Oracle SCM Cloud Using Supply Chain Cost Management. Release 13 (update 18C)

Transcription

1 Using Supply Chain Cost Management Release 13 (update 18C)

2 Release 13 (update 18C) Part Number E Copyright , Oracle and/or its affiliates. All rights reserved. Authors: C Fehily, P Paleti This software and related documentation are provided under a license agreement containing restrictions on use and disclosure and are protected by intellectual property laws. Except as expressly permitted in your license agreement or allowed by law, you may not use, copy, reproduce, translate, broadcast, modify, license, transmit, distribute, exhibit, perform, publish, or display any part, in any form, or by any means. Reverse engineering, disassembly, or decompilation of this software, unless required by law for interoperability, is prohibited. The information contained herein is subject to change without notice and is not warranted to be error-free. If you find any errors, please report them to us in writing. If this is software or related documentation that is delivered to the U.S. Government or anyone licensing it on behalf of the U.S. Government, then the following notice is applicable: U.S. GOVERNMENT END USERS: Oracle programs, including any operating system, integrated software, any programs installed on the hardware, and/ or documentation, delivered to U.S. Government end users are "commercial computer software" pursuant to the applicable Federal Acquisition Regulation and agency-specific supplemental regulations. As such, use, duplication, disclosure, modification, and adaptation of the programs, including any operating system, integrated software, any programs installed on the hardware, and/or documentation, shall be subject to license terms and license restrictions applicable to the programs. No other rights are granted to the U.S. Government. This software or hardware is developed for general use in a variety of information management applications. It is not developed or intended for use in any inherently dangerous applications, including applications that may create a risk of personal injury. If you use this software or hardware in dangerous applications, then you shall be responsible to take all appropriate fail-safe, backup, redundancy, and other measures to ensure its safe use. Oracle Corporation and its affiliates disclaim any liability for any damages caused by use of this software or hardware in dangerous applications. Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners. Intel and Intel Xeon are trademarks or registered trademarks of Intel Corporation. All SPARC trademarks are used under license and are trademarks or registered trademarks of SPARC International, Inc. AMD, Opteron, the AMD logo, and the AMD Opteron logo are trademarks or registered trademarks of Advanced Micro Devices. UNIX is a registered trademark of The Open Group. This software or hardware and documentation may provide access to or information about content, products, and services from third parties. Oracle Corporation and its affiliates are not responsible for and expressly disclaim all warranties of any kind with respect to third-party content, products, and services unless otherwise set forth in an applicable agreement between you and Oracle. Oracle Corporation and its affiliates will not be responsible for any loss, costs, or damages incurred due to your access to or use of third-party content, products, or services, except as set forth in an applicable agreement between you and Oracle. The business names used in this documentation are fictitious, and are not intended to identify any real companies currently or previously in existence.

3 Contents Preface 1 i Introduction 1 Cost Management: Overview... 1 Time Zone Settings in Cost Management: Explained... 1 Import Cost Data Using File-Based Data Import: Overview... 2 Integrate and Extend Cost Management Using Web Services: Overview Manage : Overview Configuring Expense s: Points to Consider... 5 Tasks and Events: Explained, Reconciliation, and Clearing: Explained Clearing Rules: Explained Cutoff Dates: Explained Closing a Period Cost Management for Internal Transfers: Explained for Outside Processing: Explained Global Procurement Examples Analyzing Manufacturing and Inventory Cost Details for : Overview FAQs for... 96

4 3 Manage Cost Cost : Overview Managing Scheduled Processes for Cost : Explained... Cost Planning... FAQs for Cost Planning Cost Process Flow: Explained Cost Periods Cost Processing Global Procurement Cost Examples Using Reports and Analytics for Cost : Overview Analyzing Inventory Valuation: Procedure FAQs for Cost Manage Landed Costs 223 Landed Cost Management: Overview Landed Cost Management Tasks: Explained Trade Operations: Explained Landed Cost Charges: Explained Managing Trade Operation Templates: Explained Creating Estimate Landed Costs: Procedure Enabling an Invoice for Landed Cost Processing: Explained Creating Actual Landed Costs: Procedure Charge Invoice Association Status: Explained Uploading Trade Operation Charges in a Spreadsheet: Procedure Analyzing Landed Costs: Procedure FAQs for Landed Cost Management Appendix: Events and Cost Distributions Cost Distributions: Overview Inventory Transaction Events Purchasing Events Sales Events: Explained Work in Process Events Cost Adjustment Events: Explained Consigned Events

5 Preface Preface This preface introduces information sources that can help you use the application. Using Oracle Applications Using Applications Help Use help icons to access help in the application. If you don't see any help icons on your page, click your user image or name in the global header and select Show Help Icons. Not all pages have help icons. You can also access Oracle Applications Help. Watch: This video tutorial shows you how to find help and use help features. You can also read Using Applications Help. Additional Resources Community: Use Oracle Cloud Customer Connect to get information from experts at Oracle, the partner community, and other users. Guides and Videos: Go to the Oracle Help Center to find guides and videos. Training: Take courses on Oracle Cloud from Oracle University. Conventions The following table explains the text conventions used in this guide. Convention Meaning boldface Boldface type indicates user interface elements, navigation paths, or values you enter or select. monospace Monospace type indicates file, folder, and directory names, code examples, commands, and URLs. > Greater than symbol separates elements in a navigation path. Documentation Accessibility For information about Oracle's commitment to accessibility, visit the Oracle Accessibility Program website. Videos included in this guide are provided as a media alternative for text-based help topics also available in this guide. i

6 Preface Contacting Oracle Access to Oracle Support Oracle customers that have purchased support have access to electronic support through My Oracle Support. For information, visit My Oracle Support or visit Accessible Oracle Support if you are hearing impaired. Comments and Suggestions Please give us feedback about Oracle Applications Help and guides! You can send an to: ii

7 Chapter 1 1 Introduction Introduction Cost Management: Overview Cost Management is a cost accounting solution that helps companies to effectively manage their product costing, manufacturing, and inventory accounting business flows. The solution enables companies to maintain multiple cost books and financial ledgers to better meet external regulatory reporting and internal management reporting needs. It reduces manual cost maintenance tasks by providing automated rules-based engines and efficient cost processors tuned for high volume transaction environments. Cost Management and related features are covered in the documentation listed in the following table. Area Documentation Cost accounting See the Cost chapter of the guide. accounting See the chapter of the guide. Landed cost management See the Landed Costs chapter of the guide. transactions and intracompany flows See the Using Supply Chain Financial Orchestration guide. accounting for the French market See the Implementing for France chapter of the Implementing Manufacturing and Supply Chain s Management guide. Fiscal document capture for the Brazilian market See the Using Fiscal Document Capture guide. Reports and analytics See the Creating and Administering Analytics and Reports for SCM guide. Related Topics Cost : Overview : Overview Landed Cost Management: Overview for France: Overview Creating and Administering SCM Analytics and Reports: Overview 1

8 Chapter 1 Introduction Time Zone Settings in Cost Management: Explained The transaction date of inventory and manufacturing transactions determines the accounting date and period in which those transactions are booked. If your application administrator has enabled the legal entity time zone feature, then the transaction costs are accounted using the organization's legal entity time zone. The defined time zone is used in determining the accounting date and accounting periods. It is used for displaying Cost Management dates such as the cost date, general ledger date, currency conversion date, period end validation date, cost cutoff date, and cost adjustment date. If the legal entity time zone feature is not enabled, then the server time zone is used for displaying date fields. The time zone defined in the User Preferences is used for the Transaction Date, and overrides the legal entity time zone and the server time zone for this date field. Related Topics Performing General Tasks in Your Application: Overview How can I set general preferences for myself Enabling Legal Entity Time Zones: Procedure Import Cost Data Using File-Based Data Import: Overview You can use file-based data import to integrate Cost Management with external systems. Use the Standard Costs file-based data import template to import standard costs from external sources into the Cost work area. You can view the imported cost data on the Manage Standard Costs page. For more information on file-based data import, see the chapter on Standard Costs Import in the File Based Data Import guide for Oracle Supply Chain Management Cloud. Related Topics Importing Standard Costs Using File-Based Data Import: Procedure Integrate and Extend Cost Management Using Web Services: Overview Oracle Supply Chain Management Cloud provides REST web services you can use to access data stored in Supply Chain Management Cloud and to construct integrations to other systems. The following table describes some of the REST web services provided for Cost Management integration tasks. Task Description REST Service Name Retrieve Transaction Costs Retrieve item cost details of purchase order and internal receipt transactions, by calling a REST web service. The retrieved receipt transaction cost details can be used in conjunction with cloud or third-party Costs 2

9 Chapter 1 Task Introduction Description REST Service Name applications to create analytical reports, or as inputs for other REST web services, such as the Cost Adjustments REST web service. Manage Cost Overhead Rules Create, update, or delete Cost overhead rules by calling a REST web service. You can create a new overhead rule, or update an existing overhead rule, by specifying rule details such as rule name, transaction type, item category, effectivity date, and overhead rate. Overhead Rules for Cost Create and Layer Cost Adjustments Create receipt cost adjustments and cost layer adjustments using a REST web service. This capability is useful when you need to create cost adjustments for a large number of previously received items. You can, for example, adjust the receipt cost of items to factor in the rebated amounts of supplier rebates. This REST service allows you to adjust receipt costs, receipts with zero cost, and receipt layer costs. It can be used in conjunction with other services, such as the Costs REST service. Cost Adjustments For the full list of REST web services available for Cost Management, see the guide REST API for Oracle Supply Chain Management Cloud. 3

10 Chapter 1 Introduction 4

11 Chapter 2 2 Manage Manage : Overview Oracle Fusion is used to create, manage, review, and audit purchase accruals. It includes the following features: Create Distributions. Create accounting distributions for receipts of accrue at receipt purchase orders. Review Distributions. Review the accrual accounting distributions created by receipt accounting for purchase order transactions, such as receipts, returns, corrections, and matches of uninvoiced receipts to purchase orders. You can also review the accounting distributions created by receipt accounting for deliveries that are expensed rather than stored as inventory. Manage Clearing Rules. Define business rules for the automatic clearing of balances in the purchase order accrual accounts, set the conditions for each rule, and set the order in which rules must be applied. Clear Balances. Automatic clearing of accrual balances based on predefined rules. Review Clearing Balances. Review the General Ledger accounted accrual balances on a periodic basis. Adjust Clearing Balances. Review uncleared accrual balances and perform adjustments. Manually adjust or clear accrual balances to inventory valuation for accounts not covered by automatic clearing rules, or reverse such clearing adjustments. Run reports and analytics for. The reports available include the following: Clearing Reconciliation Uninvoiced Period Close Landed Costs Related Topics Reversals: Explained Configuring Expense s: Points to Consider The key policy decision that you need to make for receipt accounting is whether or not you want to accrue at receipt. The following table outlines the points to consider for each accrual option. Setting Accrue at Points to Consider Purchases are accrued at receipt. An accrued liability account is credited when the goods are received. Optional for expense destination purchases, and mandatory for inventory purchases. 5

12 Chapter 2 Setting Manage Points to Consider Accrue at Period End More accounting and more reconciliation than when accruing at period end. The receipt accounting application provides tools to help reconcile the accrued liability clearing account. is more timely than when accruing at period end. The accounts payable account is credited when the supplier invoice is processed in accounts payable. accounting has a function to accrue uninvoiced receipts at period end. Less accounting and less reconciliation than when accruing at receipt. may be less timely than when accrued at receipt, but will be accrued by period end. The accrual options are configured in the Procurement offering. For more information on configuring the accrual options, see the related topics section. Related Topics Common Options for Payables and Procurement: Critical Choices Defaults: How They Work in Purchase Order Schedules Tasks and Events: Explained Use to: Create accruals for purchase order receipts that are expensed or shipped to inventory. Create accruals for intercompany trade flows. Create receipt inspection accounting for purchase order and interorganization receipt flows. Support budgetary control and encumbrance accounting also has tools to help you reconcile the accrual clearing accounts as the accruals are offset by the accounts payable accounting when invoices are processed. Tasks and Events The following table describes the tasks and processes to support receipt, inventory, and manufacturing accounting, and the sequence in which the tasks should be executed. Task Navigation Transfer receipt transactions and tax determinants from Receiving to. Scheduled Processes work area > Schedule New Process > Transfer Transactions from Receiving to Costing Resulting Events All receiving transactions are transferred from the Receiving application to the application, along with the tax determinants and related information that is present on receipts. 6

13 Chapter 2 Task Transfer accounts payable transactions from Payables to. Manage Navigation Scheduled Processes work area > Schedule New Process > Transfer Costs to Cost Management Resulting Events transactions are then ready in the application for further processing. All payable invoices that are accounted are transferred from the Accounts Payable application to the application. Payable Invoices are then ready in the application for further processing. Create accounting distributions for receipts of accrue at receipt purchase orders. Scheduled Processes work area > Schedule New Process > Create Distributions s for all types of purchases accounting distributions at the time of receipt or return of goods and services Trade accrual distributions for global procurement, interorganization transfers, and cross-business unit shipments to customers distributions for expense destination deliveries of purchases marked for accrual at receipt. These purchases are typically for services procurement, one-time item purchases, and expense usage purchases. Variance calculations such as IPV, ERV, TRV, TERV, and TIPV from accounted invoice distributions distributions for invoice variances Staging of variances into receiving inspection for subsequent wash by the inventory and expense revaluation processes distributions for inventory and expense revaluations Tax amounts are recalculated for all receipt transactions. Taxes are calculated by calling the Tax application programming interface. Tax accounting distributions Budgetary control and encumbrance accounting. You can enable and perform budgetary control, encumbrance accounting, or both. Budgetary control and encumbrance 7

