Oracle. SCM Cloud Using Supply Chain Cost Management. Release 13 (update 17D)

Transcription

1 Oracle SCM Cloud Using Supply Chain Cost Management Release 13 (update 17D)

2 Release 13 (update 17D) 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. Oracle customers that have purchased support have access to electronic support through My Oracle Support. For information, visit pls/topic/lookup?ctx=acc&id=info or visit if you are hearing impaired.

3 Contents Preface 1 i Manage : Overview... 1 Record and Review Manage : Overview Managing Scheduled Processes for : Explained Cost Planning Item Costs Cost Processing... Global Procurement Analyzing Manufacturing and Inventory Cost Details for : Overview Manage Landed Costs 209 Landed Cost Management: Overview 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

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5 Preface Preface This preface introduces information sources that can help you use the application. Oracle Applications Help Use the help icon to access Oracle Applications Help in the application. If you don't see any help icons on your page, click the Show Help icon in the global header. Not all pages have help icons. You can also access Oracle Applications Help at Using Applications Help Watch: This video tutorial shows you how to find help and use help features. Additional Resources Community: Use Oracle Applications 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. Documentation Accessibility For information about Oracle's commitment to accessibility, visit the Oracle Accessibility Program website at Oracle Accessibility Program. Access to Oracle Support Oracle customers that have purchased support have access to electronic support through My Oracle Support. For information, visit or visit ctx=acc&id=trs if you are hearing impaired. Comments and Suggestions Please give us feedback about Oracle Applications Help and guides! You can send to: i

6 Preface ii

7 Chapter 1 1 Manage Manage : Overview Oracle Fusion is used to create, manage, review, and audit purchase accruals. It includes the following features: Create Distributions Review Distributions Clear Balances Manage Clearing Rules Adjust Balances Audit Clearing Balances Review Journal Entries The business processes encompass the Record and Review activities. Record and Review 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. 1

8 Chapter 1 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 2

9 Chapter 1 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 Budgetary Control and Encumbrance : Explained Enabling Encumbrance : Critical Choices 3

10 Chapter 1 Manage Reversals: Explained, 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. 4

11 Chapter 1 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 PO status is Finally Closed then it is treated as Closed and accrual is cleared automatically. For all other PO statuses, user can define the rules. Possible values: Closed Or Open 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) 5

12 Chapter 1 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: Schedule Order Quantity Match Option Status 1 EA Order or Open 6

13 Chapter 1 Schedule Manage Order Quantity Match Option Status 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: 7

14 Chapter 1 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* = % 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. 8

15 Chapter 1 Manage 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 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. 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. 9

16 Chapter 1 Manage 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. Related Topics Enabling Budgetary Control: Critical Choices Reviewing Budgetary Control Validation Errors: Procedure 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 of Manufacturing. Distributions Created for Outside Processing 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 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. 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 and Oracle Fusion. 10

17 Chapter 1 Manage entries that and generate for the forward flow. entries that 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. The following diagram illustrates the flow of consigned inventory: Supplier Advanced Network Devices (AND-Fresno) Physical Flow Financial Flow Inventory Organization M1-Seattle Owner = AND-Fresno Contingent Owner = M1-Seattle Ownership Change Inventory Organization M1-Seattle Owner = M1-Seattle 11

18 Chapter 1 Manage Transaction from Oracle Fusion Inventory Management and receive the following transaction from Inventory: Supplier Advanced Network Devices (AND-Fresno). 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. When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M1-Seattle. Analysis and create accounting distributions for the forward and return shipment of goods. Entries 12

19 Chapter 1 Manage The following diagram illustrates the accounting entries for the forward flow from supplier ANDFresno to inventory organization M1-Seattle. AND-Fresno Supplier Physical Flow M1-Seattle Owner Ownership Change M1- Seattle Owner M1:PO Dr Clearing Cr M1:PO Delivery Dr Inventory Cr Clearing M1:Transfer to Owned Issue Dr Inventory Offset Cr Inventory M1: Consumption Dr Cr Clearing M1:Trade Dr Trade Clearing Cr M1: Dr Cr Trade Clearing M1:Transfer to Owned () Dr Inventory Valuation Cr and generate accounting entries under inventory organization M1-Seattle for the receipt of goods. The following table describes those accounting entries: 13

