Intercompany Transactions

1
Intercompany Transactions

• Very important in Civil Air Patrol financial
  accounting
• Very confusing

2
What Are Intercompany Transactions?

• Transactions between components of an affiliated
  group filing consolidated financial statements or
  tax return
• Civil Air Patrol reports using consolidated
  financial statements
• Civil Air Patrol files an annual group Form 990
  with the IRS

3
Why Are They Important?

• Generally Accepted Accounting Principles (GAAP)
  prohibit generating revenue or expense within a
  reporting entity through intercompany
  transactions
• In CAP, we have lots of intercompany transactions
• NHQ payments to wings, squadron payments to
  wings, wing payments to other wings, wing
  payments to region

4
So You Might Ask

• Arent funds we receive from NHQ for funded
  missions revenue for our wing since we do receive
  the money?
• Arent funds we pay to our neighboring wing
  expense for our wing since we pay them the money?
• If intercompany revenue and expense is prohibited
  by GAAP, why do we bother recording those
  transactions?

5
Posting Intercompany Transactions

• Posted to intercompany revenue and expense
  accounts

6
Intercompany Revenue Accounts

• 6400000 From Units Below National Headquarters
• 6410000 From Regions and Wings
• 6410100 From Regions
• 6410110 From Regions through NHQ
• 6410120 Other Income from Regions
• 6410200 From Wings
• 6410210 Vehicle Maintenance
• 6410220 Mission Reimbursements
• 6410230 Aircraft Fuel
• 6410240 Membership Dues
• 6410290 Miscellaneous
• 6413000 From Units Below
• 6413010 Wing Conference
• 6413020 Encampment
• 6413030 Proficiency Flying
• 6413040 Aircraft Fuel
• 6413090 Miscellaneous

7
Intercompany Expense Accounts

• 9435000 Expenditures with Regions
• 9436000 Expenditures with Wings
• 9436010 Wing Conferences
• 9436020 Encampment
• 9436030 Proficiency Flying
• 9436040 Aircraft Fuel
• 9436090 Miscellaneous
• 9437000 Expenditures with Units Below
• 9437010 Vehicle Maintenance
• 9437020 Mission Reimbursements
• 9437030 Aircraft Fuel
• 9437040 Membership Dues
• 9437090 Miscellaneous

8
NHQ Intercompany Accounts

• 63XXXXX From National Headquarters
• 9434XXX Expenditures with NHQ
• WFAs are responsible for reconciling all
  intercompany transactions with NHQ

9
The KEY to Intercompany Transactions

• If you post revenue to an intercompany revenue
  account, you or somebody else in CAP must post an
  equal expense amount to an intercompany expense
  account
• Intercompany revenue must equal intercompany
  expense in CAP in order to be eliminated at year
  end without a variance

10
Intercompany Transaction Posting

• The fool proof method of ensuring intercompany
  transactions remain equal is to create
  intercompany invoices (income) and intercompany
  bills (expense) at the same time with the same
  date.

11
Intercompany Example

• Cheyenne Sq pays an outside vendor 100 for
  vehicle maintenance
• WY Wing policy is Wing pays for all corporate
  vehicle maintenance
• WY Wing owes Cheyenne Squadron 100
• An invoice is prepared with WY Wing as the
  customer for 100
• A bill is prepared with Cheyenne Sq as the vendor
  for 100

12
Intercompany Example

• The invoice and bill have the same date
• The invoice is posted to account 6410210 (From
  Wings vehicle maintenance)
• The bill is posted to account 9437010 (Exp with
  Units vehicle maintenance)
• Intercompany revenue and expense are equal on the
  same date
• Payment and receipt of payment will not affect
  the revenue and expense date

13
Test Your Knowledge

• Every Civil Air Patrol Wing must file an annual
  report with the IRS
• FALSE

14
Test Your Knowledge

• SM John Smith pays his squadron dues to XYZ
  Squadron. This is considered an intercompany
  transaction since John is a member of Civil Air
  Patrol
• FALSE

15
Test Your Knowledge

• Regarding the previous question, XYZ Squadron
  deposits the dues money from John Smith into its
  squadron WBP sub account. It then uses that
  money to pay XYZ Wing for corporate vehicle use.
  The payment to XYZ Wing is an intercompany
  transaction
• TRUE

16
Questions???