Intercompany accounting andprocess management
Survey results

Brochure / report title goes here | Section title goes hereContents
Insights
Why strong intercompany accounting practices are so important 		

3

What the marketplace is demanding to understand 				

3Many companies are looking to overcome key challenges 				

3Technology is only part of the solution 				

4Many have consistent goals with similar challenges 				

4Conclusion 				

4Maturity analysis
Elements and maturity of intercompany 				

5Intercompany maturity results 				

6–9Demographics 				

10Additional information 				

11Disclaimer 				12

2Intercompany accounting and process management | Survey results

Intercompany insights
Deloitte Advisory is pleased to report theresults of our intercompany accounting
and process management survey.
Why strong intercompany accounting practices are so
important
Recent headlines have highlighted several instances of companies
restating prior year financial statements due to errors and fraud
discovered within the intercompany accounts. As such, regulators
have responded by focusing on intercompany transactions andaccounts, such as the Public Company Accounting Oversight Board(PCAOB) amending Audit standard No.18—Related Parties.
Remarkably, given the environment, many organizations view theintercompany process as something that just needs to "get done."As detailed within the report, this has created an environment inwhich organizations struggle with the time-intensive requirements
to manage an effective and strategic intercompany program that isdriven by inefficient processes and systems that have been pieced
together and neglected over time.
What the marketplace is demanding to understandEven as challenges persist, there is a minimal amount of information
available in the marketplace that provides insights into intercompany
leading practices and what other companies are doing.
Our survey was designed to provide insight and perspectives on thecurrent environment of intercompany accounting practices and thebarriers to optimal performance. A primary goal in preparing theintercompany survey was to close the knowledge gap of common
and leading practices across a diverse group of companies bylooking to understand:

What is intercompany accounting?
Intercompany accounting refers to the processing andaccounting for internal financial activities and events that crosslegal entities, branches, or national borders including, but notlimited to, sales of products and services, fee sharing, costallocations, royalties, and financing activities. It is a broad area
that, while rooted in accounting, has extensions into various
functions, including tax, treasury, and finance.
Many companies are looking to overcome key challenges
Many companies have been actively assessing ways to optimize
their intercompany process through leveraging an internal centerof excellence, increasing automation, and improving organizationalalignment between accounting, tax, and treasury. However, despite
these efforts, several key challenges continue to persist:•• 50% of the respondents noted a lack of defined ownershipof the intercompany process and challenges with visibility by
management into the process and key activities•• 54% have manual intercompany processing with limited
counterparty visibility to support reconciliation and elimination•• 47% indicated only ad hoc netting capabilities with no definedcalendar•• 30% of all respondents noted significant out-of- balance
positions that require frequent use of “plugs” to balance•• Many noted significant manual top-side adjustments during
period-end close•• What challenges exist in the intercompany environment?
•• How have enabling technologies affected the intercompany
process?
•• What are the leading companies doing that others should beconsidering?

As used in this document, “Deloitte” means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of thelegal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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Intercompany accounting and process management | Survey results

Technology is only part of the solution
Many of the companies that responded to the survey
told us they remain challenged in maximizing the total
potential of their intercompany program, despite
having sophisticated enterprise resource planning(ERP) landscapes supported by many capable financial
systems.
The top three challenges cited by surveyed organizations
for intercompany were:

Marketplace intercompany maturity*

4%

26%

Leading

Advanced

1. Lack of/poor use of technology
2. Nonstandardized processes
3. Transaction matching/account reconciliation
Key causes may include the following:•• Intercompany not viewed as a critical finance activity•• Multiple charts of accounts that have not beenstandardized•• High volume of disorderly transactions
Many have consistent goals with similar challenges
As many organizations are actively striving to optimize
their intercompany program, several of the previously
mentioned challenges were noted by the respondents
as being common issues preventing optimization.