20 Chapter 1 Manage Line Transaction PO Clearing Debit PO Credit PO Delivery Inventory Debit PO Delivery Clearing Credit and 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 Transaction Cost Element Basis of Amount Cost Transfer to Owned Issue Inventory Offset Debit Cost Transfer to Owned Issue Inventory Credit Consumption Debit Consumption Clearing Credit Trade Trade Clearing Debit Trade Credit Cost Trade InTransit Trade InTransit Debit Cost Trade InTransit Trade Clearing Credit 14

21 Chapter 1 Manage Line Transaction Cost Element Basis of Amount Cost Transfer to Owned () Inventory Valuation Debit Cost Transfer to Owned () Trade InTransit Credit 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. 15

22 Chapter 1 Manage AND-Fresno Supplier Physical Flow M1-Seattle Owner Ownership Change M1- Seattle Owner Legend Cons = Recpt = M1:PO Return to Vendor Dr Cr Clearing M1:PO Return to Receiving Dr Clearing Cr Inventory M1:Transfer to Cons (Recpt) Dr Inventory Cr Inventory Offset M1:Trade Return Dr Cr Trade Clearing M1: Recpt Consumption Dr Clearing Cr M1: Return Dr Trade Clearing Cr M1:Transfer to Cons (Issue) Dr Cr Inventory Valuation and 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 Transaction Cost Element Basis of Amount Cost Transfer to () Inventory Debit 16

23 Chapter 1 Manage Line Transaction Cost Element Basis of Amount Cost Transfer to () Inventory Offset Credit Consumption Clearing Debit Consumption Credit Trade Return Debit Trade Return Trade Clearing Credit Trade InTransit Return Trade Clearing Debit Trade InTransit Return Trade InTransit Credit Cost Transfer to Issue Trade InTransit Debit Cost Transfer to Issue Cost Variance* Debit 5 Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance. Cost Transfer to Issue Inventory Valuation Credit 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: 17

24 Chapter 1 Manage Line +Dr/-Cr PO Return to Supplier PO Return to Supplier Clearing - PO Return to Receiving Clearing PO Return to Receiving Inventory - Related Topics Cost Profiles, Default Cost Profiles, and Item Cost Profiles: Explained Inventory Lifecycle: Explained Inventory: Explained 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 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 and. Transactions captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to and. entries that and generate for the forward flow. entries that and generate for the return flow. 18

25 Chapter 1 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 Owner = AND-Fresno Contingent Owner = M1-Seattle Physical Flow Financial Flow Business Unit 2 Inventory Organization M2-LA 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 : Supplier Advanced Network Devices (AND-Fresno). 19

26 Chapter 1 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. 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 create accounting distributions for the forward and return shipment of goods. 20

27 Chapter 1 Manage Entries The following are accounting entries for the forward flow. AND-Fresno Supplier Physical Flow M1-Seattle Owner M1:PO Dr Clearing Cr M1:PO Delivery Dr Inventory Cr Clearing M1:In-Transit Shipment Dr In-Transit Cr Inventory M2: Trade InTransit Dr In-Transit Cr Clearing M1: Trade InTransit Issue Dr Receivable Cr In-Transit M2:In-Transit Dr Inspection Cr In-Transit M2: Trade Dr Clearing Cr Payable M2:In-Transit Delivery Dr Inventory Cr Inspection Ownership Change M2:Transfer to Owned Issue Dr Inv Offset Cr Inventory M2:Trade Recpt Dr Trade Clearing Cr IC M2-LA Owner M1:Trade Dr Trade Clearing Cr Physical Flow M2-LA 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. 21

28 Chapter 1 Manage Line +Dr/-Cr PO Clearing PO - PO Delivery Inventory PO Delivery Clearing - generates distributions under inventory organization M1-Seattle for the interorganization transfer from M1Seattle to M2-LA. Line +Dr/-Cr In-Transit Shipment InTransit In-Transit Shipment Inventory - Trade InTransit Issue Receivable Trade InTransit Issue InTransit - and generate distributions under inventory organization M2-LA for the interorganization transfer from M1-Seattle to M2-LA. Line +Dr/-Cr Trade Trade Clearing Trade InTransit - Trade InTransit Clearing Consumption Trade Clearing - 22

29 Chapter 1 Manage Line +Dr/-Cr In-Transit Inspection In-Transit InTransit - In-Transit Delivery Inventory In-Transit Delivery Inspection - and generate distributions under inventory organization M1-Seattle for the change of ownership from supplier AND-Fresno to M1-Seattle. Line +Dr/Cr Cost Element Trade Trade Clearing Trade - Trade Clearing - Issue Cost of Goods Sold Issue - and generate distributions under inventory organization M1-Seattle for the change of ownership from M1-Seattle to M2-LA. 23

