Oracle Fusion Cloud SCM

Oracle Fusion

Cloud SCM

Using Supply Chain Cost

Management

24C

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

24C

F97566-02

Author: Venkat Iyer

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Contents

Get Help ................................................................................................................................ i

Introduction

Overview of Cost Management ................................................................................................................................................... 1

Supported Cost Methods .............................................................................................................................................................. 1

Time Zones and Dates .................................................................................................................................................................. 2

Overview of Importing Cost Data ............................................................................................................................................... 7

Web Services You Can Use to Integrate Cost Management ................................................................................................. 8

Receipt Accounting

Overview of Receipt Accounting ................................................................................................................................................ 11

Receipt Accounting Infolets ........................................................................................................................................................ 12

Considerations for Accrual Settings ......................................................................................................................................... 13

Receipt Accounting Tasks and Accounting Events ............................................................................................................... 13

Receipt Accrual, Reconciliation, and Clearing ........................................................................................................................ 16

Receipt Accrual Clearing Rules .................................................................................................................................................. 17

Receipt Accounting Cutoff Dates .............................................................................................................................................. 22

Overview of Accrual Reversal .................................................................................................................................................... 23

Period End Uninvoiced Receipt Accrual .................................................................................................................................. 24

How You Close a Receipt Accounting Period ......................................................................................................................... 32

Cost Management for Internal Material Transfers ................................................................................................................ 34

Receipt Accounting for Outside Processing ........................................................................................................................... 35

Receipt Accounting for Manual Procurement of Items for Work Orders ......................................................................... 36

Receipt Accounting for Drop Shipments ................................................................................................................................ 36

Global Procurement ..................................................................................................................................................................... 38

Receipt Accounting Examples .................................................................................................................................................. 44

Reports and Analytics for Receipt Accounting .................................................................................................................... 123

FAQ for Receipt Accounting Reports ..................................................................................................................................... 125

FAQs for Receipt Accounting ................................................................................................................................................... 126

Cost Planning

131

Cost Planning Process ................................................................................................................................................................ 131

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Supply Chain Cost Rollup .......................................................................................................................................................... 131

Cost Scenario ............................................................................................................................................................................... 136

Standard Costs ............................................................................................................................................................................ 146

Resource Rates ............................................................................................................................................................................ 150

Overhead Rates ............................................................................................................................................................................ 151

Cost Rollup ................................................................................................................................................................................... 154

Cost Analysis ............................................................................................................................................................................... 188

Publish Costs ............................................................................................................................................................................... 189

FAQs for Cost Planning ............................................................................................................................................................. 190

Cost Accounting

195

Overview of Cost Accounting .................................................................................................................................................. 195

Cost Accounting Infolets ........................................................................................................................................................... 196

Scheduled Processes for Cost Accounting ........................................................................................................................... 197

Cost Accounting Process .......................................................................................................................................................... 199

Cost Accounting Periods .......................................................................................................................................................... 208

Cost Processing ........................................................................................................................................................................... 213

Internal Material Transfers ....................................................................................................................................................... 252

Lot Transactions ......................................................................................................................................................................... 264

Cost of Goods Sold and Gross Margin ................................................................................................................................. 270

Global Procurement ................................................................................................................................................................... 277

Cost Accounting Examples ...................................................................................................................................................... 297

Cost Management for Project Driven Supply Chain .......................................................................................................... 374

Reports and Analytics for Cost Accounting ......................................................................................................................... 389

FAQs for Cost Accounting Reports ........................................................................................................................................ 397

Review Inventory Valuation ..................................................................................................................................................... 399

FAQs for Cost Accounting ........................................................................................................................................................ 401

Landed Cost Management

411

Overview of Landed Cost Management ................................................................................................................................ 411

Landed Cost Management Tasks ............................................................................................................................................ 412

Trade Operations ........................................................................................................................................................................ 413

Landed Cost Charge Lines ....................................................................................................................................................... 416

Trade Operation Statuses ......................................................................................................................................................... 418

Trade Operation Templates ...................................................................................................................................................... 419

Create Estimate Landed Costs ................................................................................................................................................ 419

How You Enable an Invoice for Landed Cost Processing ................................................................................................. 420

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Create Actual Landed Costs ..................................................................................................................................................... 421

Charge Invoice Association Status ......................................................................................................................................... 422

Upload Trade Operation Charges in a Spreadsheet ........................................................................................................... 423

Analyze Landed Costs .............................................................................................................................................................. 423

FAQs for Landed Cost Management ..................................................................................................................................... 424

Appendix: Events and Cost Accounting Distributions

427

Overview of Cost Accounting Distributions ......................................................................................................................... 427

Inventory Transaction Events .................................................................................................................................................. 427

Purchasing Events ..................................................................................................................................................................... 448

Sales Events ................................................................................................................................................................................ 459

Work in Process Events ........................................................................................................................................................... 460

Cost Adjustment Events .......................................................................................................................................................... 464

Consigned Material Events ..................................................................................................................................................... 466

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

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Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

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Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 1

Introduction

1 Introduction

Overview of Cost Management

Cost Management is a cost accounting solution that helps companies to effectively manage their product costing,

manufacturing, and inventory accounting business flows. The solution enables companies to maintain multiple cost

books and financial ledgers to better meet external regulatory reporting and internal management reporting needs.

It reduces manual cost maintenance tasks by providing automated rules-based engines and efficient cost processors

tuned for high volume transaction environments.

Cost Management and related features are covered in the documentation listed in the following table.

Functional Area Documentation

Cost accounting

See the Cost Accounting chapter of the Using Supply Chain Cost Management guide.

Receipt accounting

See the Receipt Accounting chapter of the Using Supply Chain Cost Management guide.

Landed cost management

See the Landed Costs chapter of the Using Supply Chain Cost Management guide.

Intercompany transactions and

intracompany flows

See the Using Supply Chain Financial Orchestration guide.

Subledger accounting for the French

market

See the Implementing Subledger Accounting for France chapter of the Implementing Manufacturing

and Supply Chain Materials Management guide.

Fiscal document capture for the Brazilian

market

See the Using Fiscal Document Capture guide.

Reports and analytics

See the Creating and Administering Analytics and Reports for SCM guide.

Related Topics

•

Overview of Cost Accounting

•

Overview of Subledger Accounting for France

Supported Cost Methods

The cost methods used to cost your transactions are configured using the Manage Cost Profiles task in the Setup and

Maintenance work area. You can use multiple cost methods in your cost profiles.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 1

Introduction

This table describes the supported cost methods.

Cost Method Description

Standard

Inventory is valued at a predetermined standard value. You track variances for the difference between

the standard cost and the actual transaction cost, and you periodically update the standard cost to

bring it in line with actual costs.