15%

DeﬁnedDeveloping*See maturity deﬁnitions on page 5•• Rapid growth due to acquisition leading to disparate
systems and processes•• Multiple disparate legacy systems

55%•• A majority have systems-based pricing element controls that support
intercompany transaction reporting and analytics•• 82% have deployed an integrated transaction flow across multiple platforms
supported by a standardized chart of accounts•• Many have implemented an automated and dynamic settlement and clearing
of intercompany transactions•• 46% have fully automated transaction-level matching, reconciliation, andelimination processes•• Reporting capabilities support financial, tax, statutory, and regulatory
requirements with minimal manual intervention

This is consistent with our findings on the overall
intercompany maturity as 70% of respondingorganizations fall into the Developing and Definedmaturity levels, whereas 26% are Advanced and only
4% are Leading (see page 5 for definitions).

Conclusion

Organizations with Leading or Advanced programs cited
having the following qualities:

Intercompany accounting will continue to be a big focus area for manyorganizations. We hope that the information learned in this survey will help you
set the path forward. If you would like additional information, please reach out toone of the contacts listed on page 11.

•• 71% have standard intercompany policies andprocedures that are supported by a center of
excellence that clearly defines ownership andaccountability across the organization
More detailed information about the survey
results is found on the following pages
4

We would like to extend a sincere thank you to the 81 companies that responded
to our survey. Their willingness to take the time to answer our questions has
provided great insights into issues with which many companies are struggling.

Intercompany accounting and process management | Survey results

Intercompany maturity analysis
Elements and maturity of intercompany
Based on our experience, we have developed an intercompany capability maturity model that helps organizations understand their current
capabilities and target improvements across the seven key elements of the end-to-end intercompany process. These seven elements were
the key focal points for which the survey results are presented on the following pages.

Governanceand policies

Intercompany
pricing

Data management

Transaction
management

Netting andsettlement
Reconciliation andelimination
Internal andexternal reporting

Developing

DefinedAdvanced

Leading

Reactive approach
to monitor or detect
intercompany out-ofbalance positions

High-level policy, someglobal consistency,
escalation processes,
trade/service agreements
in place

Regular policy compliancemonitoring, clear
ownership, andaccountability supported
by a center of excellence

Timely execution of global
policy, with appropriate
mix of preventive/detective
controls

Global policy adoption,system-based pricing
element controls

Global policy adoption,system-based pricing
element controls

Ad hoc, retroactive, manual Some transaction-leveltransfer pricing application pricing policy defines costelements and application
procedures
No cross-platform
knowledge of transactionlevel data elements

Limited transaction-level
Integrated transaction
Master data management todata element definition and flow across platforms with support tax, statutory, andhigh-level mapping across common charts of accounts finance requirements
subsystems

Manual transaction
processing with limited
counterparty visibility

Some standard processes
and workflow enable
controlled intercompany
booking

Ability to match
Automated processing andcounterparty transactions balanced counterparty
across technology platforms transactions

Uncertain tax positions
Bilateral settlement on aand unexpected profit/loss specified calendar
volatility

Bilateral settlement on a
specified calendar

Bilateral settlement on a
specified calendar

Bilateral settlement on a
specified calendar

Bilateral settlement on a
specified calendar

Transaction-level reporting
and reconciliation; reliable
profit elimination

Fully automated transactionlevel matching, reconciliation,and elimination

Significant top-side
adjustments drive
reporting risk

Reporting focused solely
Financial, tax, statutory,
on financial requirements
and regulatory reportingand exception management capabilities

Integrated reporting andanalytics; dashboard visibility
to performance metrics

5Intercompany accounting and process management | Survey results

Intercompany governance and policies
A primary theme noted amongst the Advanced/Leading organizations is that each has, at a minimum:•• Standard policies, processes, and an intercompany center of excellence (COE)•• Trade/service agreements in place•• Clearly defined and communicated roles and responsibilities
Conversely, organizations that indicated having a high-level intercompany policy but lack overall process ownership, regardless of leading
technologies, continued to have very limited visibility into global intercompany process.

Leading33%
14%

Advanced
DefinedDeveloping

67%
76%

4%

10%

50%
25%

44%

2%

75%

No defined policy and supporting standards. Lack of visibility into processes and "due to/due from" positions. Reactive approach to monitor/detect
intercompany
out-of-balance positions and compliance matters.
High-level intercompany policy exists. Lack of overall process ownership. Inconsistent application and compliance. Limited visibility into global
inercompany process.
Standard policy, processes, COE; trade/service agreements in place. Ownership team clearly defined with roles and responsibilities clearly communicatedregularly.
Timely execution of global policy, with appropriate mix of preventive/detective controls. Global standardized chart of accounts supported by an
integrated operating model with dashboard reporting.

