Elimnination of Investment Income/Expense

[Former Member]

I have requirement to eliminiate intercompany investment against expenses.

Company X has investment in company Y for 90% of stocks.

Company Y distributes dividend income ( $1000)and Company X share is 90%($900)

Company X accounts for investment income , but pays a tax of 30%. Hence accounts for investment income as $630, tax is $270.

How will this work in elimination where X will report income of $630 and Y will report the amount to be eliminated as $900.

[Former Member · Accepted solution]

Shivaji,

Your accounting entry is wrong

Investment income should not be reduced to the extent of tax.

Investment Income should be reported only at $ 900 and not at $ 630.

In which case the investment income in Co X and Div exp in Co Y will automatically get eliminated during elimination run as we expect TP will be available.

[Former Member · Accepted solution]

Hi Indirar,

Before concluding if my entry is correct or wrong, can you read the attached literature which speaks of very same issue/entry

http://help.sap.com/saphelp_sem60ep1/helpdata/en/22/85723bbe588200e10000000a114084/content.htm

Even to certain extent I feel the accounting entry could not be right, but after seeing the above SAP link I want to recheck.

[Former Member · Accepted solution]

why i always cannot open help.sap.com?

does it need an authorization to open the help?

please kindly inform.

thanks.

[Former Member]

Use the reclassification function to tranfer the tax portion to Investment Income.

Then run the Interunit elimination functions.Now there will not be any difference and no amount will be posted to clearning account.

[Former Member]

Thanks to everyone.

[dan_sullivan]

Is consolidations of investments implemented? If so, there are settings to define this for automatic elimination.

If not, the elimination can be defined as one-sided and the determining factor could be the receiver of the dividend. The elimination would eliminate both the investment income as long as the accounts are included in the elimination method and the trading partner is included on the postings.

The tax could work the same way, or a post-elimination tax adjustment could be posted. This posting could be defined as a reclassification at posting level 30 and thus would not require trading partner.