Both sides see the same deadline
A monthly schedule creates the checklist after each month-end, with every entity accountant assigned and each due date counted back from the group reporting date.
Intercompany Reconciliation Checklist Template
An intercompany difference belongs to nobody. It sits between two ledgers, often two currencies and two finance teams, until consolidation forces it to zero with a plug nobody can explain.
This free intercompany reconciliation checklist is for group controllers, entity accountants and finance managers in groups of two or more companies that trade with, lend to or charge each other. It runs the monthly cycle from the cut-off calendar and the recharges through balance confirmation by counterparty pair, dispute resolution and eliminations to a signed-off reconciliation, with transfer pricing and withholding tax checks built in. Two scope questions decide whether the foreign exchange phase and the netting and settlement phase appear, so a single-currency month without a settlement stays short.
Why Intercompany Needs Its Own Checklist
Most reconciliations compare your ledger with something outside the business: a bank statement, a supplier statement, a subledger. An intercompany reconciliation compares two ledgers inside the same group, each kept by a different team, often on a different system and in a different currency. Neither side is automatically right, so the process needs rules agreed in advance: who raises the charge, when both sides must book it, which rate converts it, how big a difference can be cleared without argument, and who decides when the two teams disagree.
The result also matters twice. Each entity’s own accounts and tax return depend on its side of the balance, and the consolidated accounts depend on the two sides cancelling exactly. Where the entities are in different countries, tax authorities on both sides expect the price to be at arm’s length and documented. This checklist sits alongside the Month-End Close Checklist, which each entity runs for its own books, and feeds the group close.
Bank reconciliation
Ledger against an outside record
- One entity, one account, one statement
- The bank’s record is the reference point
- Differences are timing, errors or fraud
Month-end close
One entity’s books, complete
- Cut-off, accruals and every balance sheet reconciliation
- Intercompany appears as one balance to reconcile
- Owned by the entity’s own accountant
Intercompany reconciliation
Two group ledgers, against each other
- Every counterparty pair, in transaction currency
- Neither side is the reference: a group rule decides
- Ends in eliminations, settlement and tax evidence
What the Intercompany Reconciliation Checklist Covers
Seven phases run from the cut-off calendar to the group controller’s sign-off. Phase 4 appears only when a counterparty pair holds balances in more than one currency, and Phase 6 only in a settlement month.
Scope
Phase 1: Calendar, Agreements & Scope
Owned by the group intercompany lead. The two scope questions decide which later phases this month’s checklist shows.
- Name the intercompany lead, the entity accountants and the group financial controller — every later task is assigned from these fields
- Answer the scope questions — does any counterparty pair hold balances in more than one currency, and is this a settlement month
- Publish the intercompany cut-off calendar — last day to raise charges, booking deadline for both sides, confirmation date and dispute deadline, counted back from the group reporting date
- Update the entity and counterparty list — new companies, disposals, dormant entities and any change of functional currency
- Check an intercompany agreement covers each type of charge — services, licences, loans and cost sharing, signed and stating the pricing basis
Recharges
Phase 2: Raise & Record Intercompany Charges
- Calculate management fees and recharges under the group policy — cost base, allocation keys and mark-up as the agreement sets them
- Calculate interest on intercompany loans — at the agreed rate on the balance outstanding, accrued where not yet invoiced
- Raise intercompany invoices before the cut-off — quoting the counterparty’s entity code and the agreement, so the receiver can book without asking
- Record dividends and capital movements in both entities — with the board minute or resolution attached
- Deduct withholding tax on cross-border interest and royalties where it applies — at the domestic or treaty rate, with the treaty paperwork on file
- Book the receiving side by the booking deadline — nothing left in transit except documented goods or cash on the move
Matching
Phase 3: Confirm & Match Balances
- Run the intercompany balance report by counterparty pair — receivables against payables, loans against borrowings, interest income against expense, sales against purchases
- Each entity confirms its balances to its counterparties — in transaction currency, as at the confirmation date
- Match each pair and record the difference — in transaction currency first, so an exchange difference is not mistaken for a missing invoice
- Classify every difference — in transit, not booked, wrong counterparty code, wrong amount, pricing dispute or exchange rate
- Post agreed corrections in the entity that made the error — with the evidence attached and the counterparty told
Multi-Currency
Phase 4: Foreign Exchange Differences
Shown only when a counterparty pair holds balances in more than one currency.