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Intercompany accounting and process management | Survey results

Intercompany pricing procedures
A very small portion of organizations, mostly in the Advanced group, indicated having integrated transaction-level reporting and analytics. A
majority of organizations noted that they have transaction-level pricing policies with defined cost elements and application procedures that
support accounting, tax, treasury analytics, and compliance reporting.
The majority of respondents noted the pricing process is ad hoc and retroactive in application of transfer pricing.

75%
62%

67%
58%
43%

42%
33%

33%

20%

19%

5%

2%

Ad hoc, retroactive,
manual transfer pricing
application
Leading

Advanced

Integrated transactionallevel reporting andanalytics

Global policy adoption;system-based pricing
element controls

Transaction-level pricing policy
defines cost elements andapplication procedures
DefinedDevelopoing

Intercompany data management
Of those Advanced/Leading organizations, a significant majority have indicated an integrated transaction flow of data across platforms with
common charts of accounts that are supported by integrated reporting capabilities to support tax, statutory, and finance requirements.
On the other hand, well over 50% of all the organizations cited challenges with cross-platform transaction communication and support ofcompliance reporting.

100%

92%

86%
67%

47%

38% 40%

38%

29%
17%

8%

5%
No cross-platform knowledgeof transaction-level data
elements
Leading		Transaction-level data element
definitions and mapping acrosssubsytems
Advanced		Integrated transaction flow acrossplatforms with common charts ofaccounts
Defined		

7%
Master data management tosupport tax, statutory, andfinance requirements

Developing7

Intercompany accounting and process management | Survey results

Intercompany transaction management
A majority of respondents have indicated that they have standard processes and workflow-enabled/controlled intercompany booking.
A majority of Advanced/Leading organizations noted having automated transaction processing and automated counterparty reconciliation.

92%
71%

67%
58%

67%
57%

44%

43%
27%

25%
14%

7%
Standard processes
and workflow enabled/
controlled intercompany
booking

Manual transaction processing
with limited counterparty visibility

Leading

Advanced

Ability to match andreconcile counterparty
transactions acrosstechnology platforms

DefinedAutomated processing andbalanced counter party
transactions (no reconciliation
required)Developoing

Intercompany netting and settlement mechanism
A clear majority, about 66%, of Advanced/Leading organizations cited having multilateral settlement based on a defined cash management
strategy, with some of the more leading organizations supported by automated dynamic settlement and clearing of intercompany
transactions.
Many of the Developing/Defined organizations have indicated that they only have ad hoc netting with no defined schedule of transaction
netting and settlement.

67%

Leading
Advanced
Defined

20%

65%
40%

15%
38%

75%

Developing

8

33%

20%
17%

2%
8%

Ad hoc netting with no defined schedule

Multilateral settlement based on defined cash management

Bilateral settlement on a specified calendar

Automated, dynamic settlement, and clearing of intercompany
transactions

Intercompany accounting and process management | Survey results

Intercompany reconciliation and elimination
In the case of intercompany reconciliation and elimination, 46% of respondents in the Advanced/Leading organizations have indicated having
fully automated transaction-level matching, reconciliation, and elimination.
48% of the Developing/Defined organizations indicated that they have centralized reconciliation processes and defined transaction cutoff-off
periods, with just 2% of them having fully automated transaction-level matching, reconciliation, and elimination.

100%

Leading
Advanced
Defined

29%

33%

14%

38%

61%

Developing

23%

92%

2%
8%

Out-of-balance and unsettled positions require frequent use of "plugs"
Centralized reconciliation processes and defined transaction cut-off periods
Transactional-level reporting and reconciliation; reliable profit elimination
Fully automated transactional-level matching, reconciliation, and elimination

Intercompany internal and external reporting
The majority of Advanced/Leading companies have indicated they have enabled financial, tax, statutory, and regulatory reporting capabilities
with minimal manual intervention.
Whereas, the Defined/Developing companies seem to have their reporting focused solely on financial requirements and exception
management.

