Intercompany Eliminations
Belgium

IFRS 10 intercompany eliminations in Belgium: Belgian GAAP (Royal Decree of 30 January 2001 implementing the Companies and Associations Code) for consolidation; IFRS 10 as adopted by the EU for listed entities

Belgian groups prepare consolidated financial statements under either Belgian GAAP (as codified in the Royal Decree of 30 January 2001, implementing the consolidation provisions of the Code des Sociétés et des Associations / Wetboek van Vennootschappen en Verenigingen) or EU-adopted IFRS 10. Companies listed on Euronext Brussels must use EU-adopted IFRS. Other groups apply Belgian GAAP unless they opt for IFRS. The Belgian GAAP consolidation rules require elimination of all intragroup balances, transactions, income, expenses, and profits, following principles that are broadly aligned with the EU Seventh Directive (which IFRS 10 has largely superseded for IFRS reporters but which still underpins the Belgian GAAP rules). Belgium's position at the intersection of Dutch-speaking and French-speaking economies means many Belgian groups operate bilingually, with subsidiaries in Flanders, Wallonia, and Brussels operating under the same legal framework but often with different operational languages and reporting practices. This creates practical challenges for intercompany reconciliation when consolidation packs are prepared in different languages and using different chart-of-accounts structures. More significantly, Belgian groups frequently have subsidiaries in neighbouring countries (Netherlands, France, Germany, Luxembourg) and serve as regional holding structures for wider international groups. The Belgian holding company (particularly the former coordination centre regime, now replaced by the notional interest deduction) has historically attracted group treasury and financing functions. Belgian corporate income tax law includes a specific regime for intragroup pricing adjustments (Article 185 §2 WIB/CIR, implementing the arm's length principle for related party transactions). The notional interest deduction (aftrek voor risicokapitaal / déduction pour capital à risque, Article 205bis-205novies WIB/CIR) reduces the effective tax rate on equity-funded activities, which can influence the structuring of intercompany financing within Belgian groups. While these tax provisions don't change the consolidation elimination mechanics, they affect the entity-level tax charges and therefore the consolidated tax expense.

Regulatory context: Autorité des Services et Marchés Financiers (FSMA) for listed entity financial reporting; College van Toezicht op de Bedrijfsrevisoren / Collège de Supervision des Réviseurs d'Entreprises (CTR/CSR) for auditor oversight

The CTR/CSR (College van Toezicht op de Bedrijfsrevisoren / Collège de Supervision des Réviseurs d'Entreprises) conducts inspections of bedrijfsrevisoren/réviseurs d'entreprises who audit public interest entities. The CTR/CSR's inspection reports have identified group audit quality as an area of concern. In its 2022 annual report, the CTR/CSR noted that group auditors sometimes didn't perform sufficient work on the consolidation process, including the completeness and accuracy of intercompany elimination entries. The CTR/CSR also noted that some auditors didn't issue sufficiently detailed instructions to component auditors regarding the intercompany data required in the consolidation pack. The FSMA reviews financial statements of listed companies and has enforcement powers to require corrections. The FSMA's review themes have included consolidation scope assessment and the adequacy of disclosures about significant subsidiaries and intragroup relationships. While the FSMA doesn't publish findings specific to intercompany elimination, its enforcement actions on consolidation scope errors (incorrect inclusion or exclusion of entities) indirectly affect the completeness of elimination. The Instituut van de Bedrijfsrevisoren (IBR) / Institut des Réviseurs d'Entreprises (IRE) provides technical guidance for Belgian auditors through its norms and recommendations. ISA 600 (as adopted in Belgium through the IBR/IRE norms) governs group audit procedures, including the evaluation of the consolidation process.

