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Does anyone know what is the difference between Arm's Length Intercompany Transactions and Non-Arm's Length? I know in the former PO and SO are required and latter only Intercompany Item Transfer, but I don't know the advantage/disadvantage?

Mostly it's the accounting need that drives it.

If you don't need it - the simpler method is significantly less complex.

Thanks <@UER9Q3SGM> but it doesn't explain why a long winded procedure is better than the  less complex one or vice versa. Why users use Arm's length? You can set a Rate for the item in both Arm/Non-Arm transaction, but will NetSuite eliminate the profit if Arm's length is used. However does NetSuite eliminate if a Rate which is higher than the Average Cost is set on non-arm's length? I imply do not know on what occasions they need to be used

It doesn't eliminate it if you aren't using arm's length.

And when you eliminate it at arms length - NetSuite uses several assumptions to how you are operating - if you have specific timing constraints involved - it could be less than optimal how it chooses to do it.

In fact - the "arms length" eliminations often incorrectly account for profit if I remember correctly. In which case you are likely better off manually eliminating for those transactions anyways.

The advantage to going through the extra long process is that you can rely on NetSuite to perform those calculations for you, and it doesn't require a user calculating them independently, and it ties the transactions to one another so you can't wind up out of balance.

So there are definitely advantages to going the arms length transaction method - but only if it matches your accounting requirements.

So back to my point - if you don't need arms length accounting, or the arms length accounting process doesn't post the right results for you - don't use the arms length accounting.

If the automation taking it out of users hands makes sense, and you aren't trying to deal with profit, or mismatched timing of good sales (i.e. when you sell it to your second subsidiary - if you aren't immediately selling it to the customer) then using the arms length process with the extra steps is nice - because it's a thorough process you don't have to justify to your auditors.

At the core is the real life relationships between the entities. Do they each need to issue tax invoices in their jurisdictions? Do they want one entity to show a profit for assembling the items? Maybe one entity will be accruing IP charges for their work?  The decision is driven by tax reporting and profit recognition and thus its an accounting decision.

Thank you <@UER9Q3SGM> and <@U01E037GJ84> for your inputs