Actual

Tracks the actual cost of each receipt into inventory. When depleting inventory, the processor identifies

the receipts that are consumed to satisfy the depletion, and assigns the associated receipt costs to the

depletion.

Perpetual Average

The average cost of an item, derived by continually averaging its valuation after each incoming

transaction. The average cost of an item is the sum of the debits and credits in the inventory general

ledger balance, divided by the on-hand quantity.

Periodic Average

The periodic average cost method values inventory by including all the expenses and invoices for a

period and other adjustments that are known only at the end of the period. The periodic average cost

of an item is the average cost for the item in a given period for a cost organization, cost book, and

valuation unit combination.

Time Zones and Dates

Time Zone Settings

The application takes into consideration these time zones:

• Server time zone: The time zone configured on the application server. In the case of cloud servers, this time

zone is set as Coordinated Universal Time (UTC).

• Legal entity time zone: The time zone in which the organization's legal entity exists. This is defined as part of

the legal address linked to the legal entity. If you want the transactions to be accounted for in this time zone,

you must select the legal entity time zone check box in the legal entity definition.

• User preferred time zone: The time zone defined in the user preferences. This is the user's preferred time zone

for entering dates on UI and for displaying dates on the UI and reports. If not configured, this time zone defaults

to the server time zone.

Note: The user preferred time zone is only considered for entering and displaying dates on the UI and reports. This

time zone isn't used for determining the various accounting dates.

The transaction date of inventory and manufacturing transactions is one of the key inputs in determining the

accounting date and the period in which the transactions are recorded. The various accounting dates are defined or

derived in the application depending on the time zones enabled and configured. By default, the server time zone is

used. However, if the legal entity time zone is enabled, then this has an impact on how the dates are recorded and how

the various accounting dates are determined.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 1

Introduction

Related Topics

•

Set Up Legal Entity Time Zones

Impact of Legal Entity Time Zone on Accounting Dates

As mentioned earlier, the server time zone is used by default to record and derive the various accounting dates.

However, when the legal entity time zone is enabled, it plays an important role in how the accounting dates are recorded

and derived.

The table here lists time zone used for recording and deriving the accounting dates depending on whether the legal

entity time zone is disabled or enabled.

Date Legal Entity Time Zone Enabled

Cost date

The cost date is derived from the transaction date. The transaction date is converted into the legal

entity time zone.

Accounting date or general ledger date

This date is derived from the cost date. As the cost date is already in the legal entity time zone it

ensures that the transactions are accounted in the correct general ledger periods.

Cost cutoff date

The date entered by the user is in the legal entity time zone.

Cost adjustment date

The date entered by the user is in the legal entity time zone.

Transaction overhead effective date

The date entered by the user is in the legal entity time zone.

Cost scenario effective date

The date entered by the user is in the legal entity time zone. It's the effective start date for standard

costs, resource rates, and overhead rates after publishing the scenario.

Cost roll up date

For regular items, the work definition effective dates are converted into the legal entity time zone.

For configured items, the work order start dates are converted into the legal entity time zone.

Currency conversion

This uses the transaction date. The transaction date is converted into the legal entity time zone.

Period end validations

The transaction dates are converted into the legal entity time zone to determine if they should be

considered for period end validations.

Related Topics

•

Cost Cutoff Dates

•

Cost Accounting Period Statuses and Transaction Accounting

•

Is the accounting date of a transaction always the same as the costing date?

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 1

Introduction

Example of How Transactions are Costed in the Legal Entity Time

Zone

Let's consider that these time zones are configured:

• Server time zone: UTC

• Legal entity time zone: PDT (UTC -7:00)

• User preferred time zone: IST ( UTC +5:30)

Scenario

These transactions are entered in the application. The user entered date in this table is in the user preferred time zone,

which is IST (UTC +5:30). However, the dates are stored in the application in the server time zone, which is UTC.

Transaction Type User Entered Date Stored Date Quantity

Tx #1

Misc Receipt

8/1/16 10:30:00 AM

8/1/16 5:00:00 AM

100 EA

Tx #2

Misc Issue

8/15/16 11:00:00 AM

8/15/16 5:30:00 AM

- 20 EA

Tx #3

Shipment

8/30/16 05:00:00 PM

8/30/16 11:30:00 AM

- 30 EA

Tx #4

PO Receipt

9/1/16 08:00:00 AM

9/1/16 2:30 AM

70 EA

Tx #5

Misc Issue

9/3/16 11:00:00 AM

9/3/16 5:30:00 AM

- 10 EA

Also, consider the standard costs as listed here.

Start Date End Date Unit Cost

7/1/16

7/31/16

$1.00

8/1/16

8/31/16

$3.00

9/1/16

9/30/16

$2.00

Analysis

If we consider the cost cutoff as 8/31/2016 11:59:59 PM (PDT), the transactions are costed as listed here. Here, the

transaction date is stored in the application in the server time zone, which is UTC, as also shown in the earlier table. The

cost date or general ledger date is in the legal entity time zone, which is PDT (UTC -7:00).

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 1

Introduction

Transaction Stored Date Cost Date/GL

Date

Quantity Cost Inventory Value GL Period

Tx #1

8/1/16 5:00:00 AM

7/31/16 9:00:00

100 EA

$1.00

$100.00

July-16

Cost Revalue

8/1/16 00:00:00

100 EA

$(3.00 - 1.00)

$200.00

August-16

Tx #2

8/15/16 5:30:00

8/14/16 9:30:00

- 20 EA

$3.00

- $60.00

August-16

Tx #3

8/30/16 11:30:00

8/30/16 3:30:00

- 30 EA

$3.00

- $90.00

August-16

Tx #4

9/1/16 2:30 AM

8/31/16 6:30 PM

70 EA

$3.00

$210.00

August-16

Tx #5

9/3/16 5:30:00 AM

9/2/16 9:30:00 PM

- 10 EA

As you can see, the last transaction isn't accounted for because the cost date is beyond the cost cutoff date in the legal

entity time zone.

The inventory value is as listed here.

Period Date Quantity Value

July-16

7/31/16

100

$100.00

August-16

8/31/16

120

$360.00

September-16

9/30/16

Date Display in Cost and Receipt Accounting UI

The user preferred time zone is used to display the date and time on the application UI. However, the application

displays some dates and times in the server time zone and some in the legal entity time zone, if enabled.

This table lists the various dates and the corresponding time zone in which they're displayed across the UI screens in the

cost planning functional area, when the legal entity time zone is enabled.

