4. An affiliated group of companies makes payments to each other as indicated on
ID: 2656047 • Letter: 4
Question
4. An affiliated group of companies makes payments to each other as indicated on the table below. (All amounts are indicated in US dollars.) payee Australia France Korea Taiwan UK Australia France Korea Taiwan UK 97000 33000 55000 Keamce15000 1340060004007 13000 69000 90000 104000 37000 95000 27000 45000 33000 121000 82000 65000113000 What does it mean for the companies to aggregate payments made to each other company? a. b. What payments should be made if this group of companies use Bilateral netting?Explanation / Answer
1) Aggregating Payment system
In This, affiliated companies makes the aggregate payment which means the collective payments need to be made at the end of period or due date.
For example, France will pay to Australia at the end of periodband australia will pay to france at the end of period
2) Bilateral Netting
Bilateral Netting refers to netting the multi transactions to convert it to one single transactions. It helps in avoiding delay in processing of payments and also saves the transaction fee.
Bilateral Netting as per above example
$42000
($69000 - $27000)
$10000
($55000 - $45000)
$18000
($115000 - $97000)
$2000
($35000 - $33000)
$57000
($90000 - $33000)
$59000
($124000 - $65000)
$15000
($121000 - $106000)
$22000
($104000 - $82000)
$28000
($65000 - $37000)
$18000
($113000 - $95000)
Payer Payee Amount Austraila Taiwan$42000
($69000 - $27000)
Australia UK$10000
($55000 - $45000)
France Australia$18000
($115000 - $97000)
Korea Australia$2000
($35000 - $33000)
France Taiwan$57000
($90000 - $33000)
Korea France$59000
($124000 - $65000)
UK France$15000
($121000 - $106000)
Korea Taiwan$22000
($104000 - $82000)
UK Korea$28000
($65000 - $37000)
UK Taiwan$18000
($113000 - $95000)
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