According to a new report from Deloitte, “Cleaning Up the Mess Under the Bed,” more and more companies are running into costly legal problems caused by inadequate “intercompany accounting,” accounting for multiple legal entities under the same corporate umbrella. The risks are especially evident postmerger, when the purchaser inherits the financial systems, charts of accounts and accounting processes of the entity it’s taking over. What can be done? Here are some takeaways from the Deloitte report:
• Governance and policies: “Effective [intercompany accounting] begins with standard global policies governing critical areas, such as data and charts of accounts, transfer pricing, and allocation methods,” according to the report. Consider establishing a department to oversees these areas.
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