Dealer Group — Intercompany Elimination (Multi-Rooftop)
Eliminating intercompany transactions between dealership points in a multi-rooftop dealer group.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Intercompany Revenue (Eliminated) | Revenue (-) | 250,000.00 | - |
| Intercompany COGS (Eliminated) | Expense (-) | - | 250,000.00 |
💡 Accountant's Note
Large dealer groups operate multiple rooftops (individual dealerships) as separate legal entities. When one rooftop sells a vehicle to another (dealer-to-dealer transfers for inventory balancing), the revenue and COGS must be eliminated in the consolidated financial statements. Similarly, management fees charged between entities are eliminated on consolidation.
Practitioner & Systems Framework
💻 ERP Architecture
Multi-rooftop dealer groups use a consolidating accounting system (or module within their ERP) to eliminate intercompany transactions. Common intercompany transactions include: (1) vehicle transfers between rooftops at a transfer price; (2) management fees from holding company to operating entities; (3) parts sold between rooftops at internal pricing; (4) shared services (IT, HR, accounting) billed at cost allocation. Each rooftop maintains its own DMS and legal entity books; the consolidating system aggregates and eliminates. The intercompany balances must net to zero on consolidation.
⚠️ Audit Flags
Auditors perform the intercompany reconciliation to confirm all intercompany transactions are identified and eliminated. Test that vehicles transferred between rooftops are eliminated in revenue and COGS — unrealized profit from intercompany vehicle transfers persists in the transferee's inventory until the vehicle is sold to a third party. Confirm management fees between entities are at arm's length (for tax purposes) and eliminated on consolidation. Review intercompany loan balances and interest elimination.
📄 Required Documentation
Intercompany transaction register by entity pair, consolidating elimination worksheet, vehicle transfer records between rooftops, management fee agreements and invoices, intercompany loan agreements and interest calculations, consolidation journal eliminating entries, and entity-level vs. consolidated financial statement reconciliation.
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