30 Chapter 1 Manage Line +Dr/Cr Cost Element Trade Trade Clearing Trade - Trade Clearing - Issue Cost of Goods Sold Issue - and generate distributions under inventory organization M2-LA for the change of ownership from M1-Seattle to M2-LA. Line +Dr/Cr Cost Element Transfer to Owned Issue Inventory Offset Transfer to Owned Issue Inventory - Trade Trade Clearing 120 Trade Gross Profit Internal Markup Trade Clearing

31 Chapter 1 Manage Line +Dr/Cr Cost Element Transfer to Owned () Inventory Valuation Transfer to Owned () Inventory Valuation 20 Gross Profit Internal Markup Transfer to Owned () - 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 Inventory Lifecycle: Explained Inventory: Explained 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 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 and. entries that and generate for the forward flow. entries that and generate for the return flow. 25

32 Chapter 1 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 Owner = AND-Fresno Contingent Owner = M3-NY Physical Flow Financial Flow Inventory Organization M4-NJ Owner = AND-Fresno Contingent Owner = M4-NJ Ownership Change Inventory Organization M4-NJ Owner = M4-NJ Interfaced Transactions and receive the following transaction from Oracle Fusion Inventory: Consignment Purchase Order (PO) #0. 26

33 Chapter 1 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. 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 create accounting distributions for the forward and return shipment of goods. Entries The following are accounting entries for the forward flow. 27

34 Chapter 1 Manage The following diagram lists the accounting entries for the forward flow. M3:PO Dr Clearing Cr M3:PO Delivery Dr Inventory Cr Clearing Physical Flow M3:In-Transit Shipment Dr In-Transit Cr Inventory M4: Trade InTransit Dr In-Transit Cr Clearing M3-NY Owner M3: Trade InTransit Issue Dr Receivable Cr In-Transit AND-Fresno Supplier M4:In-Transit Dr Inspection Cr In-Transit M4: Trade Dr Clearing Cr Payable Physical Flow M4-NJ Owner Ownership Change M4:In-Transit Delivery Dr Inventory Cr Inspection M4:Transfer to Owned Issue Dr Inv Offset Cr 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 +Dr/-Cr PO Clearing 28

35 Chapter 1 Manage Line +Dr/-Cr PO - PO Delivery Inventory PO Delivery Clearing - The following table lists the distributions generated by under inventory organization M3-NY for the interorganization transfer from M3-NY to organization M4-NJ. Line +Dr/-Cr In-Transit Shipment InTransit In-Transit Shipment Inventory - Trade InTransit Issue Receivable Trade InTransit Issue InTransit - generates distributions under inventory organization M4-NJ for the interorganization transfer from M3-NY to M4-NJ. Line +Dr/-Cr Trade Clearing Trade Payable - Trade InTransit InTransit Trade InTransit Clearing - In-Transit Inspection 29

36 Chapter 1 Manage Line +Dr/-Cr In-Transit InTransit - In-Transit Delivery Inventory In-Transit Delivery Inspection - and generate distributions under inventory organization M3-NY for the change of ownership from supplier AND-Fresno to M3-NY. Line +Dr/Cr Cost Element Trade Trade Clearing Trade - Trade Clearing - Issue Interorganization Receivable Issue - and generate distributions under inventory organization M4-NJ for the change of ownership from M3-NY to M4-NJ. Line +Dr/Cr Cost Element Transfer to Owned Issue Inventory Offset Transfer to Owned Issue Inventory - 30

37 Chapter 1 Manage Line +Dr/Cr Cost Element Trade Trade Clearing Trade Interorganization Payable - Trade Clearing - Transfer to Owned () Inventory Valuation 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 Inventory Lifecycle: Explained Inventory: Explained 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 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. Transactions that flow from Oracle Fusion Inventory into and. 31

38 Chapter 1 Manage Transactions that flow from Oracle Fusion Supply Chain Financial Orchestration into and. entries that and generate for the forward flow. entries that 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 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 32

39 Chapter 1 Manage Interfaced Transactions 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. 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 create accounting distributions for the forward and return shipment of goods. 33