UI Screen Date Time Zone

Manage Cost Scenarios

Effective Date

Legal entity time zone

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 1

Introduction

UI Screen Date Time Zone

Manage Standard Costs

Effective Start Date, Effective End Date

Legal entity time zone

Manage Resource Rates

Effective Start Date, Effective End Date

Legal entity time zone

Manage Overhead Rates

Effective Start Date, Effective End Date

Legal entity time zone

View Rolled-Up Costs

Effective Date

Legal entity time zone

View Scenario Exceptions

Effective Date

Legal entity time zone

Compare Standard Costs

Effective Start Date

Legal entity time zone

This table lists the various dates and the corresponding time zone in which they're displayed across the UI screens in the

cost accounting functional area, when the legal entity time zone is enabled.

UI Screen Date Time Zone

Review Item Costs

Cost As-of Date

Legal entity time zone

Review Item Costs

Transaction Date

User preferred time zone

Analyze Standard Purchase Cost Variances

From Date, To Date

Server time zone

Manage Accounting Overhead Rules

Start Date, End Date

Legal entity time zone

Manage Cost Adjustment

Adjustment Date, Cost Date

Legal entity time zone

Manage Cost Adjustment

Transaction Date

User preferred time zone

Create Cost Accounting Distributions

Cutoff Date

Legal entity time zone

Create Cost Accounting Distributions

Last Run Date

User preferred time zone

Manage Cost Accounting Periods

From Date, To Date

Legal entity time zone

Review Cost Accounting Processes

Transaction Date

User preferred time zone

Review Work Order Costs

Released Date, Completion Date, Closed Date

Legal entity time zone

Review Cost Accounting Distributions

Transaction Date

User preferred time zone

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 1

Introduction

UI Screen Date Time Zone

Review Cost Accounting Distributions

Costed Date

Legal entity time zone

Review Inventory Valuation

Cost Date

Legal entity time zone

Create Accounting

End Date

Legal entity time zone

The transaction dates for these transactions in cost accounting are recorded in the legal entity time zone. The user

preferred time zone is ignored and the transaction dates are displayed time zone is the legal entity time zone.

• Standard cost revaluation transaction

• WIP revaluation transaction

• Resource rate revaluation transaction

• Cost adjustment transaction

This table lists the various dates and the corresponding time zone in which they're displayed across the UI screens in the

receipt accounting functional area, when the legal entity time zone is enabled.

UI Screen Date Time Zone

Adjust Receipt Accrual Balances

Last Activity Date

Legal entity time zone

Match Receipt Accruals

From Date, To Date

Legal entity time zone

Audit Receipt Accrual Clearing Balances

Transaction Date

User preferred time zone

Create Accounting

End Date

Legal entity time zone

The transaction dates for these transactions in receipt accounting are recorded in the legal entity time zone. The user

preferred time zone is ignored and the transaction dates are displayed time zone is the legal entity time zone.

• AP invoices (transaction date is based on the accounting date on the invoice)

• Manual accrual clearing

• Accrual reversal

• Expense adjustment (due to accrual clearing, reversal)

Overview of Importing Cost Data

You can use file-based data import to integrate Cost Management with external systems. Use the Standard Costs file-

based data import template to import standard costs from external sources into the Cost Accounting work area. You can

view the imported cost data on the Manage Standard Costs page. For more information on file-based data import, see

the chapter on Standard Costs Import in the File Based Data Import guide for Oracle Fusion Cloud SCM.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 1

Introduction

Related Topics

•

Import Standard Costs Using File-Based Data Import

Web Services You Can Use to Integrate Cost

Management

Oracle Fusion Cloud SCM provides REST web services you can use to access data stored in Oracle Cloud SCM and to

construct integrations to other systems. The following table describes some of the REST web services provided for Cost

Management integration tasks.

Task Description REST Service Name

Retrieve receipt transaction costs

Retrieve item cost details of purchase order and

internal receipt transactions, by calling a REST

web service. The retrieved receipt transaction

cost details can be used in conjunction with

cloud or third-party applications to create

analytical reports, or as inputs for other REST

web services, such as the Cost Adjustments

REST web service.

Receipt Costs

Manage cost accounting overhead rules

Create, update, or delete Cost Accounting

overhead rules by calling a REST web service.

You can create a new overhead rule, or update

an existing overhead rule, by specifying rule

details such as rule name, transaction type,

item category, effectivity date, and overhead

rate.

Overhead Rules for Cost Accounting

Create receipt and layer cost adjustments

Create receipt cost adjustments and cost

layer adjustments using a REST web service.

This capability is useful when you need to

create cost adjustments for a large number of

previously received items. You can, for example,

adjust the receipt cost of items to factor in the

rebated amounts of supplier rebates. Using

this REST service you can adjust receipt costs,

receipts with zero cost, and receipt layer costs. It

can be used in conjunction with other services,

such as the Receipt Costs REST service.

Cost Adjustments

Manage landed cost trade operations

Create, update, or delete landed cost trade

operations and associated charges using a

REST web service. Automatically create trade

operations when integrating with an external

system or when dealing with a high volume of

trade operations or a high volume of charges.

Landed Cost Trade Operations

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 1

Introduction

For the full list of REST web services available for Cost Management, see the guide REST API for Oracle Fusion Cloud

SCM.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 1

Introduction

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

2 Receipt Accounting

Overview of Receipt Accounting

Oracle Receipt Accounting is used to create, manage, review, and audit purchase accruals. It includes the following

features:

• Create Receipt Accounting Distributions. Create accounting distributions for receipts of accrue at receipt

purchase orders.

• Review Receipt Accounting Distributions. Review the accrual accounting distributions created by receipt

accounting for purchase order transactions, such as receipts, returns, corrections, and matches of uninvoiced

receipts to purchase orders. You can also review the accounting distributions created by receipt accounting for

deliveries that are expensed rather than stored as inventory.

• Manage Accrual Clearing Rules. Define business rules for the automatic clearing of balances in the purchase

order accrual accounts, set the conditions for each rule, and set the order in which rules must be applied.

• Match Receipt Accruals. Match purchase order receipt accruals with invoices from the payables application.

• Clear Receipt Accrual Balances. Automatic clearing of accrual balances based on predefined rules.

• Review Receipt Accrual Clearing Balances. Review the General Ledger accounted accrual balances on a periodic

basis.

• Adjust Accrual Clearing Balances. Review uncleared accrual balances and perform adjustments. Manually

adjust or clear accrual balances to inventory valuation for accounts not covered by automatic clearing rules, or

reverse such clearing adjustments.