14 Chapter 2 Task Manage Navigation Resulting Events accounting are optional tasks, and are enabled in Financials. Create period end uninvoiced receipt accruals. Create subledger accounting. Review accrual distributions and tax calculations. Clear receipt accruals. Generate and view reconciliation reports. work area > Create Uninvoiced s work area > Create work area > Review Distributions work area > Clear Balances Scheduled Processes work area > Schedule New Process > Reconciliation report Provisional expense accruals for purchases not marked for accrual at receipt Journal entries for receipt accounting distributions Review accrual distributions and tax calculations. Automatic clearing of accrual balances based on predefined rules Staging of information for revaluation of inventory and expenses by cost accounting and receipt accounting processes Reconciliation report Clearing report distributions for cleared accrual balances Revaluation and expense adjustment entries for invoice variances or accrual clearing events that modify acquisition costs for purchases Scheduled Processes work area > Scheduled Processes > Clearing report Create receipt accounting distributions. Review uncleared accrual balances and perform adjustments. work area > Create Distributions work area > Adjust Balances Match purchase order receipt accruals with invoices from payables. Review accrual clearing balances. work area > Match s work area > Audit Clearing Balances Staging for manual intervention for exceptions of high material value Manual accrual clearing Manual adjustments and reversals of prior accrual clearing adjustments Automatic creation of accounting distributions for these adjustments Manual reconciliation of accrual balances Review and audit accrual balances that were final accounted. Audit the General Ledger accounted accrual balances on a periodic basis. Related Topics Reversals: Explained 8

15 Chapter 2 Manage, Reconciliation, and Clearing: Explained When goods are interfaced from Receiving to Oracle Fusion, recognizes the liability to the supplier, and creates accruals for receipts destined for inventory or expense. For consigned purchases, the supplier accrual is booked upon change of ownership. then reconciles these accrual balances against the corresponding invoices from accounts payable and clears them to inventory valuation. The following discusses receipt accruals, their reconciliation, and clearing. Creation When goods are received and delivered to inventory or expense destinations, the receipt accounting application creates accrued liability balances for the estimated cost of purchase order receipts. The application creates accruals for: Inventory destination receipts, which are always accrued on receipt Expense destination receipts, which are accrued on receipt, or at period end if the supplier invoice has not yet been processed When it processes the supplier invoice, Accounts Payable creates the actual supplier liability and offsets the accrual balances. The accrued liability account typically has high volumes of entries going through it, and may have remaining balances that must be justified if the account payable invoice has not yet been processed; or if the Account Payable invoice has been processed, any remaining balance must be resolved and cleared. provides tools to help with this reconciliation. Reconciliation and Clearing Some of the remaining balance in the accrued liability account can be automatically cleared by and Cost to the appropriate purchase expense or asset account, based on your predefined clearing rules. However, some of this balance will represent uninvoiced quantities, or other discrepancies which you will want to resolve and clear manually. Example 1: Assume that the purchase order receipt is for units at $5 each; the application creates a credit to the accrued liability account in the amount of $500. When the corresponding invoice arrives from the supplier, it reflects units at $6 each; the application debits the accrued liability account in the amount of $600. The difference of $ automatically clears and flows to inventory valuation. Example 2: Assume that the quantity received is 99.4, and the quantity on the supplier invoice is. The processor does not always know if that is the final invoice or if more invoices are pending for the uninvoiced quantity. If small variations are normal, you can set up rules to automatically clear small variations, while large variations are verified manually. If there is a predefined rule for the treatment of such a discrepancy, the application automatically clears the difference to inventory valuation. However if no such rule exists, then you must clear it manually. Audit Clearing Balances After accrual balances are cleared to the appropriate expense or asset account, you can review and audit the final accounting distributions generated by. 9

16 Chapter 2 Manage Clearing Rules: Explained Define accrual clearing rules to clear accrual balances automatically. balances are often of unknown origin and unpredictable. With accrual clearing rules you can specify when accrual balances should be cleared and written off. The Clear process scans for applicable rules on the transactions, and clears the balances when rule criteria are met. The following discusses the creation of accrual clearing rules using predefined attributes, and illustrates the results with an example. Predefined Attributes The following table describes the attributes that are available in the Line tree in the Conditions browser: Attribute Name Description CmrPODistributionID Purchase order structure is based on the hierarchy of purchase order header > purchase order line > purchase order schedule > purchase order distribution. The accounting for purchase order transaction is at the lowest level of purchase order distribution. The accrual and charge account codes are defined at this level. Invoices are matched and accrual is offset at the PO distribution level. This attribute represents the PO distribution ID on the PO document. Percentage Over-Invoiced At each purchase order distribution level, receipt accounting tracks the original ordered quantity, total received quantity, and total invoiced quantity. Percentage Over-Invoiced Quantity represents the condition: IF (Net Rct qty - Invoice Qty) < 0 then ABS(NetRecptQty - InvoiceQty)/ NetRecptQty Percentage Uninvoiced At each purchase order distribution level, receipt accounting tracks the original ordered quantity, total received quantity, and total invoiced quantity. Percentage Uninvoiced Quantity represents the condition: IF (Net Rct qty - Invoice Qty) > 0 then ABS(NetRecptQty - InvoiceQty)/ NetRecptQty PO Status Status of the purchase order document. If the PO status is Finally closed, then it is treated as Closed. For all other PO statuses, you can define the accrual clearing rules. PO Match Option Invoice match option defined on the purchase order schedule. It can be PO or. Invoice Age Days or time since the latest invoice was recorded for a purchase order distribution. Age Days or time since the latest receipt was recorded for a purchase order distribution. Over-Invoiced Quantity When the invoiced quantity is greater than the ordered quantity, it represents the difference between the two: IF (Net Rct qty - Invoice Qty) < 0 then Over Invoiced Quantity = ABS(InvoiceQty NetRecptQty) 10

17 Chapter 2 Manage Attribute Name Description Under-Invoiced Quantity When the invoiced quantity is less than the ordered quantity, it represents the difference between the two: IF (Net Rct qty - Invoice Qty) > 0 then Under Invoiced Quantity = ABS(NetRecptQty InvoiceQty) Percentage PO accrual amount The balance in the accrual account for a PO distribution divided by the accrual value for the ordered quantity: Sum(accruals in CMR and AP)/PO amount PO amount = Net Order Qty * Clear Amount Absolute value of balance in an accrual account for a PO distribution. AP Amount Absolute value of balance (net of invoices and debit memos) in an accrual account in Payables for a PO distribution. CMR Amount Absolute value of balance (net of receipts, corrections and returns) in an accrual account in for a PO distribution. Supplier Supplier name on the purchase order document. Supplier Site Supplier site code on the purchase order document. Item Item on the purchase order line. Item Category Item category on the purchase order line. Example This example illustrates the distributions for a purchase order with associated receipts and invoices. The following table describes the purchase order details: PO Header Supplier Supplier Site Status PO#1234 Advanced Network Devices New York Open/ Close/Final Close The following table describes the purchase order lines: Item Item Category Ordered Quantity AS54888 Raw s EA The following table describes the purchase order schedules: 11

18 Chapter 2 Manage Schedule Order Quantity Match Option Status 1 EA Order or Open The following table describes the receipts and invoices: s Ordered Quantity Received Quantity Invoiced Quantity Account Status Open Open The following table describes the purchase order distributions and accrual balances: PO Distribution CMR Amount (A) AP Account (B) Clear Amount (C) = (A-B) UnderInvoiced Quantity OverInvoiced Quantity Percentage UnderInvoiced Percentage OverInvoiced Percentage PO Amount (C)/ Ordered Quantity*PO Price Distribution 1 58* = * = = 5 Not Applicable 5/58* = 8.62% Not Applicable 300 /60* = 5% Distribution 2 40* = * = 4500 (500) Not Applicable = 5 Not Applicable 5/40* = % 500 /40* = % The following table describes the Rule 1: Attribute Operator Value Conditions PO Status = OPEN And Percentage Under-Invoiced Less Than 10% Results: The PO Status and the Percentage Under-Invoiced values meet the criteria of Rule 1; therefore the accrual balance of 300 is automatically cleared. The following table describes the Amounts Cleared Based on Rule 1: 12

19 Chapter 2 Manage PO Distribution CMR Amount (A) AP Account (B) Clear Amount (C) = (A-B) UnderInvoiced Quantity OverInvoiced Quantity Percentage UnderInvoiced Percentage OverInvoiced Percentage PO Amount (C)/ Ordered Quantity*PO Price Distribution 1 58* = * = = 5 Not Applicable 5/58* = 8.62% Not Applicable 300 /60* = 5% The following table describes the Rule 2: Attribute Operator Value Conditions PO Status = OPEN And Clear Amount Less Than Absolute (0) Or Percentage Under-Invoiced Less Than 10% Or Percentage Over-Invoiced Less Than 10% Results: The PO Status, Percentage Under-Invoiced, and Clear Amount Absolute values meet the criteria of Rule 2; therefore the accrual balances of 300 and (500) are automatically cleared. The following table describes the Amounts Cleared Based on Rule 2: PO Distribution CMR Amount (A) AP Account (B) Clear Amount (C) = (A-B) UnderInvoiced Quantity OverInvoiced Quantity Percentage UnderInvoiced Percentage OverInvoiced Percentage PO Amount (C)/ Ordered Quantity*PO Price Distribution 1 58* = * = = 5 Not Applicable 5/58* = 8.62% Not Applicable 300 /60* = 5% Distribution 2 40* = * = 4500 (500) Not Applicable = 5 Not Applicable 5/40* = % 500 /40* = % 13

20 Chapter 2 Manage Cutoff Dates: Explained The accrual cutoff date enables you to control when backdated receipts are accounted. The following describes how uses offset days to determine the accrual cutoff date for processing backdated receipts. Using Offset Days Offset days define the grace period for processing backdated transactions in the prior GL period. You can indicate the number of offset days for a business unit in the work area, on the Manage Clearing Rules page, Manage Cutoff Rules tab. uses the offset days to calculate the accrual cutoff date. For example, assume the number of offset days is 3, then the accrual cutoff date for processing receipts in the October GL period is November 3: A receipt that is backdated to October 31 but is processed on November 3 is accounted in October A receipt that is backdated to October 31 but is processed on November 4 is accounted in the November GL period If the offset days are not defined, then the backdated receipts are processed in the prior GL period until the period is closed. Closing a Period Video Watch: This video tutorial shows you how to process receipt accruals in preparation for the closing of a receipt accounting period. It also shows you how to schedule receipt accounting processes to run automatically. The content of this video is also covered in text topics. Procedure This procedure shows you how to process receipt accruals in preparation for the closing of a receipt accounting period. You can schedule to automatically process receipts that are set to be accrued on receipt. If receipts are not marked for automatic accrual on receipt, you can run the Create Uninvoiced s process. This will accrue all receipts that are not yet invoiced in Accounts Payable. You can access the following processes in the Scheduled Processes work area: Transfer Costs to Cost Management Transfer Transactions from Receiving to Costing Clearing Report Reconciliation Report Create Reversal 14

21 Chapter 2 Manage You can access the following processes in the work area: Create Distributions Clear Balances Create Uninvoiced s Create Entries for Match s You can schedule the processes, or you can run them on demand. This procedure covers the following tasks: Transferring Cost Data to Creating Distributions Creating Uninvoiced s Transferring Cost Data to This task covers processes that should be run in the Scheduled Processes work area before closing a receipt accounting period. To transfer cost data to, complete the following steps. 1. From the Navigator menu, select Scheduled Processes. 2. Select the processes that you want to run or schedule. The following receipt accounting processes should be completed before closing a receipt accounting period: Transfer Costs to Cost Management. This process transfers invoice information to. Transfer Transactions from Receiving to Costing. This process transfers receipt information to. 3. Review the Status column to confirm that the processes have completed successfully. Creating Distributions This task creates receipt accounting distributions in preparation for the closing of a receipt accounting period. You can schedule this process, or run it on demand. To create receipt accounting distributions, complete the following steps Navigate to the work area, and select the Create Distributions task. Enter the Bill-to Business Unit, and select the Advanced option. Click on the Schedule tab, and select the option Run Using a Schedule. Complete the Frequency, Start Date, and End Date fields, and click Submit. From the tasks menu, select the Review Distributions task to view the receipt accounting distributions that were created. 6. On the Review Distributions page, search for transactions that have a Transaction Status of Final Accounted and a Transaction Type of into Receiving Inspection. 7. Click on the Distributions tab, and click the Detach button to view the details on a new page. 8. Click on the Journal Entries tab to view the journal entries for the accounting distributions. Click the Detach button to view the details on a new page. Creating Uninvoiced s If receipts are not marked for automatic accrual on receipt, you can run the Create Uninvoiced s process. This will accrue all receipts that are not yet invoiced in Accounts Payable. You can run this job more than once during the period 15

22 Chapter 2 Manage close process. At a minimum it should be run after the Accounts Payable period is closed and all the Accounts Payable invoices are interfaced to Cost Management, and before the General Ledger period is closed. For period end accrual, the accounted date always falls on the last date of the period selected. To create uninvoiced receipt accruals, complete the following steps Navigate to the work area, and select the Create Uninvoiced s task. On the Create Uninvoiced s page, complete the Bill-to Business Unit and Period fields. Click Submit. On the Review Distributions page, search for transactions with a Transaction Type of Period End. 5. Scroll down and select the Distributions and Journal Entries tabs to view the accounting details. Related Topics Reversals: Explained Oracle Fusion Predefined Reports Cost Management for Internal Transfers: Explained Cost Management supports receipt accounting and cost accounting for requisition based internal transfers for items going to either an expense or an inventory destination, with or without a receipt at the destination. Self-Service Procurement, Supply Chain Financial Orchestration, and Cost Management have been integrated to provide an estimated transfer price based on the internal cost of the items on the requisition. A transfer price is required on the internal material transfer requisition line for approval, budgetary control, and encumbrance accounting. Cost Management supports requisition-sourced transfer orders going to expense destinations with multiple distributions and different expense accounts. Based on the account defined at the distribution level, Cost Management will book the expense for the appropriate account. In the case of transfers to expense destinations where a receipt is not required, new logical receipt and delivery transactions are created in Cost Management, similar to the physical events created with receipt expense destination transfers when a receipt is required. Budgetary control and encumbrance accounting are supported for expense destination internal transfer orders. Budgetary Control You can ensure that budget funds are available before a requisition for an internal transfer is submitted for approval. Depending on your budgetary control configuration, the funds will be reserved either at the time the requisition is submitted for approval, or when the requisition is approved. Insufficient funds override rules and approvers can be configured as part of budgetary control setup. Cost Management liquidates the commitment and books an expenditure at the time of delivery when a receipt is required, or at the time of shipment by creating a virtual receipt when the receipt is not required. The Requisition for Internal Transfer transaction subtype has been added to enable budgetary control of requisitions for internal material transfers. Encumbrance Encumbrance accounting entries are created for transactions subject to budgetary control and encumbrance accounting when the Create process is run. Cost Management liquidates the reserve for the encumbrance account and creates journal entries for the actual expense value. 16

