Intercompany profit is the profit made when one group entity sells to another entity of the same group (intercompany). The intercompany profit is generated at the selling entity and is the difference between the revenue and the local cost at this entity.
At the end of the reporting period, all intercompany (also unrealized) profit is calculated and rolled up along the value chain and is visible in every business process. For the consolidation process, the intercompany profits are mainly relevant in the following areas:
- Profit in inventory: value of the intercompany profit for global materials that are held in stock in the various companies (in the financial value chain)
- Profit on stock in transit: the intercompany profit for goods shipped but not yet received by the intercompany receiver needs to be considered from the inventory perspective for all materials traded between the companies
- Profit on goods sold externally: the intercompany profit generated when goods are sold to the market
EXA GVC can be used to calculate UPI at any point of a value chain.