• Run reports and analytics for Receipt Accounting. The reports available include the following:

◦

Accrual Clearing

◦

Accrual Reconciliation

◦

Uninvoiced Receipt Accrual

◦

Receipt Accounting Period Close

◦

Landed Costs

Note: You can run the Create Receipt Accounting Distributions, Match Receipt Accruals, and Match Receipt Accruals

process jobs for either all your business units or for a selected business unit. If you want to trigger these jobs using the

ERP integration service, ESS web service, or job sets then use the following job definitions:

Job Name ESS Job Definition

Create Receipt Accounting Distributions

ReceiptAccrualProcessMasterEssJobDef

Match Receipt Accrual

MatchReceiptAccrualMasterEssJobDef

Clear Receipt Accruals

AccrualClearRulesMasterEssJobDef

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Related Topics

•

Receipt Accrual, Reconciliation, and Clearing

•

Accrual Reversals

Receipt Accounting Infolets

The Overview page of the Receipt Accounting work area displays some infolets. These infolets are visible by default. You

can configure which infolets should be displayed on the page from My Infolets.

You can set the View By option on the page to view the information for a specific business unit or for all the business

units that you have access to. Also, if you have access to more than one business unit, then you can flip the infolet to

view the corresponding information for all the business units you have access to.

The table lists the infolets available in the Receipt Accounting work area.

Infolet Description

Accrual Write Off

The accrual amount that has been written off in the last seven days.

Charge Line Status

The count and status of trade operation charge lines for all the open trade operations. It provides a

quick actionable view to take necessary actions on the charge lines.

Cost of Receipts

The material cost from purchase orders, tax, landed cost charges, and payables variance for receipts in

the last seven days.

Exceptions

The number of exceptions logged by the Receipt Accounting processor.

Open Charge Invoice Associations

The count and status of the landed cost charge invoices that aren't fully associated to a trade operation

charge line.

Recent Processes

The recent processes run and their corresponding status. You can view the information for the last 25

processes that were run.

Trade Operations

The count of open trade operations.

Unmatched Accrual Balances

The open accrual balance for receipts corresponding to purchase order schedules set to accrue on

receipt. The infolet shows the accounted accrual balance as per Payables and Receipt Accounting

allowing you to monitor for any differences between them.

You can choose to not list and display one or more of the infolets on the Overview page by setting the profile option

code ORA_CMR_HIDE_INFOLETS on the Manage Receipt Accounting Profile Options page in the Setup and Maintenance

work area.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Related Topics

•

Manage Cost Accounting Profile Options

Considerations for Accrual Settings

The key policy decision that you need to make for receipt accounting is whether or not you want to accrue at receipt.

This table outlines the points to consider for each accrual option.

Accrual Setting Points to Consider

Accrue at Receipt

• Purchases are accrued at receipt. An accrued liability account is credited when the goods are

received.

• Optional for expense destination purchases, and mandatory for inventory purchases.

• More accounting and more reconciliation than when accruing at period end. The receipt

accounting application provides tools to help reconcile the accrued liability clearing account.

• Accounting is more timely than when accruing at period end.

Accrue at Period End

• The accounts payable account is credited when the supplier invoice is processed in accounts

payable. Receipt accounting has a function to accrue uninvoiced receipts at period end.

• Less accounting and less reconciliation than when accruing at receipt.

• Accounting may be less timely than when accrued at receipt, but will be accrued by period end.

The accrual options are configured in the Procurement offering. For more information on configuring the accrual

options, see the related topics section.

Related Topics

•

Receipt Accrual, Reconciliation, and Clearing

•

Guidelines for Common Options for Payables and Procurement

•

How Purchase Order Schedule Defaults Work

Receipt Accounting Tasks and Accounting Events

Use Receipt Accounting 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

Receipt 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.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Receipt Accounting Tasks and Accounting Events

The following table describes the Receipt Accounting tasks and processes to support receipt, inventory, and

manufacturing accounting, and the sequence in which the tasks should be executed.

Task Navigation Resulting Events

Transfer receipt transactions and tax

determinants from Receiving to Receipt

Accounting.

Scheduled Processes work area > Schedule New

Process > Transfer Transactions from Receiving

to Costing

• All receiving transactions are transferred

from the Receiving application to the

Receipt Accounting application, along

with the tax determinants and related

information that's present on receipts.

• Receipt transactions are then ready in the

Receipt Accounting application for further

processing.

Transfer accounts payable transactions from

Payables to Receipt Accounting.

Scheduled Processes work area > Schedule New

Process > Transfer Costs to Cost Management

• All payable invoices that are accounted

are transferred from the Accounts Payable

application to the Receipt Accounting

application.

• Payable Invoices are then ready in the

Receipt Accounting application for further

processing.

Create accounting distributions for receipts of

accrue at receipt purchase orders.

Receipt Accounting Work Area > Create Receipt

Accounting Distributions

• Accruals for all types of purchases

• Accrual 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

• Accounting 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.

• Accounting distributions for invoice

variances for IPV, ERV, TRV, TERV, and

TIPV

• Staging of variances into receiving

inspection for subsequent wash by

the inventory and expense revaluation

processes

• Accounting 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

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Task Navigation Resulting Events

budgetary control, encumbrance

accounting, or both. Budgetary control

and encumbrance accounting are optional

tasks, and are enabled in Financials.

Create period end uninvoiced receipt accruals.

Receipt Accounting work area > Create

Uninvoiced Receipt Accruals

• Provisional expense accruals for

purchases not marked for accrual at

receipt

Create subledger accounting.

Receipt Accounting work area > Create

Accounting

• Journal entries for receipt accounting

distributions

Review accrual distributions and tax

calculations.

Receipt Accounting work area > Review Receipt

Accounting Distributions

• Review accrual distributions and tax

calculations.

Clear receipt accruals.

Receipt Accounting work area > Clear Receipt

Accrual Balances

• 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

Generate and view reconciliation reports.

Scheduled Processes work area > Schedule New

Process > Accrual Reconciliation report

Scheduled Processes work area > Scheduled

Processes > Accrual Clearing report

• Accrual Reconciliation report

• Accrual Clearing report

Create receipt accounting distributions.

Receipt Accounting work area > Create Receipt

Accounting Distributions

• Accounting distributions for cleared

accrual balances

• Revaluation and expense adjustment

entries for invoice variances or accrual

clearing events that modify acquisition

costs for purchases

Review uncleared accrual balances and perform

adjustments.

Receipt Accounting work area > Adjust Receipt

Accrual 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

Match purchase order receipt accruals with

invoices from payables.

Receipt Accounting work area > Match Receipt

Accruals

• Manual reconciliation of accrual balances

• Review and audit accrual balances that

were final accounted.

Review accrual clearing balances.

Receipt Accounting work area > Audit Receipt

Accrual Clearing Balances

• Audit the General Ledger accounted

accrual balances on a periodic basis.

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Related Topics

•

Receipt Accrual, Reconciliation, and Clearing

•

What is the recommended sequence for scheduling of receipt accounting processes?