23 Chapter 2 Manage for Outside Processing: Explained supports manufacturing outside processing, where one or more work order operations are outsourced to a supplier who provides specialized manufacturing services. Outside processing transactions are accounted in under the Destination Type of Manufacturing. Distributions Created for Outside Processing Cost supports the Purchase Order into Manufacturing transaction type for the costing of outside processing items delivered to Manufacturing. The transaction processing depends on the cost method, as follows. Actual or Average cost method. The purchase price multiplied by the number of items received is added to the work in process valuation. Standard cost method. The standard cost multiplied by the number of items received is added to the work in process valuation. The difference between the purchase price and the purchase order is accounted as a purchase price variance. Related Topics Planning,, and Reviewing Outside Processing Costs: Explained Setting Up Items for Outside Processing: Explained Global Procurement Global Procurement Trade : Overview Companies often design their legal structure for financial efficiency as well as efficiencies in the physical flow of goods through the supply chain. Typically, the most optimal financial movement of goods is different from the most optimal physical movement of goods. For example, the purchase requisitions from a group of subsidiary companies could be routed through a single international purchasing company who deals with the suppliers. As a result, the legal owners of the purchasing organizations will be different from the legal owners of the receiving organizations. This form of purchasing is known as global procurement. The following discusses: Global procurement trade flows Trade agreements and accounting rule sets Agreements converted to purchase orders Commonly used terms 17

24 Chapter 2 Manage Global Procurement Trade Flows This figure illustrates a typical global procurement trade flow, in this case between a US corporation and its China supplier. The US corporation has a central procurement business unit which creates trade agreements and purchase orders on behalf of its subsidiaries. China Supplier US Corporation Ownership Change Event China Ltd Sold-to Legal Entity (Purchasing Affiliate) CN BU China Sold-to Profit Center Business Unit CN INV ORG China Purchasing Trade Organization Procurement Business Unit Ownership Change Event Management Flow Physical Flow US Inc Receiving Legal Entity US West Receiving Profit Center Business Unit US East Receiving Profit Center Business Unit M1 US Receiving Inventory Organization M2 US Receiving Inventory Organization The China supplier drop ships the goods directly to the US receiving inventory organization M1. However for legal and accounting purposes, the trade flows from the China supplier through the China sold-to legal entity (China Ltd), to the US receiving legal entity (US Inc). For management and profit tracking purposes, the trade flows from the China sold-to profit center business unit CN BU to the US receiving profit center business unit US West. 18

25 Chapter 2 Manage Financial Trade Agreements and Rule Sets A trade agreement defines the parties in the trade relationship. In this example the trade agreement is between the US corporation and the China supplier, and it defines the buying, selling, sold-to, and receiving legal entities, profit center business units, inventory organizations, and trade organizations. The accounting rule sets define source documents and accounting that is required in the legal and financial flow, also known as the ownership change event flow. A rule set is associated with a financial route, and financial routes can have different accounting rule sets. The following illustrates a trade agreement setup for the US corporation: Agreement #: GP001 Type: Procurement Supplier Ownership Change: ASN (Advance Shipment Notice) Primary Trade Relationship #: PTR1 Sold-to Legal Entity: China Ltd. Sold-to Business Unit: CN BU Deliver-to Legal Entity: US Inc. Deliver-to Business Unit: US West Financial Trade Relationship #: FTR1 From Legal Entity: China Ltd. From Business Unit: CN BU From Organization: CN INV ORG To Legal Entity: US Inc. To Business Unit: US West To Organization: M1 Profit Tracking: Yes Invoicing: Yes Obligation Currency: CNY Rate Type: Corporate Transfer Pricing: Purchase Order - 10% Purchase Order/Sales Order: No Trade Agreement Converted to Purchase Orders The trade agreement is used to create purchase orders. The following illustrates a purchase order created under the US Corporation trade agreement # GP001: Document Type: Purchase Order Document #: PO-GP001 Document Line #: 1 Document Line Detail: 1.1 Document Line Distribution #: Item: SFO-CST_ASSET 19

26 Chapter 2 Manage Quantity: UOM: Each Currency: CNY Price: 650 Sold-to Legal Entity: China Ltd. Trade Organization: CN INV ORG Deliver-to Organization: M1 Primary Trade Relationship #: PTR1 Global Procurement Common Terms The following table describes the terms commonly used in global procurement trading: Terms Definitions and Rules buy-sell relationship Relationship between two business units where one acts as a buyer and the other as a seller of goods or services. The seller records the revenue, cost of sale, and receivables. The buyer records the payables and inventory or expense. A buy-sell trade between internal business units is settled through the transfer price. asset item Inventory item where the cost of acquisition is valued as an asset on the balance sheet. The inventory cost is expensed when it is consumed or sold. expense item Inventory item whose cost of acquisition is booked as an expense. transfer price The unit price that one business unit charges another for goods or services traded within the enterprise. The transfer price is typically based on the price list, cost plus or minus, or purchase price plus or minus. financial route Designates how financial transactions are settled, can be different from the physical route, and may involve one or more intermediary nodes. The intermediary nodes are internal business units that are not part of the physical supply chain transaction but are part of the financial route. Incoterms A series of sales terms in international trade, used to define the rights and obligations of the trade partners with respect to the delivery of goods sold. Incoterms are used to divide transaction costs and responsibilities between buyer and seller, and to reflect transportation practices. intercompany profit and loss The internal profit or loss arising out of trade among business units in the enterprise. These internal profits and losses are used for internal management but are typically eliminated when producing the enterprise consolidated financial statements for external stakeholders. intercompany trade The trade of goods and services between organizations belonging to different legal entities within a conglomerate. intracompany trade The trade of goods or services between two internal organizations within a legal entity. ownership change event The transfer of title of goods and services from one party to another. This results in accounting and the creation of financial documents such as Accounts Receivable and Accounts Payable invoices. price list Contains the basic list information and pricing attributes for items or product groups. 20

27 Chapter 2 Manage Terms Definitions and Rules pricing option A method to compute the transfer price based on cost, source document price, or price list. profit center A business unit that operates with its own income statement and reports to the legal entity. purchasing trade organization The inventory organization reporting to the sold-to legal entity identified in the purchase order. This organization is used for cost accounting the transactions in the sold-to legal entity. qualifiers Business attributes of a supply chain document or transaction that determine the applicability of the trade agreement. supply chain financial orchestration agreement An agreement between the legal entities, business units, and trade organizations of a corporate group. The agreement defines the parties in the trade relationship and the financial settlement process. trade distributions entries created by Oracle Fusion and Oracle Fusion Cost for Oracle Fusion Supply Chain Financial Orchestration trade transactions. procurement business unit Has central responsibility for the creation of trade agreements and purchase orders on behalf of legal entities and business units under the holding company. Related Topics of Global Procurement Trade Transactions into Inventory: Example of Global Procurement Trade Transactions into Expense: Example Profit Center Business Units and Bill-to Business Units: Explained Profit Center Business Units and Bill-to Business Units: Explained Oracle Fusion and Oracle Fusion Cost create accounting distributions for trade transactions in the supply chain. These accounting distributions are associated with two kinds of business units: profit center business units and bill-to business units. The following explains the different business units associated with trade transactions and the assumptions used to derive them. Profit Center Business Unit A profit center business unit reports to a single legal entity and is responsible for measuring the profitability of inventory organizations under that legal entity. All trade transactions are associated with a profit center business unit which, in turn, is derived from the inventory organization that owns the trade transaction. Cost uses the profit center business unit to process all inventory transactions. 21

28 Chapter 2 Manage Bill-to Business Unit A bill-to business unit is used to process receipt accruals in a trade transaction, and is the same business unit that processes the invoice in Accounts Payable. For supplier accruals, the bill-to business unit is derived from the purchase order. For intercompany accruals, the bill-to business unit is derived from the profit center business unit. Related Topics Cost Organizations, Inventory Organizations, and Cost Books: How They Fit Together Reviewing Item Costs and for Global Procurement Trade Transactions: Explained and Cost process and create accounting distributions for trade transactions in the supply chain. The following explains how to review the results of global procurement trade transactions processed by and Cost. Results In the work area, access the Review Distributions page. On this page you can view accounting details by Source Document Number and Source Document Line Number. Source documents are purchase order schedules, transfer orders, and sales orders. Cost Results In the Cost work area: Access the Review Item Costs page. On this page you can view a breakdown of the cost of items, cost comparisons of items across organizations, and cost trends over time. Access the Review Cost Distributions page. On this page you can view accounting details of trade transactions by Reference Document Number. Related Topics Reviewing Item Costs: Explained Examples Consigned Inventory in a Simple Purchase Order: Example When an organization receives a shipment of goods under a consignment purchase order, the ownership of the goods remains with the supplier even after they are in the custody of the buyer. Ownership passes from the supplier to the buyer when the inventory is consumed. 22

29 Chapter 2 Manage When the inventory is consumed, two events occur: First there is a transfer of ownership to the buyer and the consigned goods become owned inventory for a brief period of time, then the owned inventory is depleted. The following example illustrates: The physical and financial flow of consigned inventory under a consigned purchase order (PO). The transaction that flows from Oracle Fusion Inventory Management into Oracle Fusion Cost and Oracle Fusion. entries that Cost and generate for the forward flow. entries that Cost and generate for the return flow. Scenario Supplier Advanced Network Devices (AND-Fresno) ships the goods under a consigned purchase order to inventory organization M1-Seattle. 23

30 Chapter 2 Manage The following diagram illustrates the flow of consigned inventory: Supplier Advanced Network Devices (AND-Fresno) Physical Flow Financial Flow Inventory Organization M1-Seattle Consigned Owner = AND-Fresno Contingent Owner = M1-Seattle Ownership Change Inventory Organization M1-Seattle Owner = M1-Seattle Transaction from Oracle Fusion Inventory Management Cost and receive the following transaction from Inventory: Supplier Advanced Network Devices (AND-Fresno). Consignment Purchase Order #0. Purchase Order price. 24

31 Chapter 2 Manage Ship-to organization is M1-Seattle which is the contingent owner. Contingent owner assumes ownership from the supplier when inventory is consumed. and put away transactions performed in M1-Seattle inventory organization in consigned status. When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M1-Seattle. Analysis and Cost create accounting distributions for the forward and return shipment of goods. Entries 25

32 Chapter 2 Manage The following diagram illustrates the accounting entries for the forward flow from supplier AND-Fresno to inventory organization M1-Seattle. AND-Fresno Supplier Physical Flow M1-Seattle Consigned Owner Ownership Change M1- Seattle Owner M1:PO Dr Consigned Clearing Cr Consigned M1:PO Delivery Dr Consigned Inventory Cr Consigned Clearing M1:Transfer to Owned Issue Dr Consigned Inventory Offset Cr Consigned Inventory M1:Consigned Consumption Dr Consigned Cr Consigned Clearing M1:Trade Dr Trade Clearing Cr M1: Dr Cr Trade Clearing M1:Transfer to Owned () Dr Inventory Valuation Cr and Cost generate accounting entries under inventory organization M1-Seattle for the receipt of goods. The following table describes those accounting entries: 26

33 Chapter 2 Manage Line Type Transaction Type Amount in Currency Currency Basis of Amount PO Consigned Clearing PO Consigned Cost PO Delivery Consigned Inventory Cost PO Delivery Consigned Clearing and Cost generate accounting entries under inventory organization M1-Seattle for the change of ownership from supplier AND-Fresno to M1-Seattle. The following table describes those accounting entries: Line Type Transaction Type Amount in Currency Currency Cost Element Basis of Amount Cost Transfer to Owned Issue Consigned Inventory Offset Cost Transfer to Owned Issue Consigned Inventory Consigned Consumption Consigned Consigned Consumption Consigned Clearing Trade Trade Clearing Trade Cost Trade InTransit Trade InTransit Cost Trade InTransit Trade Clearing 27

34 Chapter 2 Manage Line Type Transaction Type Amount in Currency Currency Cost Element Basis of Amount Cost Transfer to Owned () Inventory Valuation Cost Transfer to Owned () Trade InTransit Organization M1-Seattle returns goods to supplier AND-Fresno. This figure illustrates the accounting entries for the return flow from M1-Seattle to AND-Fresno. 28

35 Chapter 2 Manage AND-Fresno Supplier Physical Flow M1-Seattle Consigned Owner Ownership Change M1- Seattle Owner Legend Cons = Consigned Recpt = M1:PO Return to Vendor Dr Consigned Cr Consigned Clearing M1:PO Return to Receiving Dr Consigned Clearing Cr Consigned Inventory M1:Transfer to Cons (Recpt) Dr Consigned Inventory Cr Consigned Inventory Offset M1:Trade Return Dr Cr Trade Clearing M1:Consigned Recpt Consumption Dr Consigned Clearing Cr Consigned M1: Return Dr Trade Clearing Cr M1:Transfer to Cons (Issue) Dr Cr Inventory Valuation and Cost generate accounting entries under inventory organization M1-Seattle for the change of ownership from M1-Seattle to supplier AND-Fresno. The following table describes the accounting entries for the change in ownership. Line Type Transaction Type Amount in Currency Currency Cost Element Basis of Amount Cost Transfer to Consigned () Consigned Inventory 29