40 Chapter 1 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 Inv Offset Cr Inventory M2: Consignment Dr Cr 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 Owner = AND-Fresno Contingent Owner = M2-LA M2:PO Dr Clearing Cr M2:PO Delivery Dr Inventory Cr 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. 34

41 Chapter 1 Manage Line +Dr/-Cr PO Clearing PO - PO Delivery Inventory PO Delivery Clearing - and generate distributions under inventory organization M1-Seattle for the change of ownership from supplier AND-Fresno to M1-Seattle. Line +Dr/Cr Cost Element Trade Trade Clearing Trade - Trade clearing - Issue Cost of Goods Sold Issue - and generate distributions under inventory organization M2-LA for the change of ownership from M1-Seattle to M2-LA. Line +Dr/Cr Cost Element Transfer to Owned Issue Inventory Offset 35

42 Chapter 1 Manage Line +Dr/Cr Cost Element Transfer to Owned Issue Inventory - Consumption Consumption Clearing - Trade Trade Clearing 120 Trade Gross Profit Internal Markup Trade Clearing -120 Transfer to Owned () Inventory Valuation Transfer to Owned () Inventory Valuation 20 Gross Profit Internal Markup Transfer to Owned () - 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. 36

43 Chapter 1 AND-Fresno Supplier Ownership Change M1-Seattle Owner Physical Flow Ownership Change M2-LA Owner = AND-Fresno Contingent Owner = M2-LA Manage M2:Transfer to () Dr Inventory Cr 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 Cr Clearing M2:Trade Ret Dr IC Cr Trade Clearing M2: Ret Dr Trade Clearing Cr M2: Consumption Dr Clearing Cr M2:Transfer to 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 Clearing Cr Inventory Legend Inv = Inventory IC = COGS = Cost of Goods Sold Recpt = Ret = Return MAT = GP = Gross Profit OH = Overhead and generate distributions under inventory organization M2-LA for the change of ownership from M2-LA to M1-Seattle: Line +Dr/Cr Cost Element Transfer to Inventory 37

44 Chapter 1 Manage Line +Dr/Cr Cost Element Transfer to Inventory Offset - Trade Return 120 Trade Return Trade Clearing -120 Return Trade Clearing 120 Return - Return -20 Gross Profit Internal Markup Consumption Clearing Consumption - Transfer to Issue Inventory Valuation Transfer to Issue Inventory Valuation 20 Gross Profit Internal Markup Transfer to Issue Inventory Valuation 10 Overhead Transfer to Issue - Transfer to Issue -20 Gross Profit Internal Markup Transfer to Issue Cost Variance*

45 Chapter 1 Manage *Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance. and generate distributions under inventory organization M1-LA for the change of ownership from M1-LA to supplier AND-Fresno: Line +Dr/Cr Cost Element Trade Return Trade Return Trade Clearing - Return Trade Clearing Return - Return Return Cost of Goods Sold - generates distributions under inventory organization M2-LA for the return shipment from M2-LA to supplier AND-Fresno: Line +Dr/-Cr PO Return to Supplier PO Return to Supplier Clearing - PO Return to Receiving Clearing PO Return to Receiving Inventory - Related Topics Inventory Lifecycle: Explained 39

46 Chapter 1 Manage Inventory: Explained 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 40

47 Chapter 1 Manage Global Procurement Trade Flows This diagram 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. 41

48 Chapter 1 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 : 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 : CNY Rate : 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 : Purchase Order Document #: PO-GP001 Document Line #: 1 Document Line Detail: 1.1 Document Line Distribution #:

49 Chapter 1 Manage Item: SFO-CST_ASSET Quantity: UOM: Each : 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 terms are 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. 43

50 Chapter 1 Manage Terms Definitions and Rules price list Contains the basic list information and pricing attributes for items or product groups. 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 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. Profit Center Business Units and Bill-to Business Units: Explained Oracle Fusion and Oracle Fusion 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. uses the profit center business unit to process all inventory transactions. 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 44

51 Chapter 1 Manage 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 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. entries that and generate for the forward flow of a shipment from the supplier, through the intermediary distributor, to the final receiving organization. entries that and 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 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 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 create accounting distributions for the forward and return shipment of goods. Entries 45

52 Chapter 1 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. generates distributions under cost organization CO1 and inventory organization M1. The following table describes those distributions. 46