- Confirm both entities used the group closing rate — from the same source and date, for every monetary intercompany balance
- Retranslate intercompany monetary balances in each entity’s ledger — with the exchange gain or loss in that entity’s profit or loss
- Re-perform the match in transaction currency — any difference left after retranslation is a real difference, not exchange
- Identify loans treated as part of a net investment in a foreign operation — settlement neither planned nor likely in the foreseeable future, so consolidation treatment differs
- Record the exchange differences that survive elimination — for the consolidation team, with the loan or balance each one came from
Disputes
Phase 5: Disputes & Escalation
- Apply the group tolerance — differences below it are cleared by the entity named in the policy, larger ones must be resolved
- Log each difference over tolerance with an owner and a target date — both entity accountants can see and comment on it
- Escalate anything unresolved at the dispute deadline to the group financial controller — with both sides’ evidence attached
- Record the group financial controller’s decision — which side adjusts, by how much and why, binding on both entities
- Report differences older than one month to the CFO — with the cause and the fix, so recurring breaks get a process change
Settlement Month
Phase 6: Netting & Cash Settlement
Shown only in a settlement month, for example the quarterly netting run.
- Prepare the settlement statement for each entity — net amounts by counterparty, or against the netting centre, after disputes are cleared
- Check local restrictions before paying — exchange controls, withholding tax on the payment and any lender limits on cash leaving an entity
- Treasury approval of the settlement amounts — required before any payment instruction is released
- Pay on the common settlement date — and book both sides of each payment on the same day
- Confirm every settled pair now agrees — the remaining balance matches the agreed post-settlement amount on both sides
Sign-Off
Phase 7: Eliminate, Review & Sign Off
- Post the consolidation eliminations — intercompany balances, sales and purchases, interest, fees and dividends, and investments against equity
- Eliminate unrealised profit on assets still held in the group — inventory and fixed assets bought from another group company, with the deferred tax effect
- Check the eliminations net to zero — any residual is explained and cleared before the consolidation is released
- Compare transfer pricing outcomes with the policy — margins and mark-ups year to date, so any adjustment is made before year-end and not after
- Confirm the transfer pricing documentation will cover this period’s transactions — new flows, new entities and changed agreements
- Group financial controller approval of the intercompany reconciliation — the checklist does not close until it is given
The Accounting and Tax Rules Behind Each Phase
The checklist is a process, but most of its tasks exist because a standard or a tax rule requires something. The table shows the main US and UK or IFRS references. Rates, thresholds and treaties change, so confirm the current position with your advisers.
| Topic | United States | UK and IFRS |
|---|---|---|
| Eliminations (Phase 7) | ASC 810-10-45-1: intra-entity balances and transactions are eliminated, and intra-entity profit on assets still in the group is eliminated in full even where there is a noncontrolling interest | IFRS 10 paragraph B86: intragroup assets, liabilities, equity, income, expenses and cash flows are eliminated in full, including profit recognised in inventory and fixed assets. FRS 102 Section 9 sets the same rule |
| Exchange differences (Phase 4) | ASC 830-20-35-3: gains and losses on intra-entity balances of a long-term investment nature go to the cumulative translation adjustment on consolidation; others stay in earnings | IAS 21 paragraph 45: an intragroup monetary item cannot be eliminated without showing the exchange difference, which stays in consolidated profit or loss unless the item forms part of a net investment in a foreign operation |
| Arm’s length pricing (Phases 1, 2, 7) | Internal Revenue Code section 482 and its regulations | UK transfer pricing legislation, read in line with the OECD Transfer Pricing Guidelines; small and medium-sized enterprises are generally exempt |
| Documentation (Phase 7) | Penalty protection under section 6662(e) depends on documentation existing when the return is filed; the penalty is 20% of the underpayment, or 40% for a gross misstatement | Groups with consolidated revenue of €750 million or more keep a master file and local file in the OECD format, plus a summary audit trail, for periods beginning on or after 1 April 2023, and provide them within 30 days of an HMRC request |
| Country-by-country reporting | Form 8975 for US-parented groups with revenue of $850 million or more in the preceding year | Groups with consolidated revenue of €750 million or more, following OECD BEPS Action 13 |
| Low value-adding services (Phase 2) | The services cost method in the section 482 regulations allows certain routine services to be charged at cost | The OECD simplified approach allows a 5% mark-up on the cost of qualifying services without a benchmarking study, where the jurisdiction accepts it |
| Withholding tax (Phases 2, 6) | 30% on US-source interest, royalties and other fixed or periodic income paid to foreign persons, unless reduced by a treaty | 20% on UK-source yearly interest and on royalties paid abroad, unless reduced by a treaty; the rate on interest rises to 22% from 6 April 2027 |
Disclosure in each entity’s own accounts. Under FRS 102 paragraph 33.1A, a UK company need not disclose transactions with other group members where every subsidiary involved is wholly owned. Partly owned subsidiaries lose that exemption, so keep the counterparty list in Phase 1 clear about ownership.
