Use intercompany funding deals to centrally manage the debt and investment relationships between a company and the parties (either companies or counterparties) that are part of its intercompany group.
If you enter into an intercompany funding deal with another company, journal entries are automatically created for both companies. If you enter into an intercompany funding deal with a counterparty, journal entries are only created for the company.
Note: If you enter into a company to company intercompany funding deal, and the two companies in the deal use a different chart of accounts structure, those companies will generate very different journal entries. If you plan to enter into company to company intercompany funding deals, ensure that you define the journal entry actions for the IG deal type for each company correctly. Consult a functional accounting person to determine the correct journal entry structure for your company to company intercompany funding deals.
You define the way that journal entries are generated for each company in the Journal Entry Actions window (see: Journal Entry Actions). All journal entries that are generated for intercompany funding deals can be posted to General Ledger using the Daily Journals window (see: Daily Journals).
Use the Bank Account Interest Rates window to set up the default interest rates that you want to use for your intercompany funding deals. There are two types of intercompany interest rates that you can define:
Global interest rates are the default intercompany funding interest rates for a company and account balance range.
Specific interest rates are the default intercompany funding interest rates for a combination of company, party, currency, and account balance range. If an applicable specific interest rate exists, that rate is used in place of any global interest rates that may exist.
In the Intercompany Funding window, choose the company that you want to define an intercompany interest rate.
If you want to define a global interest rate, choose the Global Interest button. The Bank Account Interest Rates window appears.
If you want to define a specific interest rate, choose the Intercompany party and the currency that you want to set a rate for and choose the Specific Interest button. The Bank Account Interest Rates window appears.
In the Effective Date field, enter the date that you want the rate to become effective on.
In the Account Balance Low and the Account Balance High fields, specify the balance range that you want the interest rate to apply to. For example, 100 to 1,000,000.00.
Suggestion: To effectively set up intercompany interest rates, ensure that the value in the Account Balance Low field as close as possible to the value in the Account Balance High field of the preceding rate. For example, if you set the Account Balance High value for one range as $1,000,000.00, set the Account Balance Low value for the following range as $1,000,000.01.
In the Interest Rate field, enter the default interest rate for the balance range.
Repeat steps 1 to 6 for each global or specific intercompany interest rate you want to set up.
Save your work.
Use the Intercompany Funding window to record intercompany funding deals between a company and parties that are part of the company's intercompany group.
Navigate to the Intercompany Funding window.
In the Company field, choose the company for the deal. The default bank account number, currency, day count basis, interest rate and portfolio for the company are automatically populated in the appropriate fields. The Transfer Date field is automatically populated with the current system date.
In the Intercompany Party field, choose the deal party. The party must be part of the company's intercompany group.
If you choose another company, journal entries are generated for both companies in the deal. The default bank account number for the intercompany party appears in the Party Account field.
If you do not want to use the default account, currency, day count basis, or interest rate for the deal, change the values as required.
The default interest rate for an intercompany funding deal defaults in based on the predefined global interest rate (for a company and balance combination), or on a specific interest rate (for a company, party, currency, and balance combination). To view the global interest rates for the company, choose the Global Rates button. To view the specific interest rates for the company, choose the Specific Rates button. For more information on setting up global and specific interest rates, see: Setting Up Intercompany Interest Rates.
Choose the Main Details tab region.
In the Action field, select the action for the intercompany funding deal. Choose PAY, if the company is transferring funds to the intercompany party. Choose REC if the company is transferring funds from the intercompany party.
In the Principal Adjust field, enter the amount transferred.
In the Balance field, the balance of funds transferred between the company and the intercompany party appears. If the intercompany party owes the company, then the balance is positive. If the company owes the intercompany party, then the balance is negative.
In the Accrued Interest field, the total amount of accrued interest for the intercompany funding deal appears. You can override this calculated interest amount by entering a new interest amount. The System Interest field shows the original interest amount calculated by the system.
