Transactions Between Subsidiaries

Industry Status Quo and Pain Points

• Lack of trust between subsidiaries

  Transaction parties do not fully trust in each other for ownership and fund transfer during contract execution and transactions.

• Delayed financial settlement

  Reconciliation of internal transactions can be extremely time and labor consuming. The discrepancy in reconciliation may lead to delayed settlement and report issuance.

• Low efficiency and high cost

  Internal reconciliation is time-consuming and requires a large number of financial personnel's efforts. However, the reconciliation result may still be incorrect, and it is hard to perform supervision.

• No simple method of data sharing

  The financial data of subsidiaries is distributed in different types of enterprise resource planning (ERP) systems, which are not integrated or connected.

• Regulators lacking trust in company

  A multinational company must keep data for many years (usually 10 or more years) and provide evidence to external auditors or authorities, demonstrating that data sources are trustworthy and the data has not been tampered with.

• Restatements

  Inter-subsidiary transfer pricing and complex transactions may cause tax base erosion and profit shifting (BEPS) and may result in financial statement restatements.

Solution Architecture

The BCS-based inter-subsidiary transaction solution has the following features:

• Unified ledger

  Tamper-proof, consistent business transaction records are traceable, eliminating the necessity of reconciliation and meeting audit requirements.

• Digital assets

  Tokens are used to record the transaction assets and rights to realize the life-cycle management of digital assets.

• Smart contract fulfillment

  Automated fulfillment ensures the fairness of transactions based on the contract terms and conditions.

Figure 1 Solution architecture

Solution Highlights

• Ensuring consistency of inter-subsidiary transaction records and the balance of accounting without the need for reconciliation
• Using tokens to follow goods' statuses, timing, locations, and ownership changes and strictly adhering to the contract clauses to carry out transactions, improving the trust between transaction parties
• Simplifying and normalizing the inter-subsidiary supply chain processes
• Supporting transactions that involve different systems
• Providing E2E traceable and immutable information for internal and external audits