36 Chapter 2 Manage Line Type Transaction Type Amount in Currency Currency Cost Element Basis of Amount Cost Transfer to Consigned () Consigned Inventory Offset Consigned Consumption Consigned Clearing Consigned Consumption Consigned Trade Return Trade Return Trade Clearing Trade InTransit Return Trade Clearing Trade InTransit Return Trade InTransit Cost Transfer to Consigned Issue Trade InTransit Cost Transfer to Consigned Issue Cost Variance* 5 Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance. Cost Transfer to Consigned Issue Inventory Valuation 105 Current Cost * Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance. generates accounting entries under inventory organization M1-Seattle for the return of consigned goods from M1-Seattle to AND-Fresno. The following table describes those accounting entries: 30

37 Chapter 2 Manage Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount PO Return to Supplier Consigned PO Return to Supplier Consigned Clearing - PO Return to Receiving Consigned Clearing PO Return to Receiving Consigned Inventory - Related Topics Cost Profiles, Default Cost Profiles, and Item Cost Profiles: Explained What are the accounting distribution basis options for consigned inventory transactions Consigned Inventory Lifecycle: Explained Consigned Inventory: Explained Consigned Inventory of an Interorganization Transfer Across Business Units: Example An interorganization transfer is a trade transaction involving the movement of goods or services between organizations in the supply chain. The following is an example of accounting performed by Oracle Fusion Cost and Oracle Fusion in a simple purchase order with an interorganization transfer of goods across profit center business units. The goods remain in consigned status until ownership changes in the receiving organization. This example illustrates: Transactions captured in Oracle Fusion Inventory and interfaced to Cost and. Transactions captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to Cost and. entries that Cost and generate for the forward flow. entries that Cost and generate for the return flow. 31

38 Chapter 2 Manage Scenario Supplier Advanced Network Devices (AND-Fresno) ships the goods in consigned status to inventory organization M1-Seattle, who in turn transfers the consigned goods to inventory organization M2-LA. Inventory organizations, M1-Seattle and M2-LA, are in different business units. Supplier Advanced Network Devices (AND-Fresno) Financial Flow Physical Flow Business Unit 1 Inventory Organization M1-Seattle Consigned Owner = AND-Fresno Contingent Owner = M1-Seattle Physical Flow Financial Flow Business Unit 2 Inventory Organization M2-LA Consigned Owner = AND-Fresno Contingent Owner = M1-Seattle Ownership Change Business Unit 2 Inventory Organization M2-LA Owner = M2-LA Interfaced Transactions Oracle Fusion Inventory sends the following transactions to and Cost : Supplier Advanced Network Devices (AND-Fresno). 32

39 Chapter 2 Manage Consignment Purchase Order #0. Purchase Order price. Ship-to organization is M1-Seattle which is the contingent owner. Contingent owner assumes ownership from the supplier when inventory is consumed. and put away transactions performed in M1-Seattle inventory organization in consigned status. Goods transferred in consigned status from inventory organization M1-Seattle to M2-LA. When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M2-LA through M1-Seattle. Oracle Fusion Supply Chain Financial Orchestration sets up the trade agreement, accounting rule sets, and associated purchase orders, and the information flows into and Cost. The transfer from M1-Seattle to M2-LA is based on trade agreement SFO #123 which has the following terms: transfer price is 120. invoicing is set to Yes. Profit tracking is set to Yes. Analysis and Cost create accounting distributions for the forward and return shipment of goods. 33

40 Chapter 2 Manage Entries The following are accounting entries for the forward flow. AND-Fresno Supplier Physical Flow M1-Seattle Consigned Owner M1:PO Dr Consigned Clearing Cr Consigned M1:PO Delivery Dr Consigned Inventory Cr Consigned Clearing M1:In-Transit Shipment Dr Consigned In-Transit Cr Consigned Inventory M2:Consigned Trade InTransit Dr Consigned In-Transit Cr Consigned Clearing M1:Consigned Trade InTransit Issue Dr Consigned Receivable Cr Consigned In-Transit M2:In-Transit Dr Consigned Inspection Cr Consigned In-Transit M2:Consigned Trade Dr Consigned Clearing Cr Consigned Payable M2:In-Transit Delivery Dr Consigned Inventory Cr Consigned Inspection Ownership Change M2:Transfer to Owned Issue Dr Consigned Inv Offset Cr Consigned Inventory M2:Trade Recpt Dr Trade Clearing Cr IC M2-LA Owner M1:Trade Dr Trade Clearing Cr Physical Flow M2-LA Consigned Owner Legend Inv = Inventory IC = COGS = Cost of Goods Sold MAT = GP = Gross Profit Recpt = M1: Recpt Dr Cr Trade Clearing M1: Issue Dr IC COGS Cr M2: Dr MAT Dr GP Cr Trade Clearing M2:Transfer to Owned () Dr Inv Valuation MAT Dr Inv Valuation GP Cr MAT Cr GP generates distributions under inventory organization M1-Seattle for the shipment from supplier ANDFresno to M1-Seattle. 34

41 Chapter 2 Manage Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount PO Consigned Clearing PO Consigned - PO Delivery Consigned Inventory PO Delivery Consigned Clearing - Cost generates distributions under inventory organization M1-Seattle for the interorganization transfer from M1Seattle to M2-LA. Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount Cost In-Transit Shipment Consigned InTransit Cost In-Transit Shipment Consigned Inventory - Cost Consigned Trade InTransit Issue Consigned Receivable Cost Consigned Trade InTransit Issue Consigned InTransit - and Cost generate distributions under inventory organization M2-LA for the interorganization transfer from M1-Seattle to M2-LA. Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount Consigned Trade Trade Clearing Consigned Trade Consigned InTransit - Consigned Trade InTransit Consigned Clearing Consigned Consumption Trade Clearing - 35

42 Chapter 2 Manage Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount Cost In-Transit Consigned Inspection Cost In-Transit Consigned InTransit - Cost In-Transit Delivery Consigned Inventory Cost In-Transit Delivery Consigned Inspection - and Cost generate distributions under inventory organization M1-Seattle for the change of ownership from supplier AND-Fresno to M1-Seattle. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing Trade - Cost Cost Trade Clearing - Cost Issue Cost of Goods Sold Cost Issue - and Cost generate distributions under inventory organization M1-Seattle for the change of ownership from M1-Seattle to M2-LA. 36

43 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing Trade - Cost Cost Trade Clearing - Cost Issue Cost of Goods Sold Cost Issue - and Cost generate distributions under inventory organization M2-LA for the change of ownership from M1-Seattle to M2-LA. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Transfer to Owned Issue Consigned Inventory Offset Cost Transfer to Owned Issue Consigned Inventory - Trade Trade Clearing 120 Trade -120 Cost Cost 20 Gross Profit Internal Markup Cost Trade Clearing

44 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Transfer to Owned () Inventory Valuation Cost Transfer to Owned () Inventory Valuation 20 Gross Profit Internal Markup Cost Transfer to Owned () - Cost Transfer to Owned () -20 Gross Profit Internal Markup Inventory organization M2-LA returns the goods to supplier AND-Fresno. The return of the consignment is executed in two parts: An interorganization transfer from M2-LA to M1-Seattle. The accounting is the same as simple purchase order return transactions. A consignment return from M1-Seattle to the supplier. The accounting is the same as regular return to supplier transactions. Related Topics Consigned Inventory in a Simple Purchase Order: Example Consigned Inventory of an Interorganization Transfer Within the Same Business Unit: Example What are the accounting distribution basis options for consigned inventory transactions Consigned Inventory Lifecycle: Explained Consigned Inventory: Explained Consigned Inventory of an Interorganization Transfer Within the Same Business Unit: Example An intraorganization transfer is a trade transaction involving the movement of goods or services between organizations in the supply chain. The following is an example of accounting performed by Oracle Fusion Cost and Oracle Fusion for an interorganization transfer of goods within the same profit center business unit. This example illustrates: Transactions captured in Oracle Fusion Inventory and interfaced to Cost and. entries that Cost and generate for the forward flow. entries that Cost and generate for the return flow. 38

45 Chapter 2 Manage Scenario Supplier Advanced Network Devices (AND-Fresno) ships the goods in consigned status to inventory organization M3-NY, who in turn transfers the goods to inventory organization M4-NJ. Inventory organizations, M3-NY and M4-NJ, are within the same business unit. Supplier Advanced Network Devices (AND-Fresno) Financial Flow Physical Flow Inventory Organization M3-NY Consigned Owner = AND-Fresno Contingent Owner = M3-NY Physical Flow Financial Flow Inventory Organization M4-NJ Consigned Owner = AND-Fresno Contingent Owner = M4-NJ Ownership Change Inventory Organization M4-NJ Owner = M4-NJ Interfaced Transactions Cost and receive the following transaction from Oracle Fusion Inventory: Consignment Purchase Order (PO) #0. 39

46 Chapter 2 Manage Purchase Order price. Ship-to organization is M3-NY which is also the contingent owner. Contingent owner assumes ownership from the supplier when inventory is consumed. and put away transactions are performed in M3-NY in consigned status. Goods are transferred in consigned status from M3-NY to M4-NJ. Ownership changes from supplier to M4-NJ through M3-NY when the goods are consumed. Cost generates transactions for: Ownership changes from supplier AND-Fresno to inventory organization M3-NY and from M3-NY to M4-NJ. Transfer of goods from M3-NY to M4-NJ. The transfer is at cost because the organizations are within the same profit center business unit. Analysis and Cost create accounting distributions for the forward and return shipment of goods. Entries The following are accounting entries for the forward flow. 40

47 Chapter 2 Manage The following diagram lists the accounting entries for the forward flow. M3:PO Dr Consigned Clearing Cr Consigned M3:PO Delivery Dr Consigned Inventory Cr Consigned Clearing Physical Flow M3:In-Transit Shipment Dr Consigned In-Transit Cr Consigned Inventory M4:Consigned Trade InTransit Dr Consigned In-Transit Cr Consigned Clearing M3-NY Consigned Owner M3:Consigned Trade InTransit Issue Dr Consigned Receivable Cr Consigned In-Transit AND-Fresno Supplier M4:In-Transit Dr Consigned Inspection Cr Consigned In-Transit M4:Consigned Trade Dr Consigned Clearing Cr Consigned Payable Physical Flow M4-NJ Consigned Owner Ownership Change M4:In-Transit Delivery Dr Consigned Inventory Cr Consigned Inspection M4:Transfer to Owned Issue Dr Consigned Inv Offset Cr Consigned Inventory M4:Trade Recpt Dr Trade Clearing Cr Interorg Payable M4: Dr Cr Trade Clearing M3:Trade Dr Trade Clearing Cr M4-NJ Owner M3: Recpt Dr Cr Trade Clearing Legend Inv = Inventory Interorg = Interorganization MAT = Recpt = M4:Transfer to Owned () Dr Inv Valuation MAT Cr M3: Issue Dr Interorg Receivable Cr The following table lists the distributions that generates under inventory organization M3-NY for the shipment from supplier AND-Fresno to M3-NY. Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount PO Consigned Clearing 41

48 Chapter 2 Manage Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount PO Consigned - PO Delivery Consigned Inventory PO Delivery Consigned Clearing - The following table lists the distributions generated by Cost under inventory organization M3-NY for the interorganization transfer from M3-NY to organization M4-NJ. Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount Cost In-Transit Shipment Consigned InTransit Cost In-Transit Shipment Consigned Inventory - Cost Consigned Trade InTransit Issue Consigned Receivable Cost Consigned Trade InTransit Issue Consigned InTransit - Cost generates distributions under inventory organization M4-NJ for the interorganization transfer from M3-NY to M4-NJ. Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount Cost Consigned Trade Consigned Clearing Cost Consigned Trade Consigned Payable - Cost Consigned Trade InTransit Consigned InTransit Cost Consigned Trade InTransit Consigned Clearing - Cost In-Transit Consigned Inspection 42

49 Chapter 2 Manage Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount Cost In-Transit Consigned InTransit - Cost In-Transit Delivery Consigned Inventory Cost In-Transit Delivery Consigned Inspection - and Cost generate distributions under inventory organization M3-NY for the change of ownership from supplier AND-Fresno to M3-NY. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing Trade - Cost Cost Trade Clearing - Cost Issue Interorganization Receivable Cost Issue - and Cost generate distributions under inventory organization M4-NJ for the change of ownership from M3-NY to M4-NJ. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Transfer to Owned Issue Consigned Inventory Offset Cost Transfer to Owned Issue Consigned Inventory - 43

50 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing Trade Interorganization Payable - Cost Cost Trade Clearing - Cost Transfer to Owned () Inventory Valuation Cost Transfer to Owned () - Inventory organization M4-NJ returns goods to supplier AND-Fresno. The return of the consignment is executed in two parts: An interorganization transfer from M4-NJ to M3-NY. The accounting is the same as simple purchase order return transactions. A consignment return from M3-NY to the supplier. The accounting is the same as regular return to supplier transactions. Related Topics Consigned Inventory of an Interorganization Transfer Across Business Units: Example What are the accounting distribution basis options for consigned inventory transactions Consigned Inventory Lifecycle: Explained Consigned Inventory: Explained Consigned Inventory in a Global Purchase Order: Example Most large enterprises use a global procurement approach to their purchasing needs, where a central buying organization buys goods from suppliers on behalf of the internal organizations. This includes trade transactions involving consigned inventory executed under a global purchase order. Oracle Fusion and Oracle Fusion Cost process these consigned inventory transactions and generate subledger journal entries. The following example illustrates: The physical and financial flow of consigned inventory in a global purchase order. 44

