Where do intercompany eliminations take place?

Intercompany eliminations take place at the parent-level within a corporate structure. This process is essential in group financial reporting where transactions between subsidiaries or affiliates under the same parent company must be eliminated to avoid double counting and provide a clearer, consolidated view of the financial performance and position of the organization. By performing the eliminations at the parent level, the consolidated financial statements reflect only the external transactions with entities outside the group.

At the parent level, the finance and accounting teams have the overall view of all intercompany transactions and relationships, allowing for accurate adjustments to eliminate the impact of these transactions when preparing consolidated financial statements. This involves addressing items like intercompany sales, expenses, and profits that are recognized at both the individual entity level but do not represent actual earnings from an external perspective.

Intercompany eliminations do not typically take place at the regional offices, individual entities, or through external partners, as these parties do not have the full oversight necessary to manage and adjust for these internal transactions comprehensively.