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Foreign divisional consolidations

Interest Transactions

When a foreign divisional consolidation’s
Intercompany Data Entry and Processing Level
is set to Division, intercompany payments and receipts are recorded in the member (division) binders rather than the foreign divisional consolidation binder. However, interest expense bases 411/511, 412/512, 413/513 are built at the legal entity level and the aggregate interest expense apportioned in the foreign divisional consolidation binder. The divisional consolidation’s interest expense apportionment is then back-allocated to the divisions (members) with interest expense.
If an entity has intercompany interest expense, any deductions apportioned on base code 055 will switch to base 513-Div which is a division level interest base. Other expenses apportioned on base 155 will switch to base 513-DC, a divisional consolidation interest base.
The apportionment of the intercompany interest expense accounts in the payor divisions is used to determine the reallocation of the income at the recipient level. The intercompany interest income in the recipient divisions is reallocated to match the way the related expense is spread at the payor level. Any expenses in division recipients that use base codes 055, 056, 060, 065, 070 and 071 will be reapportioned using the results within that division binder.
If an expense is apportioned on base codes 155, 156, 160, 165, 170 or 171, it will be spread using ratios determined at the divisional consolidation level.

This article applies to:

  • Product: ONESOURCE Income Tax, ONESOURCE International Tax
  • Return type: 1120 Corporation
  • Subject: Consolidations
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