•

Accrual Reversals

Receipt Accrual, Reconciliation, and Clearing

When goods are interfaced from Oracle Receiving to Oracle Receipt Accounting, Receipt Accounting 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.

Receipt Accounting 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.

Receipt Accrual 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 hasn't 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 hasn't yet been processed; or if the Account Payable

invoice has been processed, any remaining balance must be resolved and cleared. Receipt Accounting provides tools to

help with this reconciliation.

Receipt Accrual Reconciliation and Clearing

Some of the remaining balance in the accrued liability account can be automatically cleared by Receipt Accounting

and Cost Accounting 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.

You can manually clear receipt accrual balances from the Adjust Receipt Accrual Balances page for purchases without

receipts but with invoices matched to the order:

• You’ve matched an invoice incorrectly to a wrong PO distribution for which receipt didn't get created in the

period.

• You’ve open invoices for a receipt that was corrected or returned and the PO is closed.

This helps you to reconcile and clear out old accrual accounts in accounts payable for orders that are closed or no

further activity is expected in the period.

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Note:

• You can clear out old accruals in accounts payables without any receipts for orders that are matched to order

only.

• Use Accrual Clearing Reason as the accounting source to derive the relevant account for the Receiving

Inspection account.

• If the accrual balance is cleared assuming no further receipts, and subsequently if receipts are recorded, you

must manually reverse the accrual clearing for the accrual account to reconcile.

Example 1: Assume that the purchase order receipt is for 100 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

100 units at $6 each; the application debits the accrued liability account in the amount of $600. The difference of $100

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 100. The processor

doesn't always know if that's 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 Receipt Accrual 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 Receipt Accounting.

Receipt Accrual Clearing Rules

Define accrual clearing rules to clear accrual balances automatically. Accrual 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 Receipt Accrual Balances 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.

Note: You must ensure that the corresponding general ledger period is open before running the Clear Receipt Accrual

Balances process. If the period is closed, then the accrual clearing is moved to the next open period. If no other period

is open, then the event will fail with error. Before closing the general ledger period, you must ensure that all the events

in Receipt Accounting are fully accounted.

Predefined Attributes

The following table describes the attributes that are available in the Accrual Line tree in the Conditions browser:

Attribute Name Description

Purchase Order Distribution Identifier

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

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Attribute Name Description

transaction is at the lowest level of purchase order distribution. The accrual and charge account codes

are defined at this level. Invoices are matched and accrual is offset at the PO distribution level.

This attribute represents the PO distribution ID on the PO document.

Percentage Over-Invoiced

At each purchase order distribution level, receipt accounting tracks the original ordered quantity, total

received quantity, and total invoiced quantity.

Percentage Over-Invoiced Quantity represents the condition: IF (Net Rct qty - Invoice Qty)

< 0 then ABS(NetRecptQty - InvoiceQty)/ NetRecptQty

Percentage Uninvoiced

At each purchase order distribution level, receipt accounting tracks the original ordered quantity, total

received quantity, and total invoiced quantity.

Percentage Uninvoiced Quantity represents the condition: IF (Net Rct qty - Invoice Qty) >

0 then ABS(NetRecptQty - InvoiceQty)/ NetRecptQty

PO Status

Status of the purchase order document. If the PO status is Finally closed, then it's treated as Closed.

You can define the accrual clearing rules based on the PO Status.

PO Match Option

Invoice match option defined on the purchase order schedule. It can be PO or Receipt.

Invoice Age

Days or time since the latest invoice was recorded for a purchase order distribution.

Receipt 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)

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 * PO Price

Accrual Clear Amount

Value of balance in an accrual account for a PO distribution. Net of accrual amount credited in Receipt

Accounting and that debited in Accounts Payable. To clear debit balance enter a positive number and

for credit balance enter a negative number.

Total Invoice Accrual Amount

Absolute value of balance (net of invoices and debit memos) in an accrual account in Payables

Subledger for a PO distribution.

Total Receipt Accrual Amount

Absolute value of balance (net of receipts, corrections and returns) in an accrual account in Receipt

Accounting Subledger for a PO distribution.

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Attribute Name Description

PO Distribution Number

This attribute represents the PO distribution number on the PO document, such as 1, 2, and so on, and

is different from the Purchase Order Distribution Identifier.

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.

Accrual Amount Difference

Difference in accrual amount credited in Receipt Accounting and that debited in Accounts Payable.

Purchase Order Schedule Identifier

The identifier of the PO Schedule that uniquely identifies a PO Schedule number of PO.

Invoice Accrual Amount

Accrual amount debited on invoice in Accounts Payable for the item price.

Invoice Nonrecoverable Tax Amount

Accrual amount debited on invoice in Accounts Payable for the nonrecoverable tax.

PO Line Number

Line number on the Purchase Order Line.

Nonrecoverable Tax Amount Difference

Difference in the nonrecoverable tax amounts booked in Receipt Accounting and Accounts Payable for

a PO Distribution.

Inventory Organization Code

Code that uniquely identifies a Inventory Organization.

PO Total Amount

Total amount on the Purchase Order.

PO Number

Unique identifier for the Purchase Order.

PO Quantity

Quantity ordered from the Purchase Order.

Purchase Basis

The basis on which the purchase is done.

Received Accrual Amount

Amount received for PO distribution.

Received Nonrecoverable Tax Amount

Nonrecoverable tax in the amount received for PO distribution.

PO Shipment Number

Schedule in purchase order indicating place of delivery.

Invoice Quantity

Quantity invoiced for PO Distribution.

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Attribute Name Description

Invoice Recoverable Tax Amount

Recoverable tax amount on the invoice for a PO distribution.

Received Quantity

Quantity received for a PO distribution.

Received Recoverable Tax Amount

Recoverable tax amount on the receipt for a PO distribution.

Procurement Business Unit

Business unit performing procurement business function.

Purchase Order - Deliver to Location

Delivery location on the purchase order schedule indicating place of delivery.

Profit Center Business Unit

Indicates the business unit which serves as the profit center.

PO Destination Type

Destination type on the PO which can be inventory, expense, manufacturing or drop ship.

