This component enables you to eliminate profit and loss resulting from inventory transfers between subsidiaries in your corporate group. This elimination may be a legal requirement and/or a policy of management accounting for the group.

You can use this component if:

• Interunit (IU) profit or loss has been recorded in your group as a result of the sale of inventory.
• The subsidiaries involved in the inventory transaction are included in consolidation for the group.
• On the date of consolidation, the inventory concerned is still owned by the group.
• You want elimination entries to be posted automatically.

Install this component if you want to eliminate IU profit/loss resulting from inventory transfers by means of automatic posting.

The elimination of interunit profit/loss in inventory (IPI) is based on data from the consolidation unit managing the inventory concerned and the unit that supplied the inventory. This data shows the supply relationships on the level of product groups, for which elimination takes place. The product group is in this case used for a comparison between inventory and supplier data.

The calculation base is the book value of the asset and the group cost of goods manufactured which are determined using additional financial data, or they may exist in the totals database (the latter applies only to inventory data).

IU profit/loss is the difference between the book value of the inventory and the group COGM. IU loss (inventory book value greater than group COGM) is eliminated by reducing the book value to match the group COGM. IU loss (inventory book value less than group COGM) is eliminated by increasing the book value to match the group COGM. You have the option of not eliminating IU losses if the inventory concerned was sold at a market price that is lower than the group production costs, or if it would be relatively difficult to calculate the exact amount involved.

The inventory book value is adjusted to match the group COGM, and an offsetting entry is posted to the income statement. The retained earnings or annual net income, and deferred taxes are thereby automatically adjusted.

Currently, materials data relevant to IPI cannot be accessed by means of integration with Product Cost Controlling (CO-PC).

A supply chain encompassing multiple trading partner relationships is not available at present. Supply relationships can currently only involve pairs of units.