Allocation of Group overheads or admin charges between subsidiaries in a group situation
This is the 5th in a series of articles on Group Consolidated Forecasts by Johnny Kipps, Forecast 5 UK
It often happens that a parent or “head office” company incurs overheads to be allocated to subsidiaries, to ensure the subs carry a reasonable “full cost” of overheads in their forecasts.
Forecast 5 handles this simply by:
- Setting up Key Performance Indicators (KPIs) in the parent forecast with the relevant percentage of the overheads to be borne by each subsidiary. (These are recorded in the parent “Memo” records in Forecast 5)
- The resulting product of the KPIs with the overheads are charged across from the parent company into each subsidiary via Forecast 5’s hotlinking function.
- As KPIs can be reported on a monthly basis in Forecast 5 P&L reports, the share of these group overheads both in budget and actual can be monitored at a group level to ensure fair review across the subsidiaries can take place.
- Upon preparation of consolidation forecasts, these intercompany charges are set off in the normal way as inter-company profits and losses to ensure no double counting of the group overhead. (For more detail of this set off, please see the 2nd in this series of Consolidation Forecasts, here.)
The process is straightforward; Forecast 5 makes the preparation of group consolidated forecasts simple!
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You can read more in our series Group Consolidated Forecasts:
Consolidations 4: Actual results in Group Consolidated Forecasts
Consolidations 5: Allocation of Group admin amongst subsidiaries
Consolidations 6: Forecast 5 handling of Minority and Associate Interests and Goodwill