What is changing. For UK chargeable periods beginning on or after 1 January 2026, Finance Act 2026 exempts many UK-to-UK transactions from transfer pricing where there is no risk of UK tax loss. Banks, REITs and some other regimes are carved out, and companies can elect out. The government dropped its proposal to remove the medium-sized enterprise exemption, and it plans a new International Controlled Transactions Schedule for reporting cross-border related-party transactions, expected to apply from accounting periods beginning on or after 1 January 2027 once secondary legislation is made. The OECD published proposed revisions to Chapter VII of its guidelines, on intra-group services, on 1 June 2026, with comments closing on 22 July 2026; they are not yet final. And IFRS 18, which replaces IAS 1 for periods beginning on or after 1 January 2027, prompted an April 2026 IFRS Interpretations Committee agenda decision on which category of the income statement holds exchange differences on intragroup loans.
Why Run Intercompany Reconciliations in CheckFlow?
Disputes with an owner and a decision
Each difference over tolerance has an owner, comments from both sides and the evidence attached. The group controller’s decision is recorded on the task, and the approval halts the checklist until it is given.
Entities and pairs from a live list
Keep your entities, entity codes, functional currencies and ownership in a data set, so counterparty dropdowns stay current. The Tasks grid shows every open item by person, and analytics show which entities finish late.
Intercompany is one reconciliation among many in the close. The Bank Reconciliation Checklist covers cash, the Journal Entry Review & Approval Checklist controls the correcting entries this process produces, and the Year-End Close Checklist picks up the final transfer pricing true-up. Our month-end close guide shows where intercompany fits in the timetable.
CheckFlow is not a consolidation tool or an accounting system, and it does not match transactions or post eliminations. It runs the workflow around those tools: who books what by when, who confirmed, which differences are open, who decided and who approved, with a timestamped trail you can export for your auditors.
Frequently Asked Questions
What is an intercompany reconciliation?
It is the process of agreeing the balances and transactions that companies in the same group record with each other, so that a receivable in one entity equals the payable in the other, interest income equals interest expense, and so on. Once each counterparty pair agrees, the balances can be eliminated on consolidation without an unexplained difference.
Why don’t intercompany balances agree?
The usual causes are timing (one side booked the charge this month, the other next month), charges never booked by the receiver, the wrong counterparty code, disagreement over the amount or the pricing, goods or cash in transit, and exchange rates. Matching in transaction currency first, then retranslating, separates the exchange effect from the real differences.
How often should intercompany balances be reconciled?
Monthly, as part of the close, is common practice for any group that produces monthly consolidated accounts. Cash settlement is often less frequent, for example quarterly through a netting run, which is why the settlement phase in this template is switched on only in a settlement month.
What happens to exchange differences on intercompany loans?
Under IAS 21 they stay in consolidated profit or loss even though the loan itself is eliminated, because the group is genuinely exposed to the currency. The exception is a loan that forms part of the net investment in a foreign operation, where settlement is neither planned nor likely in the foreseeable future: then the differences go to other comprehensive income on consolidation. US GAAP reaches a similar answer under ASC 830 for balances of a long-term investment nature.
Do intercompany charges need transfer pricing documentation?
Cross-border charges between related companies must be priced at arm’s length in most countries. In the UK, groups with consolidated revenue of €750 million or more must keep a master file and local file, and smaller groups still need enough evidence to support their returns. In the US, documentation in place when the return is filed is what protects against the section 6662(e) penalties. Since 2026 many UK-to-UK transactions are exempt.
Is CheckFlow free for this template?
14-day free trial, no card required. The Business plan is $10 per user per month after the trial. Full details at checkflow.io/pricing.