Item Description

Description of the item 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 PO Price Ordered Quantity

AS54888

Raw Materials

100 USD

100 EA

The following table describes the purchase order schedules:

Schedule Order Quantity Match Option Status

100 EA

Order or Receipt

Open

The following table describes the receipts and invoices:

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Receipts Ordered Quantity Received Quantity Invoiced Quantity Accrual Account Status

Receipt 1

01-2210

Open

Receipt 2

01-2220

Open

The following table describes the purchase order distributions and accrual balances:

Distribution

CMR Accrual

Amount (A)

AP Accrual

Account (B)

Accrual Clear

Amount (C) =

(A-B)

Under-

Invoiced

Quantity

Over-

Invoiced

Quantity

Percentage

Under-

Invoiced

Percentage

Over-

Invoiced

Percentage

PO Accrual

Amount (C)/

Ordered

Quantity*PO

Price

Distribution 1

58*100 USD =

5800 USD

55*100 USD =

5500 USD

300 USD

60 - 55 = 5

Not Applicable

5/58*100 =

8.62%

Not Applicable

300

USD/60*100

= 5%

Distribution 2

40*100 USD =

4000 USD

45*100 USD =

4500 USD

(500) USD

Not Applicable

45-40 = 5

Not Applicable

5/40*100 =

12.50 %

500

USD/40*100 =

12.50 %

The following table describes the Rule 1:

Attribute Operator Value Conditions

PO Status

OPEN

And

Percentage Under-Invoiced

Less Than

10%

Not Applicable

Results: The PO Status and the Percentage Under-Invoiced values meet the criteria of Rule 1; therefore the accrual

balance of 300 USD is automatically cleared.

The following table describes the Accrual Amounts Cleared Based on Rule 1:

Distribution

CMR Accrual

Amount (A)

AP Accrual

Account (B)

Accrual Clear

Amount (C) =

(A-B)

Under-

Invoiced

Quantity

Over-

Invoiced

Quantity

Percentage

Under-

Invoiced

Percentage

Over-

Invoiced

Percentage

PO Accrual

Amount (C)/

Ordered

Quantity*PO

Price

Distribution 1

58*100 USD =

5800 USD

55*100 USD =

5500 USD

300 USD

60 - 55 = 5

Not Applicable

5/58*100 =

8.62%

Not Applicable

300

USD/60*100

= 5%

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The following table describes the Rule 2:

Attribute Operator Value Conditions

PO Status

OPEN

And

Accrual Clear Amount

Less Than

Absolute (1000) USD

Percentage Under-Invoiced

Less Than

10%

Percentage Over-Invoiced

Less Than

10%

Not Applicable

Results: The PO Status, Percentage Under-Invoiced, and Accrual Clear Amount Absolute values meet the criteria of Rule

2; therefore the accrual balances of 300 USD and (500) USD are automatically cleared.

The following table describes the Accrual Amounts Cleared Based on Rule 2:

Distribution

CMR Accrual

Amount (A)

AP Accrual

Account (B)

Accrual Clear

Amount (C) =

(A-B)

Under-

Invoiced

Quantity

Over-

Invoiced

Quantity

Percentage

Under-

Invoiced

Percentage

Over-

Invoiced

Percentage

PO Accrual

Amount (C)/

Ordered

Quantity*PO

Price

Distribution 1

58*100 USD =

5800 USD

55*100 USD =

5500 USD

300 USD

60 - 55 = 5

Not Applicable

5/58*100 =

8.62%

Not Applicable

300

USD/60*100

= 5%

Distribution 2

40*100 USD =

4000 USD

45*100 USD =

4500 USD

(500) USD

Not Applicable

45-40 = 5

Not Applicable

5/40*100 =

12.50 %

500

USD/40*100 =

12.50 %

Receipt Accounting Cutoff Dates

The accrual cutoff date enables you to control when backdated receipts are accounted.

The following describes how Receipt Accounting uses offset days to determine the accrual cutoff date for processing

backdated receipts.

Using Offset Days

Offset days define the grace period for processing backdated transactions in the prior GL period. You can indicate the

number of offset days for a business unit in the Receipt Accounting work area, on the Manage Accrual Clearing Rules

page, Manage Accrual Cutoff Rules tab. Receipt Accounting uses the offset days to calculate the accrual cutoff date.

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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.

Note:

• This is applicable only for Accrue at Receipt purchase orders.

• For Accrue at Period End purchase orders, use the Period End Accrual Cutoff and Accounting Date parameter

to set the appropriate cuttoff date when running the Create Uninvoiced Receipt Accrual process.

Related Topics

•

Receipt Accounting Tasks and Accounting Events

•

Create Uninvoiced Receipt Accrual

Overview of Accrual Reversal

Use the Create Accrual Reversal Accounting process in the Scheduled Processes work area to reverse accrual journal

entries. You can schedule this process to run automatically at predefined intervals, or run it on demand.

You can define how and when accrual reversals are automatically performed by:

• Indicating that an accounting event is eligible for accrual reversal.

• Determining when the accrual is reversed.

• Scheduling the Create Accrual Reversal Accounting process to generate the reversal entries.

For more information on accrual reversal, prerequisites, and step-by-step instructions, see the links in the Related

Topics section.

Related Topics

•

Accrual Reversals

•

How You Submit the Create Accrual Reversal Accounting Process

•

Submit Scheduled Processes and Process Sets

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Period End Uninvoiced Receipt Accrual

Receipt Accounting for Purchase Orders Set to Accrue at Period

End

You can run the Create Uninvoiced Receipt Accruals process to create accrual accounting for purchase orders that are

set to accrue at period end. This process creates accruals for purchase orders based on these conditions:

• Although the receipts have been received, accounting hasn't been created because the Accrue at Receipt option

isn't selected in the purchase order.

• Receipts haven't been invoiced or the invoiced quantity is less than the quantity received on the purchase order.

You must run this process after closing the Accounts Payable period and transferring all the Accounts Payable invoices

to Cost Management, and before you close the General Ledger period. Also, you can run this process as many times or

as frequently as required during the accounting period to have the latest expense and accrual information in your books

of accounts.

The image here shows the various processes and the sequence in which you must run them to create accruals for the

uninvoiced receipts. It also shows the work areas from where you can run these processes.

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You start by running processes to transfer the receipt and invoice information to Cost Management. Then you run

the Create Receipt Accounting Distributions process so that the appropriate data is populated when you generate the

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Uninvoiced Receipt Accruals Report. Before you generate the report, you must also run the Create Uninvoiced Receipts

Accruals process in the Report accrual run mode.

The report helps you to understand the details about the uninvoiced purchase order receipts for which accruals will be

created. After reviewing the report, you can perform additional actions:

• Exclude receipt accruals from the report by accounting the corresponding invoices.

• Exclude receipt accruals from the report by setting purchase order schedule status to Finally Closed.

When you run the Create Uninvoiced Receipt Accruals process in the Accounting accrual run mode, the corresponding

distributions are created. Next, you run Create Accounting to transfer the distributions to SLA and General Ledger. And

lastly, you run the Create Accrual Reversal Accounting process, which creates a new journal entry on the first date of the

next open general ledger period.

The integration with General Ledger ensures that the period end accruals and also the reversals are automatically

created in General Ledger. By automatically creating the reversals, double booking doesn't occur when the invoices are

eventually received.

