SEM-BCS One vs Two Sided Eliminations

[Former Member]

Hi,

What are the significant differences between One and two sided elimination?

When do we use one sided and when to use two sided?

Thanks is advance.

[Former Member · Accepted solution]

Hi,

Interunit eliminations happen between pairs of cons units.

<b>Two-sided elimination</b> might be used when both cons units have information regarding operations between them.

Example: A/P & A/R in balance sheet:

The company X has A/R in amount ZZZ with regard to Y company-partner.

The company Y has A/P in amount ZZZ with regard to X company-partner.

All these entries mean that Company Y owe Company X $ZZZ amount.

Using this two-directed information the system may exclude these liabilities.

Certainly, not always amount of debt is shown equally by both companies. In this case we select the strategy of writing off the difference.

<b>One-sided elimination</b> might be used when only one cons units have information regarding operations with another unit.

The typical example: elimination of interunit revenue and expense in P&L:

The company X sold iron ore (its finished product) to Y company-partner. Usually, the P&L revenue accounts have subassignment by the company-partner.

The company Y wrote off the bought ore to its production in progress. Usually, expense items of P&L don't have subassignment by the company-partner.

The system encountering an amount on the P&L revenue item, looks for unit-partner and deducts the amount from the revenue of company X and expenses of unit-partner, regardless of the fact that unit-partner doesn't show in P&L any such operations between companies.

So, if you have enough information from both ends of pairs of cons units - use two-sided elimination. Otherwise, you simply have to aplly one-sided elimination.

Hope this helps.

[Former Member · Accepted solution]

Eugene,

Thanks for replying.

If you don't mind, let us go more detail on one sided elimination.

when upload RFD, i put this information on the excel upload :

Company AA => Revenue = -200 (have subassignment to Company BB)

Company AA => Expense = 500 ( no subassignment)

I set one sided elimination for them with following configuration :

• in selection 1 , i put revenue account.

• in differences, i put debit=revenue and credit=expense

so when i execute the elimination method, there are journals as follows :

Company AA => Dr Revenue 200

Company AA => Cr Expense -200

Are the journal and the configuration correct?

Let say, if Expense (in the above example) have subassignment to company BB, then i should use two sided eliminations. Is it right?

Thanks in advance.