51 Chapter 2 Manage Transactions that flow from Oracle Fusion Inventory into Cost and. Transactions that flow from Oracle Fusion Supply Chain Financial Orchestration into Cost and. entries that Cost and generate for the forward flow. entries that Cost and generate for the return flow. Scenario The supplier AND-Fresno ships the goods in consigned status to inventory organization M2-LA, through the purchasing trade organization M1-Seattle. Supplier Advanced Network Devices (AND-Fresno) Financial Flow Sold-to Legal Entity Sold-to Profit Center BU 1 Purchasing Trade Org = M1-Seattle Financial Flow Physical Flow Profit Center BU 2 Ship-To Inventory Org M2-LA Consigned Owner = AND-Fresno Contingent Owner = M2-LA Ownership Change Legend BU = Business Unit Org = Organization Profit Center BU 2 Inventory Organization M2-LA Owner = M2-LA 45

52 Chapter 2 Manage Interfaced Transactions Cost and receive the following transaction from Oracle Fusion Inventory: Consignment Purchase Order (PO) #0. Purchase Order price. Sold-to Legal Entity is LE1. Ship-to organization is M2-LA which is also the contingent owner. Contingent owner assumes ownership from the supplier when inventory is consumed. and put away transactions performed in M2-LA in consigned status. Ownership changes from supplier AND-Fresno to M2-LA through M1-Seattle when the goods are consumed. The trade agreement, accounting rule sets, and associated purchase orders are set up in Supply Chain Financial Orchestration, and the transactions flow into and Cost. The shipment from supplier to inventory organization M2-LA is based on trade agreement GP #123 which has the following terms: transfer price is 120. invoicing is set to Yes. Profit tracking is set to Yes. Analysis and Cost create accounting distributions for the forward and return shipment of goods. 46

53 Chapter 2 Manage Entries The following are accounting entries for the forward flow. AND-Fresno Supplier Ownership Change M1-Seattle Owner Ownership Change M2:Transfer to Owned Issue Dr Consigned Inv Offset Cr Consigned Inventory M2:Consigned Consignment Dr Consigned Cr Consigned Clearing M1:Trade Dr Trade Clearing Cr M2:Trade Recpt Dr Trade Clearing Cr IC M1: Recpt Dr Cr Trade Clearing M2: Recpt Dr MAT Dr GP Cr Trade Clearing M1: Issue Dr IC COGS Cr M2:Transfer to Owned () Dr Inv Valuation MAT Dr Inv Valuation GP Cr MAT Cr GP Physical Flow M2-LA Consigned Owner = AND-Fresno Contingent Owner = M2-LA M2:PO Dr Consigned Clearing Cr Consigned M2:PO Delivery Dr Consigned Inventory Cr Consigned Clearing Legend Inv = Inventory IC = COGS = Cost of Goods Sold Recpt = MAT = GP = Gross Profit generates distributions under inventory organization M2-LA for the consigned shipment from supplier AND-Fresno to M2-LA. 47

54 Chapter 2 Manage Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount PO Consigned Clearing PO Consigned - PO Delivery Consigned Inventory PO Delivery Consigned Clearing - and Cost generate distributions under inventory organization M1-Seattle for the change of ownership from supplier AND-Fresno to M1-Seattle. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing Trade - Trade clearing - Cost Issue Cost of Goods Sold Cost Issue - and Cost generate distributions under inventory organization M2-LA for the change of ownership from M1-Seattle to M2-LA. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Transfer to Owned Issue Consigned Inventory Offset 48

55 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Transfer to Owned Issue Consigned Inventory - Consigned Consumption Consigned Consigned Consumption Consigned Clearing - Trade Trade Clearing 120 Trade -120 Cost Cost 20 Gross Profit Internal Markup Cost Trade Clearing -120 Cost Transfer to Owned () Inventory Valuation Cost Transfer to Owned () Inventory Valuation 20 Gross Profit Internal Markup Cost Transfer to Owned () - Cost Transfer to Owned () -20 Gross Profit Internal Markup Organization M2-LA returns goods to supplier AND-Fresno. The following are accounting entries for the return flow. 49

56 Chapter 2 AND-Fresno Supplier Ownership Change M1-Seattle Owner Physical Flow Ownership Change M2-LA Consigned Owner = AND-Fresno Contingent Owner = M2-LA Manage M2:Transfer to Consigned () Dr Consigned Inventory Cr Consigned Inv Offset M1:Trade Ret Dr Cr Trade Clearing M1: Ret Dr Trade Clearing Cr M1: Return Dr Cr IC COGS M2:PO Return to Vendor Dr Consigned Cr Consigned Clearing M2:Trade Ret Dr IC Cr Trade Clearing M2: Ret Dr Trade Clearing Cr M2:Consigned Consumption Dr Consigned Clearing Cr Consigned M2:Transfer to Consigned Issue Dr Inv Valuation MAT Dr Inv Valuation GP Dr Inv Valuation OH Cr trade In-Transit MAT Cr Cr Cost Variance M2:PO Ret to Receiving Dr Consigned Clearing Cr Consigned Inventory Legend Inv = Inventory IC = COGS = Cost of Goods Sold Recpt = Ret = Return MAT = GP = Gross Profit OH = Overhead and Cost generate distributions under inventory organization M2-LA for the change of ownership from M2-LA to M1-Seattle: Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Transfer to Consigned Consigned Inventory 50

57 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Transfer to Consigned Consigned Inventory Offset - Trade Return 120 Trade Return Trade Clearing -120 Cost Return Trade Clearing 120 Cost Return - Cost Return -20 Gross Profit Internal Markup Cost Consigned Consumption Consigned Clearing Cost Consigned Consumption Consigned - Cost Transfer to Consigned Issue Inventory Valuation Cost Transfer to Consigned Issue Inventory Valuation 20 Gross Profit Internal Markup Cost Transfer to Consigned Issue Inventory Valuation 10 Overhead Cost Transfer to Consigned Issue - Cost Transfer to Consigned Issue -20 Gross Profit Internal Markup Cost Transfer to Consigned Issue Cost Variance*

58 Chapter 2 Manage *Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance. and Cost generate distributions under inventory organization M1-LA for the change of ownership from M1-LA to supplier AND-Fresno: Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Return Trade Return Trade Clearing - Cost Return Trade Clearing Cost Return - Cost Return Cost Return Cost of Goods Sold - generates distributions under inventory organization M2-LA for the return shipment from M2-LA to supplier AND-Fresno: Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount PO Return to Supplier Consigned PO Return to Supplier Consigned Clearing - PO Return to Receiving Consigned Clearing PO Return to Receiving Consigned Inventory - Related Topics Global Procurement Trade : Overview 52

59 Chapter 2 Manage What are the accounting distribution basis options for consigned inventory transactions Consigned Inventory Lifecycle: Explained Consigned Inventory: Explained of Global Procurement Trade Transactions into Inventory: Example Most large enterprises use a global procurement approach to their purchasing needs, wherein a central buying organization buys goods from suppliers on behalf of the internal organizations. Oracle Fusion and Oracle Fusion Cost process transactions for these global procurement trade events and generate subledger journal entries. The following is an example of accounting performed by Cost and for a global procurement flow into inventory. It illustrates: Transactions that are captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to and Cost. entries that and Cost generate for the forward flow of a shipment from the supplier, through the intermediary distributor, to the final receiving organization. entries that and Cost generate for the return flow from the receiving organization to the supplier. Scenario China Supplier ships the goods to US Inc. through the intermediary distributor, China Ltd. Transactions from Oracle Fusion Supply Chain Financial Orchestration The global procurement trade agreement, accounting rule sets, and associated purchase orders are set up in Supply Chain Financial Orchestration, and the transactions flow into and Cost based on this setup: Purchase Order (PO) price from China Supplier to China Ltd. is 50. transfer price from China Ltd. to US Inc. is. invoicing is set to Yes. Profit tracking is set to Yes. Overhead rule is configured in Cost for transaction type Trade in-transit in Cost Organization CO1. China Ltd books a profit of 40 ( transfer price - 50 PO price - 10 overhead). Analysis and Cost create accounting distributions for the forward and return shipment of goods. Entries 53

60 Chapter 2 Manage The following figure illustrates accounting entries for the forward flow from legal entity China Ltd. to legal entity US Inc. China Supplier China Ltd (Sold-to LE) CN (Sold-to Profit Ctr BU) CO1 (Sold-to Cst Org) M1 (Sold-to Inv Org) Trade Trade Issue PO Delivery Dr Trade Clearing $50 Cr $50 Dr MAT $50 Dr OVH $10 Cr Trade Clearing $50 Cr OVH Absorption $10 Dr IC COGS MAT $50 Dr IC COGS OVH $10 Cr MAT $50 Cr OVH $10 Legend LE = Legal Entity BU = Business Unit MAT = OVH = Overhead IC = COGS = Cost of Goods Sold AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization US Inc (Receiving LE) US West (Receiving Profit Ctr BU) CO2 (Receiving Cst Org) M2 (Receiving Inv Org) IC AR Invoice Dr IC Receivable $ Cr IC Revenue $ Supplier Invoice Dr $50 Cr Liability $50 Dr Trade Clearing $ Cr IC $ Dr MAT $50 Dr OVH $10 Dr GP $40 Cr Trade Clearing $ Dr Inventory Valuation MAT$50 Dr Inventory Valuation OVH$10 Dr Inventory Valuation GP $40 Cr Receiving Inspection $ PO Dr Receiving Inspection $ Cr $ IC AP Invoice Dr IC $ Cr IC Liability $ generates distributions under business unit CN and inventory organization M1. Cost generates distributions under cost organization CO1 and inventory organization M1. The following table describes those distributions. 54

61 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing 50 Trade -50 Cost 50 Cost Trade Clearing -50 Cost 10 Overhead Overhead Rate Cost Overhead Absorption -10 Overhead Overhead Rate Cost Issue COGS 50 Cost Issue COGS 10 Overhead Overhead Rate Cost Issue -50 Cost Issue -10 Overhead Overhead Rate Accounts Receivable Accounts Receivable Invoice Receivable Accounts Receivable Accounts Receivable Invoice Revenue - Supplier Invoice 50 Supplier Invoice Liability

62 Chapter 2 Manage generates distributions under business unit US West and inventory organization M2. Cost generates distributions under cost organization CO2 and inventory organization M2. The following table describes those distributions. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing Trade - Cost 50 Sending Organization Cost Cost 10 Overhead Sending Organization Cost Cost 40 Gross Profit Internal Markup Cost Trade Clearing - Accounts Payable Accounts Payable Invoice Accounts Payable Accounts Payable Invoice Liability - PO Receiving Inspection PO - Cost PO Delivery Inventory Valuation 50 Sending Organization Cost Cost PO Delivery Inventory Valuation 10 Overhead Sending Organization Cost 56

63 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost PO Delivery Inventory Valuation 40 Gross Profit Internal Markup Cost PO Delivery Receiving Inspection - US Inc returns goods directly to China Supplier. The following figure illustrates accounting entries for the return flow from legal entity US Inc to legal entity China Ltd. 57

64 Chapter 2 China Supplier Manage US Inc (Receiving LE) US West (Receiving Profit Ctr BU) CO2 (Receiving Cst Org) M2 (Receiving Inv Org) China Ltd (Sold-to LE) CN (Sold-to Profit Ctr BU) CO1 (Sold-to Cst Org) M1 (Sold-to Inv Org) Trade Return Dr $50 Cr Trade Clearing $50 Trade Return Dr IC $ Cr Trade Clearing $ Return Return Ret Rec Return to Receiving Dr Trade Clearing $50 Dr Cost Variance $10 Cr MAT $50 Cr OVH $10 Dr MAT $50 Dr OVH $10 Cr IC COGS MAT $50 Cr IC COGS OVH $10 Dr Trade Clearing $ Cr MAT $50 Cr OVH $10 Cr GP $40 Dr Receiving Inspection $ Cr Inventory Valuation MAT$50 Cr Inventory Valuation OVH$10 Cr Inventory Valuation GP $40 Legend LE = Legal Entity BU = Business Unit MAT = OVH = Overhead IC = COGS = Cost of Goods Sold AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization Ret Rec = Return IC AR Invoice Dr IC Revenue $ Cr IC Receivable $ Return to Vendor Dr $ Cr Receiving Inspection $ IC AP Invoice Supplier Invoice Dr IC Liability $ Cr IC $ Dr Liability $50 Cr $50 generates distributions under business unit US West and inventory organization M2. Cost generates distributions under cost organization CO2 and inventory organization M2. The following table describes those distributions. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Return 58

65 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Return Trade Clearing - Cost Return Trade Clearing Cost Return -50 Sending Organization Cost Cost Return -10 Overhead Sending Organization Cost Cost Return -40 Gross Profit Internal Markup Cost Return to Receiving Receiving Inspection, Overhead, and Gross Profit Cost Return to Receiving Inventory Valuation -50 Sending Organization Cost Cost Return to Receiving Inventory Valuation -10 Overhead Sending Organization Cost Cost Return to Receiving Inventory Valuation -40 Gross Profit Internal Markup Return to Supplier Return to Supplier Receiving Inspection - AP Invoice Liability AP Invoice - generates distributions under business unit CN and inventory organization M1. Cost generates distributions under cost organization CO1 and inventory organization M1. 59

66 Chapter 2 Manage The following table describes those distributions. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Return 50 Trade Return Trade Clearing -50 Cost Return Trade Clearing 50 Cost Return Cost Variance* 10 Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance Cost Return -50 Cost Return -10 Overhead Overhead Rate Cost Return 50 Cost Return 10 Overhead Overhead Rate Cost Return COGS -50 Cost Return COGS -10 Overhead Overhead Rate Accounts Receivable Accounts Receivable Invoice Revenue Accounts Receivable Accounts Receivable Invoice Receivable - 60