Before You Begin

Before you start creating the accruals for uninvoiced receipts at period end, make sure that you have completed all the

upstream processes, which include creation of receipts and the final accounting of invoices wherever possible.

Next, run these processes from the Scheduled Processes work area:

• Transfer Transactions from Receiving to Costing - This process transfers receipt information to Receipt

Accounting.

• Transfer Costs to Cost Management - This process transfers invoice information to Receipt Accounting.

Review the status of the processes to make sure that they have completed successfully.

After you transfer the receipt and invoice information to Receipt Accounting, run the Create Receipt Accounting

Distributions process from the Receipt Accounting work area. You then run the Create Uninvoiced Receipt Accrual

process in the Report accrual run mode followed by generating the Uninvoiced Receipt Accruals Report. You can also

run these processes from the Scheduled Processes work area.

Related Topics

•

How You Submit Accounting Process

•

Accrual Reversals

•

How You Submit the Create Accrual Reversal Accounting Process

•

Post Subledger Transactions to the General Ledger

Create Uninvoiced Receipt Accrual

The Create Uninvoiced Receipt Accrual process creates pairs of debit and credit accounting entries to accrue for receipts

of purchase orders that are set to accrue at period end.

You can monitor the uninvoiced receipt accrual amounts in preparation for period end by running the process in the

Report accrual run mode. However, you must run the process in the Accounting accrual run mode to create the final

accrual distributions, preferably after you have closed accounts payable for the period ensuring the period end accruals

accounted are for the same value that you've reviewed.

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Each time you run the Create Uninvoiced Receipt Accruals process, data is created for reporting that you can review by

running the Uninvoiced Receipt Accrual Report.

Note: For a selected period, if you run the process in the Accounting mode, you can't run the process again in the

Report mode. The subsequent runs of the process for the selected period must be in the Accounting mode.

1. In the Receipt Accounting work area, select the Create Uninvoiced Receipt Accruals task.

2. Enter appropriate values for the parameters listed in the table.

Parameter Description

Bill to Business Unit You can run the process for a specific Bill to Business Unit. Only the data for the profit centre

business units of the Bill to Business Unit to which you have data access and have pending

transactions will be processed. If you don't have data access to the selected Bill to Business

Unit, the process ends with Warning status.

Accrual Run Mode You can run the process in the Report or Accounting mode. When you run the process in the

Accounting mode, the final accrual distributions are created and ready to be posted to the

General Ledger.

Accounting Period The accounting period for which you want to run the process.

Period End Accrual Cutoff and

Accounting Date

Enter the period end accrual and accounting cutoff date. If you don't select any date, the last

date of the accounting period is considered as the cutoff and accounting date.

Commit Limit Enter a commit limit to fine tune the size of processing sets. The default setting is sufficient for

most typical cases.

Include Purchase Order Status Select the purchase order status to filter the purchase orders that must be considered for

creating the period end accrual amounts. By default, the process only considers purchase

orders that are open or in closed status for receiving to compute period end accrual amounts.

3. Click Submit.

The process creates the accounting distributions, which can be reviewed on the Review Receipt Accounting

Distributions page. On the Review Receipt Accounting Distributions page, search for transactions with the transaction

type Period End Accrual. You can scroll down on the page and select the Distributions and Journal Entries tabs to view

the accounting details.

Related Topics

•

Create Uninvoiced Receipt Accrual

Run Uninvoiced Receipt Accruals Report

You can run the Uninvoiced Receipt Accruals Report from the Reports and Analytics work area. This report helps you to

review the uninvoiced purchase order receipts due for accrual or already accrued for a given period.

After you run the Create Uninvoiced Receipt Accruals process in the Report accrual run mode, you can generate the

Uninvoiced Receipt Accruals Report. This ensures that the report shows the data based on the selection criteria with

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which the Create Uninvoiced Receipt Accruals process was run, and thereby ensuring you know exactly what you accrue

and for what amount.

You can set these parameters when running the report.

Parameters Description

Business Unit

The business unit for which you want to generate the report.

Accounting Period

The accounting period for which you want to generate the report. You can select only one accounting

period at a time.

From Item and To Item

Set these parameters if you want to generate the report for a specific item.

From Item Category and To Item Category

Set these parameters if you want to generate the report for a specific item category.

Accrual Tolerance Amount

You can optionally specify an accrual tolerance amount and a comparison operator.

For example, if Accrual Tolerance Amount > 0 means the received amount is greater than the invoiced

amount. If Accrual Tolerance Amount = 0 means invoiced and received amounts are same. If Accrual

Tolerance Amount < 0 means invoiced amount is greater than received amount.

Supplier and Supplier Site

Set these parameters if you want to generate the report for a specific supplier or supplier site.

After you have reviewed the Uninvoiced Receipt Accruals Report and taken any necessary actions, you must run the

Create Uninvoiced Receipt Accruals process in the Accounting accrual run mode before running the Create Accounting

process.

If the accruals amounts listed in the report differ from the actual distributions created by the Create Uninvoiced Receipt

Accruals process, it could be due to any of the listed reasons:

• You have received and processed invoices between running the process and the report.

• You have returned the goods.

Create Accounting

Create Accounting transfers the distributions from Receipt Accounting to SLA and also to General Ledger.

You must run the Create Accounting process after you run the Create Uninvoiced Receipt Accruals process in the

Accounting accrual run mode. The Create Uninvoiced Receipt Accruals process creates the corresponding distributions

that you transfer to SLA and General Ledger by running the Create Accounting process.

1. In the Receipt Accounting work area, select the Create Accounting task.

2. Enter the values for these fields.

Field Value and Description

Subledger Application

Select Receipt Accounting.

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Field Value and Description

Ledger

Select the required ledger.

Process Category

Select Period End Transactions.

End Date

Set the date till which the transactions must be

accounted.

If the End Date is same as or earlier than the period end

date, you must run Create Accrual Reversal Accounting

after you run Create Accounting.

Accounting Mode

If you want to review the results, set the accounting

mode as Draft, else set it as Final.

Process Events

Select All.

Report Style

The style of report to be generated.

◦

Summary - Select this option if you want to review the results.

◦

Detail - Select this option if you want to know the details of which

transactions are accounted and which aren't.

◦

No report - Select this option if you don't want to generate the

report.

Transfer to General Ledger

Yes

This ensures that the period end accruals and reversals

are automatically created in General Ledger.

Post in General Ledger

Yes

This is mandatory to complete the accounting by

posting to General Ledger. Ensure that you've the

necessary privileges to access this option.

3. Click Submit.

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Note:

• If you set Transfer to General Ledger and Post in General Ledger to No, then to complete the accounting by

transferring the records from SLA to General Ledger and posting them, you must run the Post Subledger

Journal Entries process from the Scheduled Process work area.