53 Chapter 1 Manage Line +Dr/Cr Cost Element Trade Trade Clearing 50 Trade Trade Clearing Overhead Overhead Rate Overhead Absorption -10 Overhead Overhead Rate Issue COGS 50 Issue COGS 10 Overhead Overhead Rate Issue -50 Issue -10 Overhead Overhead Rate Accounts Receivable Accounts Receivable Invoice Receivable Accounts Receivable Accounts Receivable Invoice Revenue - Supplier Invoice 50 Supplier Invoice Liability

54 Chapter 1 Manage generates distributions under business unit US West and inventory organization M2. generates distributions under cost organization CO2 and inventory organization M2. The following table describes those distributions. Line +Dr/Cr Cost Element Trade Trade Clearing Trade - 50 Sending Organization Cost 10 Overhead Sending Organization Cost 40 Gross Profit Internal Markup Trade Clearing - Accounts Payable Accounts Payable Invoice Accounts Payable Accounts Payable Invoice Liability - PO Receiving Inspection PO - PO Delivery Inventory Valuation 50 Sending Organization Cost PO Delivery Inventory Valuation 10 Overhead Sending Organization Cost 48

55 Chapter 1 Manage Line +Dr/Cr Cost Element PO Delivery Inventory Valuation 40 Gross Profit Internal Markup 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. 49

56 Chapter 1 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. generates distributions under cost organization CO2 and inventory organization M2. The following table describes those distributions. Line +Dr/Cr Cost Element Trade Return 50

57 Chapter 1 Manage Line +Dr/Cr Cost Element Trade Return Trade Clearing - Return Trade Clearing Return -50 Sending Organization Cost Return -10 Overhead Sending Organization Cost Return -40 Gross Profit Internal Markup Return to Receiving Receiving Inspection, Overhead, and Gross Profit Return to Receiving Inventory Valuation -50 Sending Organization Cost Return to Receiving Inventory Valuation -10 Overhead Sending Organization 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. generates distributions under cost organization CO1 and inventory organization M1. 51

58 Chapter 1 Manage The following table describes those distributions. Line +Dr/Cr Cost Element Trade Return 50 Trade Return Trade Clearing -50 Return Trade Clearing 50 Return Cost Variance* 10 Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance Return -50 Return -10 Overhead Overhead Rate Return 50 Return 10 Overhead Overhead Rate Return COGS -50 Return COGS -10 Overhead Overhead Rate Accounts Receivable Accounts Receivable Invoice Revenue Accounts Receivable Accounts Receivable Invoice Receivable - 52

59 Chapter 1 Manage Line +Dr/Cr Cost Element 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. 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. entries that and 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 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 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 create accounting distributions for the transfer of goods. Entries 53

60 Chapter 1 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) 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 $ generates distributions under cost organization CO1 and inventory organization M1. The following table describes the distributions: 54

61 Chapter 1 Manage Line +Dr/Cr Cost Element In-Transit Shipment 50 Current Cost In-Transit Shipment 10 Overhead Current Cost In-Transit Shipment Inventory -50 Current Cost In-Transit Shipment Inventory -10 Overhead Current Cost Issue Interorganization Receivable, Overhead, Gross Profit Issue -50 Current Cost Issue -10 Overhead Current Cost Issue Interorganization Gain/Loss -40 Gross Profit Internal Markup generates distributions under business unit US West and inventory organization M2. generates distributions under cost organization CO2 and inventory organization M2. The following table describes those distributions. Line +Dr/Cr Cost Element Trade Trade Clearing Trade Interorganization Payable - 50 Sending Organization Cost 10 Overhead Sending Organization Cost 55

62 Chapter 1 Manage Line +Dr/Cr Cost Element 40 Gross Profit Internal Markup Trade Clearing -, Overhead, Gross Profit Interorganization Receiving Inspection Interorganization - Interorganization Delivery Inventory 50 Sending Organization Cost Interorganization Delivery Inventory 10 Overhead Sending Organization Cost Interorganization Delivery Inventory 40 Gross Profit Internal Markup Interorganization Delivery Receiving Inspection -, Overhead, Gross Profit 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. The following is an example of accounting performed by Oracle Fusion 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. entries that and generate for the drop shipment flow from the selling organization to the customer of the buying organization. 56

63 Chapter 1 Manage entries that and 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 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 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 create accounting distributions for the transfer of goods. Entries 57

64 Chapter 1 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 generates distributions under cost organization CO1 and inventory organization M1. The following table describes the cost accounting entries. 58

