Transactions Between Subsidiaries

Updated on 2023-10-11 GMT+08:00

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BCS provides end-to-end (E2E) audit support for inter-subsidiary transactions by building a collaboration consortium with subsidiaries of a multinational company and audit organizations involved, developing trust and eliminating reconciliation and discrepancies between the transaction parties.

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

Parent topic: Application Scenarios

Previous topic: Application Scenarios

Next topic: Supply Chain Logistics

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