Inventories bought from other entities within the same reporting unit include an internal margin which must be eliminated from the inventories and equity. This margin changes every reported period according to the inventory value in the assets of the buyer at closing date (balance value) and the margin (percentage) calculated by the seller.

The internal margin in the beginning inventory is eliminated from the profit (loss) of the previous years and the change in the internal margin during the year from the income of the year. Internal margins and their changes are eliminated in whole regardless of the size of the group's share of the subsidiary which has purchased or sold the asset with internal margin.

The buyer of an inventory enters the value of internal inventories each month. The value is saved as basic information for the entry to document series 40000. Document series 10000 is included in the default template for reference.

The seller provides the applicable margin percentage. The margin percentage may change periodically, but typically the same percentage is used for the year or quarter. The deferred tax is also recorded for these eliminations. The used tax percentage is usually the percentage of the buyer.

The calculation is performed and the elimination entries to document series type 4 are created when data is entered to the input template for a source account and the template is saved.