Intercompany Offsetting

[Whoknowsbest]

I am hoping I can explain this well so someone is able to provide some advice, as I feel my boss wants to do it incorrectly. We have three separate legal entities (companies) operating in three separate countries, but consolidated financials under the parent company. They want to do a recharge invoice of specific expenses from Company A to C, but they do not want to show an I/C between A/C. So they want me to put the payment through Company B

So basically:

Recharge invoice from Company A to C
Then offsetting A/P invoices from company B to C
Then offsetting A/R invoices from company B to A
With no funds transferring, just offsetting invoices from C to B to A
Company A does not have any A/P between company C to offset

I know you can do offsetting between two entities, but can you involve a third entity without any invoices?

 

[Fidget]

Do you know why they don't want a direct recharge between A & C?

 

[Whoknowsbest]

I/C Offsetting

They do not want to have any I/C between A and C and they do not want to transfers funds directly from A to C. This is what is making me think that doing it this way is incorrect. It seems as if they do not want to have a record of it from A to C at all, thus putting it through company B.

 

[Samir]

They do not want to have any I/C between A and C and they do not want to transfers funds directly from A to C. This is what is making me think that doing it this way is incorrect. It seems as if they do not want to have a record of it from A to C at all, thus putting it through company B.

That is exactly what they want done. Now, the question is if it is ethical and/or legal?

It might be just to keep the books from being skewed or some international laws that affect these type of transactions, but better to have all the details so you can do your job correctly.