Question

An affiliated group of companies makes payments to each other as indicated on the table below. (All amounts are indicated in US dollars.)

	payee
Payor		Australia	France	Korea	Taiwan	UK
	Australia		45000	121000	65000	113000
	France	27000		33000	82000	95000
	Korea	35000	124000		104000	37000
	Taiwan	115000	65000	90000		106000
	UK	97000	33000	69000	55000

What does it mean for the companies to aggregate payments made to each other company?

What payments should be made if this group of companies use multilateral netting?

What payments should be made if they use multilateral netting?

What payments would be made if the Korea company acts as a re-invoicing center for this group of companies?

Answer 1

since the group of companies who have to pay and receive are affiliated companies, thus, the can simply aggregate their payments to ease of the process of paying to each other.

If multilateral netting is used i.e instead of settling the amounts individually, only net amt is settled , following should be done:

Australia should pay $70000 net (to UK)

France should receive $30000 net (from Taiwan)

Korea should receive $13000 net (from Taiwan)

Taiwan should pay $70000 net (to France $30000 and to $13000 and bal $27000 to UK)

UK should receive $97000 net (from australia $70000 & $27000 from Taiwan)

If Korea is reinvoicing centre, following should be done:

Taiwan & australia will pay $70000 each to Korea which then will disburse the payments as mentioned above to respective cos'.