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Definition: Intersegment Sales
It refers to the transactions between departments of the same company involving exchange of goods and or provision of services and monetary compensation for the same. As the name suggests, it exists in a corporation which has multiple segments or divisions and there are active transactions between these divisions.
The corporation’s annual report includes a segment report. This segment report contains data relating to intersegment sales and transfers.
Accurate bookkeeping requires that intersegment sales are recorded correctly to give an accurate picture of the financial health of the company as a whole. In the absence of this reporting, the financial reports will portray a grossly inaccurate picture of the financial health of the company.
According to Financial Accounting Standards Board, intersegment billings for jointly incurred costs do not represent intersegment sales or transfers.