Note: You can only override interest amounts if you have the appropriate user access levels. See: User Access Levels.
Enter the date that the interest is settled in the Interest Settlement Date field if you want to settle interest on the deal.
Enter the amount of interest that is settled in the Interest Settled field.
In the Interest Rounding field, choose the rounding rule that you want to use for calculating interest on the deal. The possible choices are: Nearest, Round Up, or Round Down.
In the Interest Includes field, choose the days that you want to include when the interest is calculated on the deal. The possible choices are: First Day, Last Day, or Both Days.
Note: If you select Both Days for Interest Includes, you cannot use the 30/360, 30E/360, or 30+/360 day count basis.
Choose the Company Details tab region.
In the Portfolio and Product Type fields, choose a product type and a portfolio type for the deal.
In the Pricing Model field, enter the pricing model for this deal. Choose Face Value if you want the revaluation process to calculate currency gains and losses or No Revaluation to turn off revaluation.
In the Funding Limit field, choose a counterparty limit code that will apply to negative balances. In the Investment Limit field, choose a counterparty limit code that will apply to positive balances.
Funding and Investment limits are defined in the Limits window. See: Limits.
In the [ ] Descriptive Flexfield, complete the flexfield as necessary. For information on descriptive flexfields, see: Defining Descriptive Flexfields.
If the intercompany party that you entered is defined as a company, navigate to the Intercompany Party Details tab region. Enter portfolio, product type, pricing model, funding limit, investment limit, and comments for the intercompany party.
Save your work.
If you want to view principal and interest amount settlements associated with an intercompany funding deal, choose the Transaction Summary button. The Transaction Summary window displays a history of the principal and interest amount settlements.
If you need to enter intercompany funding deals frequently, and the deal details are available in electronic sources such as bank files or other third party applications, you can use the XTR_DEALS_INTERFACE table and the Deal Interface Summary window to import the deal details into Treasury. For more information on importing intercompany funding deals, see: Importing Deals into Treasury.
If you settle or compound interest on several deals at the same time, use the Deal Management window to define the bulk processing for interest actions associated with your intercompany funding deals.
If you want to take the same interest action for all of the intercompany funding deals for a particular company, you can set global interest actions for that company in the Deal Management window.
If you want to modify bank accounts and other attributes of your deals such as Product Type, Portfolio, Funding, and Investment Limits, select the Interest Management Additional Details tab in the Deal Management window.
If you want to pool all of the interest for your intercompany funding deals, see: Creating Intercompany Cash Pools.
In the Intercompany Funding window, choose the Deal Management button. The Find Deals window appears.
Complete the appropriate fields to find the intercompany funding deal or deals that you want to manage interest for. The deals appears in the Deal Management window.
Choose the Interest Management tab.
To define the interest action for a particular deal, do the following:
To settle interest, choose the deal and in the Interest Actions field, choose Settle.
To compound interest, choose the deal and in the Interest Actions field, choose Compound.
To exclude a deal from an interest action, choose the deal and tin the Interest Actions field, choose None.
To define the interest action for all of the deals displayed in the Deal Management window, choose the Set Global Interest Actions button. The Global Interest Actions window appears. Choose an interest action, either Settle, Compound, or None and then choose the Apply button.
If you want to only take action on part of the accrued interest, in the Interest Amount field, you can change the amount accordingly.
Change the other updatable fields in the Interest Management and Interest Management Additional Details tab regions.
Choose the Apply button or save your work to generate the settlement and compound interest transactions.
If you want to view a summary of the principal and interest amounts associated with an intercompany funding deal, choose the Transaction Summary button. The Transaction Summary window appears.
You can use intercompany cash pools to group the intercompany accounts for a company and collectively calculate interest on those accounts. An intercompany cash pool is a nominal setoff account. A cash pool can only group accounts of the same currency for parties in the same intercompany group. To create an intercompany cash pool, create a notional cash pool for your intercompany group. For more information on how to create a notional cash pool, see: Cash Pools.