> For the complete documentation index, see [llms.txt](https://smartbooks.gitbook.io/smartbooks-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://smartbooks.gitbook.io/smartbooks-docs/consolidation/intercompany-setup/reclassification-for-ic-relations.md).

# Reclassification for IC Relations

For Smartbooks to perform intercompany eliminations, intercompany transactions must be booked on a separate intercompany account. If they are not, eliminations cannot be performed. However, if your source system supports reclassifications, Smartbooks can correct this issue.

There are two ways to set up intercompany reclassifications: let Smartbooks detect them automatically, or create them manually.

### Detect IC Reclassifications Automatically

Smartbooks can detect the intercompany reclassifications for you, based on the intercompany relations matrix:

1. Select the company and open the **Reclassification** screen
2. Click **Detect IC reclassifications** at the top-right of the screen
3. Smartbooks shows the intercompany transactions that can be created
4. Tick the checkbox of the reclassifications you want to use and add them

The selected reclassifications are created automatically, with the target account code set to the original account code followed by the suffix **.IC**. This separates the intercompany balances onto dedicated accounts without losing the link to the original account.

{% hint style="info" %}
The detection is based on the intercompany relations matrix. Make sure the matrix is filled in for all entities before running the detection, relations that are not mapped cannot be detected.
{% endhint %}

### Creating an Intercompany Reclassification Manually

In certain cases, you may need to reclassify intercompany relations without altering your source system. Smartbooks facilitates this through its reclassification function:

**Access the Reclassification Function:**

1. Navigate to the **Financial Accounts** section.
2. Locate the GL account you want to reclassify for intercompany purposes.
3. Click the three dots on the right side of the account entry and select **Reclassify**.

**Reclassification Screen:**

* The account you're reclassifying appears at the top of the screen.
* Below it, you will see **Target Accounts**, representing the new intercompany accounts created through the reclassification process.

**Defining Target Accounts for Intercompany Transactions:**

* **Unique Code:** The code for each target account begins with the original account code, followed by a suffix you define (e.g., "IC" to denote intercompany).
* **Description:** Provide a descriptive name that clearly identifies the target account as an intercompany account.
* **Relation or Business Dimension:** Specify the intercompany relations that this target account should capture.

By using this intercompany reclassification feature, you can reorganize and classify your financial data in Smartbooks specifically for managing intercompany transactions, without making changes to your original source system.