Practical guidance for Belgium

Belgian GAAP consolidation follows the sequence mandated by the Royal Decree: determine the consolidation scope, prepare the consolidation pack for each entity, apply uniform accounting policies across the group, eliminate intragroup items, and present the consolidated accounts in the prescribed format. The Royal Decree specifies that intragroup profits on assets still held within the group must be eliminated in full for wholly owned subsidiaries and proportionally for jointly controlled entities (where proportional consolidation is applied under Belgian GAAP; IFRS 11 prohibits proportional consolidation and requires the equity method for joint ventures). For Belgian groups with coordination centre or diamond centre structures (largely historical but some still in wind-down), verify that all intercompany transactions involving these entities are included in the consolidation. Some of these structures were designed for tax efficiency and may have intercompany flows that the client doesn't immediately associate with the consolidation because they were set up for tax rather than operational purposes. Belgian groups must file their consolidated accounts with the Nationale Bank van België / Banque Nationale de Belgique (NBB/BNB) using the prescribed format. The NBB/BNB filing format includes specific line items for consolidation adjustments, including intercompany eliminations. This means the elimination entries must be mapped to the NBB/BNB's chart of accounts, which may differ from the group's internal chart. Request the mapping and verify that all elimination journals are correctly mapped to the regulatory filing format.

Audit expectations

The CTR/CSR expects group auditors to document their understanding of the consolidation process, including the identification of all intragroup relationships and the completeness of the intercompany elimination. Inspectors review whether the auditor tested the intercompany balance reconciliation (not just reviewed it), recalculated intercompany profit eliminations for significant items, assessed the adequacy of the client's controls over the consolidation process, and evaluated whether the consolidation adjustments are consistent with the applicable framework (Belgian GAAP or IFRS). The CTR/CSR has noted that some Belgian group auditors rely too heavily on the consolidation system's automated elimination entries without verifying the underlying data feeds.

Belgium-specific considerations

Belgium's VAT grouping regime (Article 4bis of the Belgian VAT Code) allows group companies to form a VAT unit where intragroup supplies of goods and services are outside the scope of VAT. This simplifies VAT compliance but creates an audit consideration: if entities within a VAT unit don't issue VAT invoices for intercompany transactions, the documentary trail for intercompany transactions is weaker than for external transactions. The auditor may need to rely on intercompany agreements and internal cost allocation documentation rather than VAT-documented invoices to verify the completeness and pricing of intercompany transactions. Belgian groups with entities in Luxembourg frequently use Luxembourg SOPARFIs (Sociétés de Participations Financières) or SCSps (Sociétés en Commandite Spéciale) for holding and financing purposes. Intercompany transactions between Belgian entities and Luxembourg holding vehicles must be eliminated at consolidation. The transfer pricing of these transactions is subject to scrutiny by both Belgian and Luxembourg tax authorities, and the auditor should verify that the pricing is consistent with the arm's length documentation. The Belgian Companies and Associations Code (CSA/WVV, effective 1 May 2019) introduced new rules on distributions and capital maintenance that affect intercompany dividend flows. Under the CSA/WVV, a company can only distribute dividends if the net asset test (Article 5:142 for BVs) and liquidity test (Article 5:143 for BVs) are both satisfied. If a Belgian subsidiary pays an intercompany dividend to its parent, the auditor should verify that both tests were met before the distribution. The dividend itself eliminates at consolidation, but an unlawful distribution may create a legal liability that requires separate consideration.

Common inspection findings

- The CTR/CSR found that some group auditors didn't verify the completeness of the intercompany population, accepting the client's consolidation pack data without cross-checking to the general ledgers of individual entities.

CTR/CSR inspections identified instances where auditors relied on the consolidation software's automated elimination function without testing whether the data inputs (intercompany balances and transactions reported by each entity) were accurate.

The FSMA's enforcement reviews found consolidation scope errors in listed company financial statements where entities should have been consolidated (and their intercompany transactions eliminated) but were excluded from the consolidation.

CTR/CSR noted that some auditors didn't adequately assess the completeness of intercompany documentation for transactions within a VAT unit, where the absence of VAT invoices made it harder to verify the transaction population.

Inspectors found that intercompany profit elimination on inventory was sometimes calculated using outdated margin percentages (from a prior year) rather than the current year's actual intercompany margin.