65 Chapter 1 Manage Line +Dr/Cr Cost Element Sales Order Issue 50 Current Cost Sales Order Issue 10 Overhead Current Cost Sales Order Issue Inventory -50 Current Cost Sales Order Issue Inventory -10 Overhead Current Cost Issue Cost of Goods Sold 50 Current Cost Issue Cost of Goods Sold 10 Overhead Current Cost Issue -50 Current 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. generates distributions under cost organization CO2 and inventory organization M2. The following table describes the receipt and cost accounting entries. Line +Dr/Cr Cost Element Trade Trade Clearing 59

66 Chapter 1 Manage Line +Dr/Cr Cost Element Trade - 50 Sending Organization Cost 10 Overhead Sending Organization Cost 40 Gross Profit Internal Markup Trade Clearing - Split into three lines (, Overhead, and Gross Profit) Accounts Payable Accounts Payable Invoice Accounts Payable Accounts Payable Invoice Liability - Trade Sales Issue Deferred Cost of Goods Sold 50 Sending Organization Cost Trade Sales Issue Deferred Cost of Goods Sold 10 Overhead Sending Organization Cost Trade Sales Issue Deferred Cost of Goods Sold 40 Gross Profit Internal Markup Trade Sales Issue -50 Sending Organization Cost Trade Sales Issue -10 Overhead Sending Organization Cost Trade Sales Issue -40 Gross Profit Internal Markup 60

67 Chapter 1 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 Debit Memo Dr IC Liability $ Cr IC $ Customer Customer AR Credit 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 Credit 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. generates distributions under cost organization CO2 and inventory organization M2. The following table describes those receipt and cost accounting entries. 61

68 Chapter 1 Manage Line +Dr/Cr Cost Element Trade Return Trade Return Trade Clearing - Return Trade Clearing Split into three lines (, Overhead, and Gross Profit) Return -50 Sending Organization Cost Return -10 Overhead Sending Organization Cost Return -40 Gross Profit Internal Markup Accounts Payable Accounts Payable Debit Memo Liability Accounts Payable Accounts Payable Debit Memo - Trade Sales Return 50 Sending Organization Cost Trade Sales Return 10 Overhead Sending Organization Cost Trade Sales Return 40 Gross Profit Internal Markup Trade Sales Return Deferred RMA Gain/Loss -50 Sending Organization Cost Trade Sales Return Deferred RMA Gain/Loss -10 Overhead Sending Organization Cost 62

69 Chapter 1 Manage Line +Dr/Cr Cost Element Trade Sales Return Deferred RMA Gain/Loss -40 Gross Profit Internal Markup generates distributions under business unit CN and inventory organization M1. generates distributions under cost organization CO1 and inventory organization M1. The following table describes those accounting entries. Line +Dr/Cr Cost Element RMA Inventory* 50 Current Cost RMA Inventory 10 Overhead Current Cost RMA -50 Current Cost RMA -10 Overhead Current Cost Return 50 Current Cost Return 10 Overhead Current Cost Return Cost of Goods Sold -50 Current Cost Return Cost of Goods Sold -10 Overhead Current Cost Accounts Receivable Accounts Receivable Credit Memo Revenue Accounts Receivable Accounts Receivable Credit Memo Receivable - 63

70 Chapter 1 Manage * Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance. of Global Procurement Trade Transactions into Expense: Example Oracle Fusion and Oracle Fusion 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 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. entries that and generate for the forward flow of goods or services from the supplier, through the intermediary distributor, to the final receiving organization. entries that and 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 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 for transaction type Trade in-transit in cost organization CO1. Analysis and create accounting distributions for the forward and return shipment of goods. Entries 64

71 Chapter 1 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. generates distributions under cost organization CO1 and inventory organization M1. The following table describes those receipt and cost accounting entries. 65

72 Chapter 1 Manage Line +Dr/Cr Cost Element Trade Trade Clearing 50 Trade Trade Clearing Overhead Overhead Rate Overhead Absorption -10 Overhead Overhead Rate Issue COGS 50 Issue -50 Issue COGS 10 Overhead Overhead Rate Issue -10 Overhead Overhead Rate Accounts Receivable Accounts Receivable Invoice Receivable Accounts Receivable Accounts Receivable Invoice Revenue - Supplier Invoice 50 Supplier Invoice Liability

