Intercompany balance confirmation

Purpose

Produce a counterparty-by-counterparty confirmation view of intercompany balances. It identifies whether both entities report the same transaction population and isolates timing, currency, coding, and settlement differences.

Scope

Reconcile intercompany AR/AP, loans, management fees, recharges, interest, invoices, credit notes, settlements, and entity confirmations for one closing period.

Excluded: posting elimination entries, approving confirmations, changing ledgers, and contacting counterparties.

Data basis

• Entity ledger extracts with entity, counterparty, account, document number, posting date, due date, currency, debit, credit, and closing balance.
• Counterparty confirmation files, intercompany invoice and settlement registers, FX rates, and prior reconciliation.
• Group chart of accounts and intercompany matching rules in scope.

Result

A reconciliation sheet with both sides of each balance, difference amount and currency, match status, cause, source citations, and proposed follow-up, plus a close memo.

Quality criteria

• Entity A and entity B balances are shown with sign and currency conventions.
• Exact document matches precede amount/date matching and every match is traceable.
• Differences reconcile to timing, FX, coding, missing-document, or unresolved categories.
• The closing population and net difference tie to the ledger extracts.

Instructions

Normalize signs into receivable-positive and payable-positive presentation without overwriting ledger values. Match on entity pair, counterparty document number, currency, amount, and posting period. Do not net different currencies or accounts. Treat a one-sided item as unmatched even when the amount is similar. Explain FX differences using the supplied rate and rate date. Mark confirmation status separately from accounting match status.

Adapt before use

• Map entity, counterparty, account, document, currency, debit, credit, and settlement fields.
• Add the group matching policy, sign convention, FX rate source, and materiality threshold.
• Define entity-pair naming and reconciliation-status values.

Process detail

Set the closing population

Select the period and extract every intercompany debit and credit by entity pair and counterparty.

Data basis: Ledger extracts, closing date, intercompany account list, and entity master.

Result: Signed balance population with entity-pair totals.

Acceptance criterion: Ledger totals tie to the selected accounts and period for each entity.

Exception: Keep late-posted or out-of-period rows visible and flag them.

Normalize reciprocal balances

Convert debit and credit columns to receivable-positive presentation and preserve ledger currency and document identifiers.

Data basis: Entity ledger debit, credit, currency, account, and document fields.

Result: Comparable balance columns for both sides.

Acceptance criterion: For every entity pair, presented balance equals source debit minus credit under the stated sign rule.

Exception: Do not translate currencies without a supplied FX rate and date.

Match transaction populations

Match invoices, credit notes, loans, fees, and settlements by document number, then by amount, currency, and posting date.

Data basis: Intercompany transaction registers and both ledger extracts.

Result: Matched, one-sided, duplicate, and candidate-match rows.

Acceptance criterion: No document is matched twice and each match cites both entity rows.

Exception: Put similar amounts with different currencies or document types into unresolved candidates.

Explain balance differences

Classify residuals as timing, FX, coding, missing transaction, settlement-in-transit, or unexplained.

Data basis: Matched transaction table, confirmations, FX rates, settlement register, and prior reconciliation.

Result: Difference analysis with amount, currency, cause, and evidence.

Acceptance criterion: Difference categories sum to the gross reciprocal variance for every entity pair.

Exception: Use unexplained when evidence does not distinguish timing from missing posting.

Prepare the confirmation view

Summarize balances by counterparty and present confirmation amount, confirmed amount, difference, status, and evidence.

Data basis: Reconciled balances, counterparty confirmations, and materiality threshold.

Result: Confirmation sheet and close memo ranked by unresolved value.

Acceptance criterion: Summary totals tie to the entity ledger and every difference has a citation.

Exception: Keep unconfirmed balances separate from confirmed zero differences.

Document what could not be assessed

List missing counterpart extracts, absent FX rates, unreadable confirmations, duplicate documents, and unmatched balances.

Data basis: Reconciliation exceptions and source inventory.

Result: Open-points section with entity pair, account, currency, and amount.

Acceptance criterion: Every open point is traceable to a ledger or confirmation row.

Exception: State no open points only when both sides and all currencies were checked.