Need a little advise please.
So company has 2 EUR entities. A invoices B in EUR. A has USD & EUR requirements. B has EUR & USD cash, so to better utilise group cash, I've paid invoices from B to A in both USD and EUR. This is something that is happening monthly ,so could snowball.
Logic behind this is that B wants to pay (say) 1m EUR for invoices to A
A required 250K USD (lets call this 200k EUR equivalent).
So instead of B transferring 1m EUR to A, and then 'buying' back 200EUR vs 250k USD -I 've transferred 800k EUR and 250k USD to cover the invoices.
Accounting chief just wants to book payment of 800k EUR invoices and a loan of 250k USD to entity A. Mainly to save time!
My view is that, while this is ok (ish) in the short run, its just causing other problems
1- Not reflecting that B has paid all the invoices that it actually has
2- FX exposure on both sides is incorrect (B should have less USD assets -it now has a receivable, A should have less USD liabilities, it now has cash & loan liability)
3- Because of FX exposure being wrong, and this issue happening monthly (and increasing the exposures) that it may soon become material and will be effecting P&L in both entiites (and ultimately tax)
what would people suggest?
So company has 2 EUR entities. A invoices B in EUR. A has USD & EUR requirements. B has EUR & USD cash, so to better utilise group cash, I've paid invoices from B to A in both USD and EUR. This is something that is happening monthly ,so could snowball.
Logic behind this is that B wants to pay (say) 1m EUR for invoices to A
A required 250K USD (lets call this 200k EUR equivalent).
So instead of B transferring 1m EUR to A, and then 'buying' back 200EUR vs 250k USD -I 've transferred 800k EUR and 250k USD to cover the invoices.
Accounting chief just wants to book payment of 800k EUR invoices and a loan of 250k USD to entity A. Mainly to save time!
My view is that, while this is ok (ish) in the short run, its just causing other problems
1- Not reflecting that B has paid all the invoices that it actually has
2- FX exposure on both sides is incorrect (B should have less USD assets -it now has a receivable, A should have less USD liabilities, it now has cash & loan liability)
3- Because of FX exposure being wrong, and this issue happening monthly (and increasing the exposures) that it may soon become material and will be effecting P&L in both entiites (and ultimately tax)
what would people suggest?