67 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Supplier Invoice Liability 50 Supplier Invoice -50 *Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance. Related Topics Global Procurement Trade : Overview of Global Procurement Trade Transactions into Expense: Example Reviewing Item Costs and for Global Procurement Trade Transactions: Explained of Interorganization Transfers Across Business Units: Example This example illustrates: Transactions that are captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to and Cost. entries that and Cost generate for the transfer of goods across profit center business units. Scenario China Ltd. ships the goods to US Inc. The organizations are in two different profit center business units. Transactions from Oracle Fusion Supply Chain Financial Orchestration The trade agreement, accounting rule sets, and associated purchase orders are set up in Supply Chain Financial Orchestration, and the transactions flow into and Cost based on this setup: China Ltd. acquires goods locally at the cost of 50, plus 10 overhead on the receipt of goods. transfer price from China Ltd. to US Inc. is. invoicing is set to No. Profit tracking is set to Yes. Overhead rule is configured in Cost for transaction type Trade in-transit in Cost Organization CO1. China Ltd. books a profit of 40 ( transfer price - 50 acquisition cost - 10 overhead). Analysis and Cost create accounting distributions for the transfer of goods. 61

68 Chapter 2 Manage Entries The following figure illustrates accounting entries for the shipment from legal entity China Ltd. to legal entity US Inc. China Ltd (LE) CN (Profit Ctr BU) CO1 (Cst Org) M1 (Inv Org) In-Transit Shipment Dr MAT $50 Dr OVH $10 Cr Inventory MAT $50 Cr Inventory OVH $10 US Inc (Receiving LE) US West (Receiving Profit Ctr BU) CO2 (Receiving Cst Org) M2 (Receiving Inv Org) Trade Dr Trade Clearing $ Cr IO Payable $ Issue Dr IO Receivable $ Cr MAT $50 Cr OVH $10 Cr IO Gain/Loss $40 Dr MAT $50 Dr OVH $10 Dr GP $40 Cr Trade Clearing $ Interorganization Dr Receiving Inspection $ Cr $ Legend LE = Legal Entity BU = Business Unit MAT = OVH = Overhead IC = COGS = Cost of Goods Sold AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization IO = Interorganization Interorganization Delivery Dr Inventory MAT $50 Dr Inventory OVH $10 Dr Inventory GP $40 Cr Receiving Inspection $ Cost generates distributions under cost organization CO1 and inventory organization M1. The following table describes the distributions: 62

69 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost In-Transit Shipment 50 Current Cost Cost In-Transit Shipment 10 Overhead Current Cost Cost In-Transit Shipment Inventory -50 Current Cost Cost In-Transit Shipment Inventory -10 Overhead Current Cost Cost Issue Interorganization Receivable, Overhead, Gross Profit Cost Issue -50 Current Cost Cost Issue -10 Overhead Current Cost Cost Issue Interorganization Gain/Loss -40 Gross Profit Internal Markup generates distributions under business unit US West and inventory organization M2. Cost generates distributions under cost organization CO2 and inventory organization M2. The following table describes those distributions. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing Trade Interorganization Payable - Cost 50 Sending Organization Cost Cost 10 Overhead Sending Organization Cost 63

70 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost 40 Gross Profit Internal Markup Cost Trade Clearing -, Overhead, Gross Profit Interorganization Receiving Inspection Interorganization - Cost Interorganization Delivery Inventory 50 Sending Organization Cost Cost Interorganization Delivery Inventory 10 Overhead Sending Organization Cost Cost Interorganization Delivery Inventory 40 Gross Profit Internal Markup Cost Interorganization Delivery Receiving Inspection -, Overhead, Gross Profit Related Topics of Interorganization Transfers Within the Same Business Unit: Example Reviewing Item Costs and for Global Procurement Trade Transactions: Explained of Trade Transactions in Internal Drop Shipments: Example An internal drop shipment is a trade transaction involving the movement of goods from an inventory organization directly to a customer, yet the business unit that sells the goods to the customer is different from the business unit to which the inventory organization belongs. From the financial standpoint, the business unit to which the inventory organization belongs sells the goods to the other business unit who, in turn, sells the goods to the customer. 64

71 Chapter 2 Manage The following is an example of accounting performed by Oracle Fusion Cost and Oracle Fusion for an internal drop shipment. It illustrates: Transactions that are captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to and Cost. entries that and Cost generate for the drop shipment flow from the selling organization to the customer of the buying organization. entries that and Cost generate for the return flow from the customer to the seller. Scenario China Ltd. drop ships the goods to the customer of US Inc. Transactions from Oracle Fusion Supply Chain Financial Orchestration The trade agreement, accounting rule sets, and associated purchase orders are set up in Oracle Fusion Supply Chain Financial Orchestration, and the transactions flow into and Cost based on this setup: China Ltd. acquires goods locally at the cost of 50, plus 10 overhead on the receipt of goods. transfer price from China Ltd. to US Inc. is. invoicing is set to Yes. Overhead rule is configured in Cost for transaction type Trade in-transit in Cost Organization CO1. US Inc. books a profit of 40 ( transfer price - 50 PO price - 10 overhead). Analysis and Cost create accounting distributions for the transfer of goods. Entries 65

72 Chapter 2 Manage The following figure illustrates accounting entries for the shipment from legal entity China Ltd. to legal entity US Inc. China Ltd (LE) CN (Profit Ctr BU) CO1 (Cst Org) M1 (Inv Org) Sales Order Issue Dr MAT $50 Dr OVH $10 Cr Inventory MAT $50 Cr Inventory OVH $10 US Inc (Sold-to LE) US West (Sold-to Profit Ctr BU) CO2 (Sold-to Cst Org) M2 (Sold-to Inv Org) Trade Dr Trade Clearing $ Cr IC $ Customer Customer AR Invoice Dr Receivable $120 Cr Revenue $120 Issue Dr IC COGS MAT $50 Dr IC COGS OVH $10 Cr MAT $50 Cr Trade in-transit OVH $10 Dr MAT $50 Dr OVH $10 Dr GP $40 Cr Trade Clearing $ IC AP Invoice IC AR Invoice COGS Recognition Dr COGS MAT $50 Dr COGS OVH $10 Dr COGS GP $40 Cr DCOGS MAT $50 Cr DCOGS OVH $10 Cr DCOGS GP $40 Dr IC $ Cr IC Liatility $ Dr IC Receivable $ Cr IC Revenue $ Legend Trade Sales Issue Dr DCOGS MAT $50 Dr DCOGS OVH $10 Dr DCOGS GP $40 Cr MAT $50 Cr OVH $10 Cr GP $40 LE = Legal Entity BU = Business Unit MAT = OVH = Overhead IC = COGS = Cost of Goods Sold DCOGS = Deferred COGS AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization IO = Interorganization Cost generates distributions under cost organization CO1 and inventory organization M1. The following table describes the cost accounting entries. 66

73 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Sales Order Issue 50 Current Cost Cost Sales Order Issue 10 Overhead Current Cost Cost Sales Order Issue Inventory -50 Current Cost Cost Sales Order Issue Inventory -10 Overhead Current Cost Cost Issue Cost of Goods Sold 50 Current Cost Cost Issue Cost of Goods Sold 10 Overhead Current Cost Cost Issue -50 Current Cost Cost Issue -10 Overhead Current Cost Accounts Receivable Accounts Receivable Invoice Receivable Accounts Receivable Accounts Receivable Invoice Revenue - generates distributions under business unit US West and inventory organization M2. Cost generates distributions under cost organization CO2 and inventory organization M2. The following table describes the receipt and cost accounting entries. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing 67

74 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade - Cost 50 Sending Organization Cost Cost 10 Overhead Sending Organization Cost Cost 40 Gross Profit Internal Markup Cost Trade Clearing - Split into three lines (, Overhead, and Gross Profit) Accounts Payable Accounts Payable Invoice Accounts Payable Accounts Payable Invoice Liability - Cost Trade Sales Issue Deferred Cost of Goods Sold 50 Sending Organization Cost Cost Trade Sales Issue Deferred Cost of Goods Sold 10 Overhead Sending Organization Cost Cost Trade Sales Issue Deferred Cost of Goods Sold 40 Gross Profit Internal Markup Cost Trade Sales Issue -50 Sending Organization Cost Cost Trade Sales Issue -10 Overhead Sending Organization Cost Cost Trade Sales Issue -40 Gross Profit Internal Markup 68

75 Chapter 2 Manage The customer returns goods directly to China Ltd. The following figure illustrates accounting entries for the return flow from US Inc (Sold-to Legal Entity) to China Ltd (Legal Entity). China Ltd (LE) CN (Profit Ctr BU) CO1 (Cst Org) M1 (Inv Org) RMA Dr Inentory MAT $50 Dr Inventory OVH $10 Cr MAT $50 Cr OVH $10 US Inc (Sold-to LE) US West (Sold-to Profit Ctr BU) CO2 (Sold-to Cst Org) M2 (Sold-to Inv Org) Trade Dr IC $ Cr Trade Clearing $ Return Return Dr MAT $50 Dr OVH $10 Cr IC COGS MAT $50 Cr IC COGS OVH $10 Dr Trade Clearing $ Cr MAT $50 Cr OVH $10 Cr GP $40 IC AP Memo Dr IC Liability $ Cr IC $ Customer Customer AR Memo Dr Revenue $120 Cr Receivable $120 RMA Gain/Loss Recognition Dr Deferred RMA Gain/Loss MAT $50 Dr Deferred RMA Gain/Loss OVH $10 Dr Deferred RMA Gain/Loss GP $40 Cr RMA Gain/Loss MAT $50 Cr RMA Gain/Loss OVH $10 Cr RMA Gain/Loss GP $40 IC AR Memo Dr IC Revenue $ Cr IC Receivable $ Legend Trade Sales Return Dr MAT $50 Dr OVH $10 Dr GP $40 Cr DCOGS MAT $50 Cr DCOGS OVH $10 Cr DCOGS GP $40 LE = Legal Entity BU = Business Unit MAT = OVH = Overhead IC = COGS = Cost of Goods Sold DCOGS = Deferred COGS AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization IO = Interorganization generates distributions under business unit US West and inventory organization M2. Cost generates distributions under cost organization CO2 and inventory organization M2. The following table describes those receipt and cost accounting entries. 69

76 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Return Trade Return Trade Clearing - Cost Return Trade Clearing Split into three lines (, Overhead, and Gross Profit) Cost Return -50 Sending Organization Cost Cost Return -10 Overhead Sending Organization Cost Cost Return -40 Gross Profit Internal Markup Accounts Payable Accounts Payable Memo Liability Accounts Payable Accounts Payable Memo - Cost Trade Sales Return 50 Sending Organization Cost Cost Trade Sales Return 10 Overhead Sending Organization Cost Cost Trade Sales Return 40 Gross Profit Internal Markup Cost Trade Sales Return Deferred RMA Gain/Loss -50 Sending Organization Cost Cost Trade Sales Return Deferred RMA Gain/Loss -10 Overhead Sending Organization Cost 70

77 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Trade Sales Return Deferred RMA Gain/Loss -40 Gross Profit Internal Markup generates distributions under business unit CN and inventory organization M1. Cost generates distributions under cost organization CO1 and inventory organization M1. The following table describes those accounting entries. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost RMA Inventory* 50 Current Cost Cost RMA Inventory 10 Overhead Current Cost Cost RMA -50 Current Cost Cost RMA -10 Overhead Current Cost Cost Return 50 Current Cost Cost Return 10 Overhead Current Cost Cost Return Cost of Goods Sold -50 Current Cost Cost Return Cost of Goods Sold -10 Overhead Current Cost Accounts Receivable Accounts Receivable Memo Revenue Accounts Receivable Accounts Receivable Memo Receivable - 71

78 Chapter 2 Manage * Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance. Related Topics Global Procurement Trade : Overview Reviewing Item Costs and for Global Procurement Trade Transactions: Explained of Global Procurement Trade Transactions into Inventory: Example of Global Procurement Trade Transactions into Expense: Example Oracle Fusion and Oracle Fusion Cost process transactions and create distributions for global procurement purchases that are received into expense destinations rather than inventory, and for services that are expensed. The following is an example of accounting performed by Cost and for a global procurement flow into expense. It illustrates: Transactions that are captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to and Cost. entries that and Cost generate for the forward flow of goods or services from the supplier, through the intermediary distributor, to the final receiving organization. entries that and Cost generate for the return flow from the receiving organization to the supplier. Scenario China Supplier ships the goods to US Inc. and the goods flow through an intermediary distributor, China Ltd. Transactions from Oracle Fusion Supply Chain Financial Orchestration The global procurement trade agreement, accounting rule sets, and associated purchase orders are set up in Supply Chain Financial Orchestration, and the transactions flow into and Cost based on this setup: Purchase Order (PO) price from China Supplier to China Ltd is 50. transfer price from China Ltd to US Inc is. invoicing is set to Yes. Profit tracking is set to Yes. Overhead rule is configured in Cost for transaction type Trade in-transit in cost organization CO1. Analysis and Cost create accounting distributions for the forward and return shipment of goods. Entries 72

79 Chapter 2 Manage The following figure illustrates the accounting entries for the forward flow from China Ltd (sold-to legal entity) to US Inc (receiving legal entity). China Supplier China Ltd (Sold-to LE) CN (Sold-to Profit Ctr BU) CO1 (Sold-to Cst Org) M1 (Sold-to Inv Org) Trade Dr Trade Clearing $50 Cr $50 Dr MAT $50 Dr OVH $10 Cr Trade Clearing $50 Cr OVH Absorption $10 Issue Dr IC COGS MAT $50 Dr IC COGS OVH $10 Cr MAT $50 Cr OVH $10 Legend LE = Legal Entity BU = Business Unit MAT = OVH = Overhead IC = COGS = Cost of Goods Sold AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization IC AR Invoice Dr IC Receivable $ Cr IC Revenue $ US Inc (Receiving LE) US West (Receiving Profit Ctr BU) CO2 (Receiving Cst Org) M2 (Receiving Inv Org) Trade Dr Trade Clearing $ Cr IC $ Dr $ Cr Trade Clearing $ PO Dr Receiving Inspection $ Cr $ PO Delivery Dr Expense $ Cr Receiving Inspection $ Supplier Invoice Dr $50 Cr Liability $50 IC AP Invoice Dr IC $ Cr IC Liability $ generates distributions under business unit CN and inventory organization M1. Cost generates distributions under cost organization CO1 and inventory organization M1. The following table describes those receipt and cost accounting entries. 73