82%
58%
42%

5%

67%
57%

33%
19%

13%

Significant top-side
adjustments drive
reporting risk

9%
Reporting focused solely on
financial requirements andexception management

Leading		

Advanced		Enabled financial, tax, statutory,
and regulatory reporting
capabilities with minimal manualintervention
Defined		

2%
Integrated reporting andanalytics; dashboard
visibility to performance
metrics

Developing9Intercompany accounting and process management | Survey results

Demographics
Survey process

Participating industries•• Survey responses were received from October through December
2014•• Analysis and results were compiled by Deloitte’s Accounting &Reporting Transformation practice and Deloitte Consulting LLP's
Global Benchmarking Center

17.3%

43.2%

7.4%

17.3%

9.9%

4.9%

Financial
Services

Consumer& Industrial
Products

Participating executives•• Chief Financial Officer•• Director of Finance•• Controller/Assistant ControllerLife Sciences &Health Care
ProvidersTechnology, Media& Telecommunications•• …or equivalent roles
Annual revenue breakdown for the
respondents—81 companies replied

38% >$5B

40% $1B–$5B

22% less than $1(B)illion

10Energy &Resources

Other

Intercompany accounting and process management | Survey results

Additional information
Working with Deloitte Advisory
Deloitte Advisory's Center for Controllership provides management and risk consulting services that help our clients deliver world-classcontrollership. We deliver end-to-end services that help the controller and chief accounting officer transform their organizations to be more
proficient, effective, and insightful. We build capabilities within accounting operations and reporting, accounting regulatory compliance, andstrategic finance support. Our competencies comprise designing, implementing, and assessing controllership capabilities and enablers,
including organization and people, policy, process and controls, and information and systems.
Anthony Waelter
Partner | Deloitte Advisory
Deloitte & Touche LLP
awaelter@deloitte.com+1 312 486 5519

Kyle Cheney
Partner | Deloitte Advisory
Deloitte & Touche LLP
kcheney@deloitte.com+1 216 589 1387

Tom Toppen
Managing Director | Deloitte Advisory
Deloitte & Touche LLP
ttoppen@deloitte.com+1 312 486 2137

Brian Bass
Sr. Manager | Deloitte Advisory
Deloitte & Touche LLP
bbass@deloitte.com+1 404 220 1413

Deloitte Consulting LLP's Global Benchmarking Center (GBC) helps executives assess their company’s performance compared to relevant
peers. Through tailored business function benchmarking memberships and services, the GBC has collected industry-specific, proprietarydata from more than 4,600 companies. From this data, relevant external, cross-industry, and internal organization peer groups are created
and refined by demographics and operational complexities. The GBC’s comparative analytics methodology and analysis against these peergroups can provide executives with quantified and prioritized improvement opportunities.
Richard RothPrincipal
Deloitte Consulting LLP
riroth@deloitte.com+1 404 942 6719

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Intercompany accounting and process management | Survey results

Disclaimer•• The scope of this study is limited in nature and does not comprehend all matters relating to your business.
•• This study should not be used as a basis for any decision that may affect your business.
•• We do not assume any obligations as a result of your access to this study.
•• Summary information derived from the responses to this study (other than company identifiable information) may be shared by
us with other companies and in the sale and delivery of our services to our clients.
•• We are not responsible for the disclosure or use of such information by such companies or clients.
•• This study is solely for your informational purposes and internal use, and you will not disclose it to any other person or entity.
•• No part of this document may be reproduced, copied, or transmitted except with written permission.

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This report contains general information only and Deloitte is not, by means of
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or other professional advice or services. This report is not a substitute for suchprofessional advice or services, nor should it be used as a basis for any decisionor action that may affect your business. Before making any decision or taking any
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advisor. In addition, this report contains the results of a survey conducted by
Deloitte. The information obtained during the survey was taken “as is” and was not
validated or confirmed by Deloitte.
Deloitte shall not be responsible for any loss sustained by any person who relies on
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