Cross Charging

Formal

A method used in a number of organisations to reallocate the costs of some activity to the appropriate profit or cost centre. Also used where assets of the company are used as security for a loan - these assets being cross charged to the loan giving additional comfort for the loan provider and helping reduce their risk.

Real-world Example

A parent company's IT department provides services to three subsidiaries and cross-charges each of them a share of the cost, so the expense is fairly allocated across the group rather than sitting entirely with IT.