80 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing 50 Trade -50 Cost 50 Cost Trade Clearing -50 Cost 10 Overhead Overhead Rate Cost Overhead Absorption -10 Overhead Overhead Rate Cost Issue COGS 50 Cost Issue -50 Cost Issue COGS 10 Overhead Overhead Rate Cost Issue -10 Overhead Overhead Rate Accounts Receivable Accounts Receivable Invoice Receivable Accounts Receivable Accounts Receivable Invoice Revenue - Supplier Invoice 50 Supplier Invoice Liability

81 Chapter 2 Manage generates distributions under business unit US West and inventory organization M2. Cost generates distributions under cost organization CO2 and inventory organization M2. The following table describes those receipt and cost accounting entries. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing Trade - Cost Cost Trade Clearing - Accounts Payable Accounts Payable Invoice Accounts Payable Accounts Payable Invoice Liability - PO Receiving Inspection PO - PO Delivery Expense PO Delivery Receiving Inspection - US Inc. returns goods directly to China Supplier. The following figure illustrates the accounting entries for the return flow from legal entity US Inc. to legal entity China Ltd. 75

82 Chapter 2 China Supplier Manage US Inc (Receiving LE) US West (Receiving Profit Ctr BU) CO2 (Receiving Cst Org) M2 (Receiving Inv Org) China Ltd (Sold-to LE) CN (Sold-to Profit Ctr BU) CO1 (Sold-to Cst Org) M1 (Sold-to Inv Org) Trade Return Dr $50 Cr Trade Clearing $50 Return Dr Trade Clearing $50 Dr Cost Variance $10 Cr MAT $50 Cr OVH $10 Ret Rec Dr MAT $50 Dr OVH $10 Cr IC COGS MAT $50 Cr IC COGS OVH $10 Trade Return Dr IC $ Cr Trade Clearing $ Return Dr Trade Clearing $ Cr $ Return to Receiving Dr Receiving Inspection $ Cr Expense $ Legend LE = Legal Entity BU = Business Unit MAT = OVH = Overhead IC = COGS = Cost of Goods Sold AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization Ret Rec = Return IC AR Invoice Dr IC Revenue $ Cr IC Receivable $ Return to Vendor Dr $ Cr Receiving Inspection $ IC AP Invoice Supplier Invoice Dr IC Liability $ Cr IC $ Dr Liability $50 Cr $50 generates distributions under business unit US West and inventory organization M2. Cost generates distributions under cost organization CO2 and inventory organization M2. The following table describes those receipt and cost accounting entries. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Return 76

83 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Return Trade Clearing - Cost Return Trade Clearing Cost Return - Return to Receiving Receiving Inspection Return to Receiving Expense - Return to Supplier Return to Supplier Receiving Inspection - Accounts Payable Accounts Payable Invoice Liability Accounts Payable Accounts Payable Invoice - generates distributions under business unit CN and inventory organization M1. Cost generates distributions under cost organization CO1 and inventory organization M1. The following table describes those receipt and cost accounting entries. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Return 50 Trade Return Trade Clearing -50 Cost Return Trade Clearing 50 77

84 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Return Cost Variance* 10 Overhead Overhead Rate Cost Return -50 Cost Return Trade Clearing -10 Overhead Overhead Rate Cost Return 50 Cost Return 10 Overhead Overhead Rate Cost Return Cost of Goods Sold -50 Cost Return Cost of Goods Sold -10 Overhead Overhead Rate Accounts Receivable Accounts Receivable Invoice Revenue Accounts Receivable Accounts Receivable Invoice Receivables - Supplier Invoice Liability 50 Supplier Invoice -50 *Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance. Related Topics of Global Procurement Trade Transactions into Inventory: Example Global Procurement Trade : Overview 78

85 Chapter 2 Manage Reviewing Item Costs and for Global Procurement Trade Transactions: Explained of Interorganization Transfers Within the Same Business Unit: Example An interorganization transfer is a trade transaction involving the movement of goods or services between organizations in the supply chain. When the transfer occurs between organizations within the same profit center business unit, the transfer is always at cost and there is no intercompany invoicing. Oracle Fusion Cost creates the trade events and they do not flow through Oracle Fusion Supply Chain Financial Orchestration. The following is an example of accounting performed by Oracle Fusion and Oracle Fusion Cost for an interorganization transfer of goods between inventory organizations within the same profit center business unit. Scenario Inventory organization M1 makes a transfer of goods to inventory organization M2. Both inventory organizations are under the profit center business unit US West, which is under the legal entity US Inc. Interorganization Transfer The cost of goods transferred from M1 to M2 is 50 plus overhead of 10. Analysis and Cost create accounting entries for the transfer of goods. 79

86 Chapter 2 Manage The following figure illustrates those accounting entries. US Inc (Shipping LE) US West (Shipping Profit Ctr BU) CO1 (Shipping Cst Org) M1 (Shipping Inv Org) In-Transit Shipment Dr MAT $50 Dr OVH $10 Cr Inventory MAT $50 Cr Inventory OVH $10 US Inc (Receiving LE) US West (Receiving Profit Ctr BU) CO2 (Receiving Cst Org) M2 (Receiving Inv Org) Trade Dr Trade Clearing $60 Cr IO Payable $60 Issue Dr IO Receivable $60 Cr MAT $50 Cr OVH $10 Dr MAT $50 Dr OVH $10 Cr Trade Clearing $60 Interorganization Dr Receiving Inspection $60 Cr $60 Legend LE = Legal Entity BU = Business Unit MAT = OVH = Overhead IC = COGS = Cost of Goods Sold AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization IO = Interorganization Interorganization Delivery Dr Inventory MAT $50 Dr Inventory OVH $10 Cr Receiving Inspection $60 Entries generates distributions under business unit US West and inventory organization M1. Cost generates distributions under cost organization CO1 and inventory organization M1. The following table describes the cost accounting entries. 80

87 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost In-Transit Shipment 50 Current Cost Cost In-Transit Shipment 10 Overhead Current Cost Cost In-Transit Shipment Inventory -50 Current Cost Cost In-Transit Shipment Inventory -10 Overhead Current Cost Cost Issue Interorganization Receivable 60 + Overhead Current Cost Cost Issue -50 Current Cost Cost Issue -10 Overhead Current Cost generates distributions under business unit US West and inventory organization M2. Cost generates distributions under cost organization CO2 and inventory organization M2. The following table describes the receipt and cost accounting entries. Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Trade Trade Clearing 60 Sending Organization Cost Trade Interorganization Payable -60 Sending Organization Cost Cost 50 Sending Organization Cost Cost 10 Overhead Sending Organization Cost 81

88 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Trade Clearing Overhead Sending Organization Cost Interorganization Receiving Inspection 60 Sending Organization Cost Interorganization -60 Sending Organization Cost Cost Interorganization Delivery Inventory 50 Sending Organization Cost Cost Interorganization Delivery Inventory 10 Overhead Sending Organization Cost Cost Interorganization Delivery Receiving Inspection Overhead Sending Organization Cost Related Topics of Interorganization Transfers Across Business Units: Example Reviewing Item Costs and for Global Procurement Trade Transactions: Explained Tax for Transactions Process Flow : Explained To help you comply with tax regulations, Oracle Fusion calculates taxes and generates tax distributions for all receipt transactions. You can capture item prices and all calculated inclusive and exclusive taxes in your purchases, with receipt costs adjusted to account for amounts of inclusive taxes that were incorporated in the item purchase price. The amounts of inclusive taxes are booked to a tax liability or recovery account. Taxes can be accounted at two points: When the goods are received, that is at delivery When an accounts payable invoice is created, accounted, or paid receives transactions and related tax determinants from outside sources such as Oracle Fusion Receiving, Inventory, and Accounts Payable. The following discusses: Import of tax determinants into Tax distributions created by Tax distributions by Cost 82

89 Chapter 2 Manage Review of tax distributions Receiving Inventory Accounts Payable Transactions and Tax Determinants Transactions Cost Create Distributions and Calculate Taxes Review Distributions and Tax Details Create Cost Distributions Tax Calculations Acquisition Cost Processor Review Cost Distributions and Inventory Valuation Import of Tax Determinants Import transactions and related tax determinants from outside sources on the Scheduled Processes page in the Scheduled Processes work area. Run the following processes: Select the Transfer Transactions from Receiving to process to import receipt transactions into. 83

90 Chapter 2 Manage Select the Transfer Costs to Cost Management process to import accounts payable transactions into and Cost. Tax Distributions by The Processor calls the Tax Application Programming Interface to calculate transaction taxes based on imported tax determinants. The processor also generates tax distributions for receipt transactions. Run the Processor on the Create Distributions page in the work area. Tax Distributions by Cost The Cost Processor uses tax results generated by to calculate inventory acquisition costs including nonrecoverable taxes. Run the Cost Processor on the Create Cost Distributions page in the Cost work area. Review of Tax Distributions On the Review Distributions page in the work area view results of the Processor: Distributions and journal entries for receipt transactions Tax determinants accessed by clicking the links in the Tax Determinants column Transaction taxes accessed by clicking the Transaction Unit Cost links in the Cost Information tab On the Review Cost Distributions page in the Cost work area view results of the Cost Processor: Distributions and journal entries for inventory transactions Inventory unit costs including taxes in the Cost Information tab Related Topics Tax for a Simple Procurement Transaction: Example Tax for a Consigned Inventory Transaction: Example Tax for a Purchase Order Retroactive Price Change: Example Tax for a Simple Procurement Transaction: Example This example illustrates tax accounting performed by Oracle Fusion and Oracle Fusion Cost for a simple procurement transaction that uses a tax point basis of delivery, that is, taxes are accounted at receipt of the goods. Scenario The supplier makes a shipment to the inventory organization based on a purchase order (PO) for 1,000, with the following tax details: Tax A delivery basis = 10%. Recoverable and nonrecoverable portions are both 50% Tax B invoice basis = 20%. Recoverable and nonrecoverable portions are both 50% 84

91 Chapter 2 Manage Tax Details at and Invoice Tax details at the time of receipt of goods are: Tax A delivery basis = 15%, which is changed from 10% estimated at the time of purchase order. Recoverable and nonrecoverable portions are both 50%, which is equal to 75 (that is, 1,000 * 15% * 50%). Tax B invoice basis = 25%, which is changed from 20% estimated at the time of PO. Recoverable and nonrecoverable portions are both 50%, which is equal to 125 (that is, 1,000 * 25% * 50%). Tax details at the time of invoice are: Tax A delivery basis = 20%, which is changed from 15% reported and accounted on receipt. Recoverable and nonrecoverable portions are both 50%, however taxes are not recalculated because this transaction uses a tax point basis of delivery. Tax B invoice basis = 30%, which is changed from 25% estimated on receipt. Recoverable and nonrecoverable portions are both 50%, which is equal to 150. Analysis and Cost create accounting distributions when the goods are received and when the invoice is accounted. Tax Entries and Cost generate the following accounting entries at the time of receipt: Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount PO Receiving Inspection 1,000 PO Receiving Inspection 75 Tax Tax A DeliveryBased Nonrecoverable: 1,000 * 15% * 50% PO Tax Recoverable 75 Tax Tax A DeliveryBased Recoverable: 1,000 * 15% * 50% PO Receiving Inspection 125 Tax Tax B InvoiceBased Nonrecoverable: 1,000 * 25% * 50% PO Supplier -1,275 85

92 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost PO Delivery Inventory Valuation 1,200* Cost PO Delivery Receiving Inspection -1,200* *PO price plus nonrecoverable taxes A and B. Accounts Payable generates the following accounting entries for the supplier when invoice is created: Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Accounts Payable Invoice Supplier 1,275 Accounts Payable Invoice Tax Recoverable 150 Tax Tax B InvoiceBased Recoverable: 1,000 * 30% * 50% Accounts Payable Invoice Tax B Rate Variance* 25 Difference between tax estimated at 25% and actual calculated at 30% Accounts Payable Invoice Supplier Liability -1,450 *Tax variance due to the difference between rates at time of delivery versus invoice. and Cost generate the following accounting entries when invoice is accounted: Line Type Amount in Currency +Dr/-Cr Currency Invoice Price Receiving Inspection 25 Invoice Price Adjustment Tax B Rate Variance* -25 Cost Acquisition Cost Adjustment Inventory Valuation** 25 86

93 Chapter 2 Manage Line Type Amount in Currency +Dr/-Cr Currency Cost Acquisition Cost Adjustment Receiving Inspection -25 *Tax variance due to the difference between tax rates at time of delivery versus invoice. **Inventory acquisition cost adjustment for nonrecoverable tax B. Related Topics What's the difference between recoverable and nonrecoverable taxes What's a tax point basis Tax for Transactions Process Flow : Explained Tax for a Consigned Inventory Transaction: Example This example illustrates tax accounting performed by Oracle Fusion and Oracle Fusion Cost for a consigned inventory transaction in the supply chain. This transaction uses a tax point basis of delivery, that is, taxes are accounted at receipt of the goods. Scenario The supplier makes a consigned shipment to the inventory organization based on a consigned purchase order (PO) for 1,000 with the following tax details: Tax A delivery basis = 10%. Recoverable and nonrecoverable portions are both 50% Tax B invoice basis = 20%. Recoverable and nonrecoverable portions are both 50% Tax Details at and Invoice Tax details at the consigned receipt of goods are: Item value = 1,000 Tax A delivery basis = 15%, which is changed from 10% estimated at the time of PO. Recoverable and nonrecoverable portions are both 50%, or 75, that is, 1,000 * 15% * 50%. Tax B invoice basis = 25%, which is changed from 20% estimated at the time of PO. Recoverable and nonrecoverable portions are both 50%, or 125, that is, 1,000 * 25% * 50%. Tax details at the time of invoice are: Item value = 1,000 Tax A delivery basis = 20%. Recoverable and nonrecoverable portions are both both 50%, however taxes are not recalculated because this transaction uses a tax point basis of delivery. Tax B invoice basis = 30%, which is changed from 25% estimated at the time of receipt. Recoverable and nonrecoverable portions are both 50%, or