73 Chapter 1 Manage generates distributions under business unit US West and inventory organization M2. generates distributions under cost organization CO2 and inventory organization M2. The following table describes those receipt and cost accounting entries. Line +Dr/Cr Cost Element Trade Trade Clearing Trade - 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. 67

74 Chapter 1 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. generates distributions under cost organization CO2 and inventory organization M2. The following table describes those receipt and cost accounting entries. Line +Dr/Cr Cost Element Trade Return 68

75 Chapter 1 Manage Line +Dr/Cr Cost Element Trade Return Trade Clearing - Return Trade Clearing 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. generates distributions under cost organization CO1 and inventory organization M1. The following table describes those receipt and cost accounting entries. Line +Dr/Cr Cost Element Trade Return 50 Trade Return Trade Clearing -50 Return Trade Clearing 50 69

76 Chapter 1 Manage Line +Dr/Cr Cost Element Return Cost Variance* 10 Overhead Overhead Rate Return -50 Return Trade Clearing -10 Overhead Overhead Rate Return 50 Return 10 Overhead Overhead Rate Return Cost of Goods Sold -50 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. 70

77 Chapter 1 Manage 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 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 create accounting entries for the transfer of goods. 71

78 Chapter 1 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. generates distributions under cost organization CO1 and inventory organization M1. The following table describes the cost accounting entries. 72

79 Chapter 1 Manage Line +Dr/Cr Cost Element In-Transit Shipment 50 Current Cost In-Transit Shipment 10 Overhead Current Cost In-Transit Shipment Inventory -50 Current Cost In-Transit Shipment Inventory -10 Overhead Current Cost Issue Interorganization Receivable 60 + Overhead Current Cost Issue -50 Current Cost Issue -10 Overhead Current Cost generates distributions under business unit US West and inventory organization M2. generates distributions under cost organization CO2 and inventory organization M2. The following table describes the receipt and cost accounting entries. Line +Dr/Cr Cost Element Trade Trade Clearing 60 Sending Organization Cost Trade Interorganization Payable -60 Sending Organization Cost 50 Sending Organization Cost 10 Overhead Sending Organization Cost 73

80 Chapter 1 Manage Line +Dr/Cr Cost Element Trade Clearing Overhead Sending Organization Cost Interorganization Receiving Inspection 60 Sending Organization Cost Interorganization -60 Sending Organization Cost Interorganization Delivery Inventory 50 Sending Organization Cost Interorganization Delivery Inventory 10 Overhead Sending Organization Cost Interorganization Delivery Receiving Inspection Overhead Sending Organization Cost Reviewing Item Costs and for Global Procurement Trade Transactions: Explained and 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. 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. Results In the 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. 74

81 Chapter 1 Manage Access the Review Distributions page. On this page you can view accounting details of trade transactions by Reference Document Number. Related Topics Reviewing Item Costs: 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. 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-inclusive inventory valuation by Oracle Fusion 75

82 Chapter 1 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 Distributions Tax Calculations Acquisition Cost Processor Review 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. 76

83 Chapter 1 Manage Select the Transfer Costs to Cost Management process to import accounts payable transactions into and. 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-Inclusive Inventory Valuation by The Processor uses tax results generated by to calculate inventory acquisition costs including nonrecoverable taxes. Run the Processor on the Create Distributions page in the 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 Distributions page in the work area view results of the Processor: Distributions and journal entries for inventory transactions Inventory unit costs including taxes in the Cost Information tab Tax for a Simple Procurement Transaction: Example This example illustrates tax accounting performed by Oracle Fusion and Oracle Fusion 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% 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%). 77

84 Chapter 1 Manage 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 create accounting distributions when the goods are received and when the invoice is accounted. Tax Entries and generate the following accounting entries at the time of receipt: Line +Dr/Cr Cost Element 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 PO Delivery Inventory Valuation 1,200* PO Delivery Receiving Inspection -1,200* 78

85 Chapter 1 Manage *PO price plus nonrecoverable taxes A and B. Accounts Payable generates the following accounting entries for the supplier when invoice is created: Line +Dr/Cr Cost Element 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 generate the following accounting entries when invoice is accounted: Line +Dr/-Cr Invoice Price Receiving Inspection 25 Invoice Price Adjustment Tax B Rate Variance* -25 Acquisition Cost Adjustment Inventory Valuation** 25 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. 79

