining processes for miscellaneous billings and charges between entities.\u00a0 For example, if a company has over $5B in annual revenue, is it really a good idea to create intercompany transactions to bill the cost of a pizza lunch between the home locations of participating employees?\u00a0 What about the added complexity of getting approvals, and the inevitable bill-back that shows up next month to correct for the employee who only had a salad? While the example may seem extreme, the truth is that many companies continue to wade in the mire of unnecessary Intercompany transactions.<\/p>\n

Recently, a Peeriosity member in the General Accounting (R2R) research area<\/a> performed custom research using iPolling1<\/sup> to ask the question, \u201cWhat is the status at your company of utilizing an amount threshold for Intercompany transactions?\u201d, with the follow-up question, \u201cWhat is your company\u2019s threshold?\u201d\u00a0\u00a0 \u00a0The results suggest an \u201ceither you like the idea or you don\u2019t\u201d approach with 58% having implemented thresholds, and 30% who haven\u2019t even considered the idea.<\/p>\n

\"status<\/p>\n

When you look at results from the follow-up question, \u201cWhat is your company\u2019s threshold?\u201d, there are also strong opinions at either end of the range, with 27% having a threshold greater than USD $10,000 and 27% who either have no threshold or one that is $100 or less.<\/p>\n

\"companys<\/p>\n

Comments from iPoll participants provide some additional insight into the issue.\u00a0 While there may be a consensus that, from a materiality standpoint, a very high threshold for miscellaneous charges is the right choice (after all, there isn\u2019t any value-add to creating, processing, approving, and correcting transactions where the sole purpose is to shift dollars from one business unit to the another, with zero impact on the company as a whole) when employee bonus plans have impacted the reasons for and against materiality limits become increasing muddled.\u00a0 Here are some of the comments:<\/p>\n