94 Chapter 2 Manage Analysis and Cost create accounting distributions when the consigned good are received, when the status changes from consigned to owned, and when the invoice is accounted. Tax Entries and Cost generate the following accounting entries at the time of receipt of consigned goods: Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Consigned PO Consigned Clearing 1,000 Consigned PO Consigned Clearing 75 Tax Tax A DeliveryBased Nonrecoverable: 1,000 * 15% * 50% Consigned PO Consigned Clearing 125 Tax Tax B InvoiceBased Nonrecoverable: 1,000 * 25% * 50% Consigned PO Consigned -1,200 Cost Consigned PO Delivery Consigned Inventory* 1,200 Consigned PO Delivery Consigned Clearing -1,200 *PO price plus nonrecoverable taxes A and B. and Cost generate the following accounting entries at the time of change of status from consigned to owned stock: Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Consigned Consumption Consigned 1,000 88

95 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Consigned Consumption Consigned 75 Tax A DeliveryBased Nonrecoverable: 1,000 * 15% * 50% Consigned Consumption Consigned 125 Tax B InvoiceBased Nonrecoverable: 1,000 * 15% * 50% Consigned Consumption Consigned Clearing -1,200 Cost Transfer to Owned Issue Consigned Inventory Offset 1,000 Cost Transfer to Owned Issue Consigned Inventory Offset 75 Nonrecoverable Tax Tax A DeliveryBased Nonrecoverable Cost Transfer to Owned Issue Consigned Inventory Offset 125 Nonrecoverable Tax Tax B InvoiceBased Nonrecoverable Cost Transfer to Owned Issue Consigned Inventory -1,200 Trade Trade Clearing 1,000 Trade Trade Clearing 75 Tax A DeliveryBased Nonrecoverable Trade Trade Clearing 125 Tax B InvoiceBased Nonrecoverable Trade Tax Recoverable* 75 Tax A DeliveryBased Recoverable Trade Supplier -1,275 Cost 1,000 89

96 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost 75 Tax A DeliveryBased Nonrecoverable Cost 125 Tax B InvoiceBased Nonrecoverable Cost Trade Clearing -1,200 Cost Transfer to Owned () Inventory Valuation 1,000 Cost Transfer to Owned () Inventory Valuation 75 Nonrecoverable Tax Tax A DeliveryBased Nonrecoverable Cost Transfer to Owned () Inventory Valuation 125 Nonrecoverable Tax Tax B InvoiceBased Nonrecoverable Cost Transfer to Owned () -1,200 *Delivery-based recoverable tax A is calculated on consigned receipt but will be accounted after ownership change event. Accounts Payable generates the following accounting entries when the invoice is created: Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount Accounts Payable Invoice Supplier 1,275 Accounts Payable Invoice Tax B Recovery 150 Tax B Invoice-Based Recoverable Accounts Payable Invoice Tax B Rate Variance* 25 Accounts payable Invoice Supplier Liability -1,450 *Tax variance due to the difference between tax rates at time of delivery versus invoice. 90

97 Chapter 2 Manage and Cost generate the following accounting entries when invoice is accounted: Line Type Amount in Currency +Dr/-Cr Currency Invoice Price Adjustment Trade Clearing 25 Invoice Price Adjustment Tax B Rate Variance* -25 Cost Acquisition Cost Adjustment Inventory Valuation** 25 Cost Acquisition Cost Adjustment Trade Clearing -25 *Tax variance due to the difference between tax rates at time of delivery versus invoice. **Inventory acquisition cost adjustment for nonrecoverable tax B. Related Topics Tax for Transactions Process Flow : Explained What's the difference between recoverable and nonrecoverable taxes What's a tax point basis Tax for a Purchase Order Retroactive Price Change: Example This example illustrates tax accounting performed by Oracle Fusion and Oracle Fusion Cost for a retroactive price change on a purchase order (PO) receipt that is partially invoiced. Scenario The supplier makes a shipment to the inventory organization based on a purchase order for 10 units, at a per unit price of. After receipt of the goods, a partial invoice is created for 2 units at per unit. The purchase order price changes retroactively from to 120. The remaining balance of 8 units is invoiced at 120 per unit. Tax Details This transaction uses a tax point basis of delivery, that is, taxes are accounted at the time of receipt of goods. Taxes details are the same after the retroactive price change on the PO: Tax A delivery basis = 20%. Recoverable and nonrecoverable portions are both 50%. Tax B invoice basis = 30%. Recoverable and nonrecoverable portions are both 50%. 91

98 Chapter 2 Manage Analysis and Cost create accounting distributions at the time of receipt of goods, after the retroactive purchase order price change, and for the differential invoice. Tax Entries and Cost generate the following accounting entries at the time of receipt of goods: Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount PO Receiving Inspection 1,000 PO Receiving Inspection Tax Tax A DeliveryBased Nonrecoverable: 1,000 * 20% * 50% PO Tax Recoverable (Tax A) Tax Tax A DeliveryBased Recoverable: 1,000 * 20% * 50% PO Receiving Inspection 150 Tax Tax B InvoiceBased Nonrecoverable: 1,000 * 30% * 50% PO Supplier -1,350 Cost PO Delivery Inventory Valuation 1,250* Cost PO Delivery Receiving Inspection -1,250* *PO price plus nonrecoverable taxes A and B. Accounts Payable generates the following accounting entries for the supplier when partial invoice is accounted: 92

99 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Accounts Payable Invoice Supplier 270* Item Price plus Nonrecoverable Taxes A and B for 2 units = 1,350/10 * 2 Accounts Payable Invoice Tax Recoverable 30 Tax Tax B InvoiceBased Recoverable: 200 * 30% * 50% Accounts Payable Invoice Supplier Liability -300 * is debited to the extent of quantity invoiced, which is 2 units. and Cost generate the following accounting entries after the retroactive purchase order price change: Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Retroactive Price Adjustment Receiving Inspection 160* * uninvoiced quantity of 8 units Retroactive Price Adjustment Receiving Inspection 16 Tax Tax A DeliveryBased Nonrecoverable: 160 * 20% * 50% Retroactive Price Adjustment Tax Recoverable (Tax A) 16 Tax Tax A DeliveryBased Recoverable: 160 * 20% * 50% Retroactive Price Adjustment Receiving Inspection 24 Tax Tax B InvoiceBased Nonrecoverable: 160 * 20% * 50% Retroactive Price Adjustment Supplier

100 Chapter 2 Manage Line Type Amount in Currency +Dr/Cr Currency Cost Element Basis of Amount Cost Acquisition Cost Adjustment Inventory Valuation 200** Cost Acquisition Cost Adjustment Receiving Inspection -200 *Retroactive price adjustment accounted only for the uninvoiced quantity, that is, 10 units received minus 2 units invoiced = 8 units uninvoiced. ** Retroactive PO price change plus nonrecoverable taxes A and B. Accounts Payable generates the following accounting entries for the balance of 8 units: Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount Accounts Payable Invoice Supplier 960 Item Price 120 *8 Accounts Payable Invoice Supplier 96 Tax A DeliveryBased Nonrecoverable: 120 * 8 * 20% * 50% Accounts Payable Invoice Supplier 96 Tax A DeliveryBased Recoverable: 120 * 8 * 20% * 50% Accounts Payable Invoice Supplier 144 Tax B Invoice-Based Nonrecoverable: 120 * 8 * 30% * 50% Accounts Payable Invoice Recoverable Tax B 144 Tax B Invoice-Based Recoverable: 120 * 8 * 30% * 50% Accounts Payable Invoice Supplier Liability -1,440 Accounts Payable generates the following accounting entries for the original invoice quantity of 2 units at the revised PO price: 94

101 Chapter 2 Manage Line Type Amount in Currency +Dr/-Cr Currency Basis of Amount Accounts Payable Invoice Invoice Price Variance 40 Difference in PO Item Price 20 *2 Accounts Payable Invoice Tax Invoice Price Variance Tax A 4 Tax A DeliveryBased Nonrecoverable Accounts Payable Invoice Tax Invoice Price Variance Tax B 6 Tax B Invoice-Based Nonrecoverable Accounts Payable Invoice Recoverable Tax A 4 Tax A DeliveryBased Recoverable Accounts Payable Invoice Recoverable Tax B 6 Tax B Invoice-Based Recoverable Accounts Payable Invoice Supplier Liability -60 Cost and generate the following accounting entries for the differential invoice: Line Type Amount in Currency +Dr/-Cr Currency Invoice Price Adjustment Receiving Inspection 50 Invoice Price Adjustment Invoice Price Adjustment -40 Invoice Price Adjustment Tax Invoice Price Adjustment -10* Cost Acquisition Cost Adjustment Inventory Valuation 50** Cost Acquisition Cost Adjustment Receiving Inspection -50 *Nonrecoverable taxes A and B on the differential invoice price. **Difference between invoice price and nonrecoverable taxes A and B. Related Topics What's the difference between recoverable and nonrecoverable taxes What's a tax point basis 95

102 Chapter 2 Manage Tax for Transactions Process Flow : Explained Analyzing Manufacturing and Inventory Cost Details for : Overview You can use the Reports and Analytics work area to access predefined reports and analytics that are related to your role, and to modify existing reports and analytics. The following reports and analytics are available for. Clearing Report Reconciliation Report Uninvoiced Report Real Time Period Close Real Time Landed Costs Real Time For more information on accessing and modifying reports and analytics, refer to the guide Creating and Administering Analytics and Reports. For descriptions of the reports and analyses, and information on accessing them, see the topic Oracle Supply Chain Management Cloud: View Supply Chain Management Reports and Analyses. Related Topics Creating and Administering SCM Analytics and Reports: Overview Oracle Supply Chain Management Cloud: View Supply Chain Management Reports and Analyses Reports and Analytics Work Area and Panel Tab: Explained Business Intelligence Catalog: Explained SCM Subject Areas in Oracle Transactional Business Intelligence: Explained FAQs for What is the recommended sequence for scheduling of receipt accounting processes? The recommended sequence for scheduling the receipt accounting processes is: 1. Incoming transactions: Transfer Transactions from Receiving to process. Interfaces receipt transactions. Transfer Costs from Payables to Cost Management process. Interfaces accounts payable transactions. 96

103 Chapter 2 Manage 2. accounting: Distribution process. Clear Balances process. Executes only if you have predefined accrual clearing rules. Marks purchase orders for automatic clearing. Distribution process. Creates distributions for cleared accrual balances. 3. accounting: Create process. 4. Reconciliation and reporting: Match s process. Matches purchase order receipt accruals with invoices from the payables application. Perform at period close or as needed for internal reporting and reconciliation. Audit Clearing Balances process. Audit the General Ledger accounted accrual balances. What are the accounting distribution basis options for consigned inventory transactions? You can perform cost accounting of consigned inventory transactions using zero value or actual cost. Typically, the valuation on the balance sheet for supplier-owned consigned inventory is zero. But you may sometimes want to perform accounting using actual cost. In either case, the inventory valuation reports always display the pro forma value of consigned goods. Select the accounting distribution basis for consigned inventory on the Manage Cost Profiles page in the Setup and Maintenance work area. What's a tax point basis? A point in the receipt transaction process where taxes are accounted and reported to the tax authorities. These can be classified into two categories: delivery-based and invoice-based tax points. Delivery-based taxes are accounted and reported on the receipt transaction. Invoice-based taxes are accounted and reported when the supplier invoice is created, accounted, or paid. What's the difference between recoverable and nonrecoverable taxes? Recoverable taxes are indirect taxes that are paid on the purchase of goods or services. Taxes can be claimed as credit against the taxes that are payable by the tax payer. Nonrecoverable taxes are indirect taxes that are paid on the purchase of goods or services. These taxes are accrued and added to the purchase order price of the goods or services. 97

104 Chapter 2 Manage What's the difference between inclusive basis and exclusive basis in tax calculations? Inclusive taxes are included in the assessable value or purchase price. For example: PO amount: Inclusive tax rate: 10% Tax: /1.10 = 9.09 (distribution amount divided by (1 + tax rate)) Exclusive taxes are added to the purchase price or assessable value. For example: PO amount: Exclusive tax rate: 10% Tax: *0.10 = (distribution amount multiplied by tax rate) How can I create subledger account rules and subledger journal entry rule sets for receipt accounting? Create your subledger account rules on the Manage Account Rules page. It is recommended that you highlight the account rules predefined by Oracle, copy, and modify them as needed. Create your subledger journal entry rule sets on the Manage Journal Entry Rule Sets page. It is recommended that you highlight the journal entry rule sets predefined by Oracle, copy, and modify them as needed. For each journal line rule specify the copied account combination rule. In the Setup and Maintenance work area, you can access both the Manage Account Rules task and the Manage Journal Entry Rule Sets task in the Manufacturing and Supply Chain s Management offering. Note: You must configure the account rules and journal entry rule sets before proceeding with the setup of subledger accounting rules for receipt accounting. 98

105 Chapter 3 3 Manage Cost Manage Cost Cost : Overview The Manage Cost business process is used by cost accountants to calculate inventory transaction costs, maintain inventory valuation, generate accounting distributions for inventory transactions, analyze product costs, analyze usage of working capital for inventory, and analyze gross margins. The following image lists the Cost tasks. Cost Accountant Manage Period End Manage Inventory Valuation Record Audit Review Cost Analyze Product Costs Manage Period End. Manage the timing of transaction processing, and perform validations in preparation for accounting period close. 99