86 Chapter 1 Manage Tax for a Inventory Transaction: Example This example illustrates tax accounting performed by Oracle Fusion and Oracle Fusion 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 150. Analysis and 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 generate the following accounting entries at the time of receipt of consigned goods: Line +Dr/Cr Cost Element PO Clearing 1,000 PO Clearing 75 Tax Tax A DeliveryBased Nonrecoverable: 80

87 Chapter 1 Manage Line +Dr/Cr Cost Element 1,000 * 15% * 50% PO Clearing 125 Tax Tax B InvoiceBased Nonrecoverable: 1,000 * 25% * 50% PO -1,200 PO Delivery Inventory* 1,200 PO Delivery Clearing -1,200 *PO price plus nonrecoverable taxes A and B. and generate the following accounting entries at the time of change of status from consigned to owned stock: Line +Dr/Cr Cost Element Consumption 1,000 Consumption 75 Tax A DeliveryBased Nonrecoverable: 1,000 * 15% * 50% Consumption 125 Tax B InvoiceBased Nonrecoverable: 1,000 * 15% * 50% Consumption Clearing -1,200 Transfer to Owned Issue Inventory Offset 1,000 81

88 Chapter 1 Manage Line +Dr/Cr Cost Element Transfer to Owned Issue Inventory Offset 75 Nonrecoverable Tax Tax A DeliveryBased Nonrecoverable Transfer to Owned Issue Inventory Offset 125 Nonrecoverable Tax Tax B InvoiceBased Nonrecoverable Transfer to Owned Issue 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 1, Tax A DeliveryBased Nonrecoverable 125 Tax B InvoiceBased Nonrecoverable Trade Clearing -1,200 Transfer to Owned () Inventory Valuation 1,000 82

89 Chapter 1 Manage Line +Dr/Cr Cost Element Transfer to Owned () Inventory Valuation 75 Nonrecoverable Tax Tax A DeliveryBased Nonrecoverable Transfer to Owned () Inventory Valuation 125 Nonrecoverable Tax Tax B InvoiceBased Nonrecoverable 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 +Dr/-Cr 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. and generate the following accounting entries when invoice is accounted: Line +Dr/-Cr Invoice Price Adjustment Trade Clearing 25 Invoice Price Adjustment Tax B Rate Variance* -25 Acquisition Cost Adjustment Inventory Valuation** 25 Acquisition Cost Adjustment Trade Clearing

90 Chapter 1 Manage *Tax variance due to the difference between tax rates at time of delivery versus invoice. **Inventory acquisition cost adjustment for nonrecoverable tax B. Tax for a Purchase Order Retroactive Price Change: Example This example illustrates tax accounting performed by Oracle Fusion and Oracle Fusion 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%. Analysis and 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 generate the following accounting entries at the time of receipt of goods: Line +Dr/Cr Cost Element 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: 84

91 Chapter 1 Manage Line +Dr/Cr Cost Element 1,000 * 20% * 50% PO Receiving Inspection 150 Tax Tax B InvoiceBased Nonrecoverable: 1,000 * 30% * 50% PO Supplier -1,350 PO Delivery Inventory Valuation 1,250* 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: Line +Dr/Cr Cost Element 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 generate the following accounting entries after the retroactive purchase order price change: 85

92 Chapter 1 Manage Line +Dr/Cr Cost Element 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 -216 Acquisition Cost Adjustment Inventory Valuation 200** 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 +Dr/-Cr Accounts Payable Invoice Supplier 960 Item Price 120 *8 Accounts Payable Invoice Supplier 96 Tax A DeliveryBased Nonrecoverable: 120 * 8 * 20% * 50% 86

93 Chapter 1 Manage Line +Dr/-Cr 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: Line +Dr/-Cr 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 and generate the following accounting entries for the differential invoice: 87

94 Chapter 1 Manage Line +Dr/-Cr Invoice Price Adjustment Receiving Inspection 50 Invoice Price Adjustment Invoice Price Adjustment -40 Invoice Price Adjustment Tax Invoice Price Adjustment -10* Acquisition Cost Adjustment Inventory Valuation 50** 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. FAQs for Record and Review 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. 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. 88

95 Chapter 1 Manage 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. 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. 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) 89

96 Chapter 1 Manage 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 Pane: Explained Business Intelligence Catalog: Explained SCM Subject Areas in Oracle Transactional Business Intelligence: Explained 90

97 2 Manage Manage : Overview The Manage 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 figure depicts the activities of cost accountants within the Manage business process. 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. 91