• The End Date determines whether you must run the Create Accrual Reversal Accounting process. This process

creates a new journal entry on the first date of the next open general ledger period. You must make sure that

the next general ledger period is in the open status before running the process, else the reversals entries will

be unaccounted. If the End Date is later than the period end date, you don't need to run the Create Accrual

Reversal Accounting process.

What to do next

You must run the Create Accrual Reversal Accounting process, which creates a new journal entry on the first date of the

next open general ledger period. The integration with General Ledger ensures that the period end accruals and also the

reversals are automatically created in General Ledger.

Related Topics

•

Post Subledger Transactions to the General Ledger

FAQs for Period End Uninvoiced Receipt Accrual

What accounting date is used for the accrual journal?

For period end uninvoiced receipt accrual, the accounted date will be the Period End Accrual Cutoff and Accounting

Date specified when running the Create Uninvoiced Receipt Accruals process. If this date isn't specified then the

accounting date is the last date of the selected period.

What accounting date is used for creating the accrual reversal journal?

Depending on the setting for Accrual Reversal Accounting Date Source under journal entry rule set for period end

accrual, the accounting date on the accrual reversal journal will be the first date or last date of the next open general

ledger period.

Why do the distributions created by the Create Uninvoiced Receipt Accruals process

differ from the entries in the Uninvoiced Receipt Accruals Report?

If you run Uninvoiced Receipt Accruals Report and the Create Uninvoiced Receipt Accruals process at different times,

you might notice a difference between the entries in the report and the distributions created. This could be due to any

of these reasons:

• You have received and processed invoices between running the report and the process.

• You have returned the goods.

• Nonrecoverable taxes calculated on the purchase orders and the invoices are different.

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You can resolve the first two discrepancies by regenerating the Uninvoiced Receipt Accruals Report after running the

Create Uninvoiced Receipt Accruals process.

Can I use General Ledger reversal functionality for period end accruals created from

Receipt Accounting?

No. To create the reversals in General Ledger for period end uninvoiced receipt accruals, you must run the Create

Accrual Reversal Accounting process.

Do I need to manually create reversals in General Ledger for the period end accruals

created from Receipt Accounting?

No. When you run the Create Accounting process, set the Transfer to General Ledger and Post in General Ledger

options to Yes. Also, if you set the End Date for the process to be same as or earlier than the period end date,then you

must run the Create Accrual Reversal Accounting process after you run the Create Accounting process. You must make

sure that the next general ledger period is in the open status before running the process, else the reversals entries won't

be accounted.

How do I ensure that all the processes required for period end uninvoiced receipt

accrual are run and in the correct order?

You can create a process set for period end uninvoiced receipt accrual. Include these processes in the specified order in

the process set:

1. Transfer Transactions from Receiving to Costing

2. Transfer Costs to Cost Management

3. Create Receipt Accounting Distributions

4. Create Uninvoiced Receipt Accruals

5. Create Accounting

6. Create Accrual Reversal Accounting

The processes must be run in a serial manner, which means only after a process is completed the next process must

start.

Related Topics

•

Process Sets

•

Submit Scheduled Processes and Process Sets

Why is the uninvoiced receipt accrual reversal journal in the Invalid status?

When running the Create Accounting process, you've set the End Date to be same as or earlier than the period end date.

You must run the Create Accrual Reversal Accounting process for the next accounting period to resolve this issue.

Before closing the General Ledger period are any additional actions required for

uninvoiced receipt accrual?

You must check the Subledger Period End Exceptions Report for are any period end accrual or reversal events that are in

not posted, incomplete, or invalid status. You must resolve such exceptions before closing the period.

If reversal events are in incomplete or invalid status, you must run the Create Accrual Reversal Accounting process to

resolve these exceptions. You can also use the general ledger feature to hard restrict general ledger period close when

there are incomplete, invalid, or unposted journals.

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Does Receipt Accounting create encumbrance accounting for period end uninvoiced

receipt accruals?

Yes. Receipt Accounting creates encumbrance accounting for period end uninvoiced receipt accruals.

Are period end uninvoiced receipt accruals budgetary controlled?

No. The period end uninvoiced receipt accruals aren't budgetary controlled.

How You Close a Receipt Accounting Period

This procedure shows you how to process receipt accruals in preparation for the closing of a receipt accounting period.

You can schedule Receipt Accounting to automatically process receipts that are set to be accrued on receipt.

If receipts aren't marked for automatic accrual on receipt, you can run the Create Uninvoiced Receipt Accruals process.

This will accrue all receipts that aren't yet invoiced in Accounts Payable.

You can access the following Receipt Accounting processes in the Scheduled Processes work area:

• Transfer Costs to Cost Management

• Transfer Transactions from Receiving to Costing

• Accrual Clearing Report

• Accrual Reconciliation Report

• Create Accrual Reversal Accounting

You can access the following Receipt Accounting processes in the Receipt Accounting work area:

• Create Receipt Accounting Distributions

• Clear Receipt Accrual Balances

• Create Uninvoiced Receipt Accruals

• Create Entries for Receipt Accounting

• Match Receipt Accruals

You can schedule the processes, or you can run them on demand.

This procedure covers the following tasks:

• Transferring Cost Data to Receipt Accounting

• Creating Receipt Accounting Distributions

• Creating Uninvoiced Receipt Accruals

Transferring Cost Data to Receipt Accounting

This task covers processes that should be run in the Scheduled Processes work area before closing a receipt accounting

period.

To transfer cost data to Receipt Accounting, complete the following steps.

1. From the Navigator menu, select Scheduled Processes.

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2. Select the processes that you want to run or schedule. The following receipt accounting processes should be

completed before closing a receipt accounting period:

◦

Transfer Costs to Cost Management. This process transfers invoice information to Receipt Accounting.

◦

Transfer Transactions from Receiving to Costing. This process transfers receipt information to Receipt

Accounting.

3. Review the Status column to confirm that the processes have completed successfully.

Creating Receipt Accounting Distributions

This task creates receipt accounting distributions in preparation for the closing of a receipt accounting period. You can

schedule this process, or run it on demand.

To create receipt accounting distributions, complete the following steps.

1. Navigate to the Receipt Accounting work area, and select the Create Receipt Accounting Distributions task.

2. To run the receipt accounting processes for all the business units that you have access to, leave the Bill-to

Business Unit empty. However, if you want to run them only for a particular business unit, select it from the Bill-

to Business Unit drop-down list.

Note: When you run this process, the application creates one parent job and a child job for each of the profit

center BU that's associated with the Bill to Business Unit.

3. Click on the Schedule tab, and select the option Run Using a Schedule.

4. Complete the Frequency, Start Date, and End Date fields, and click Submit.

5. From the tasks menu, select the Review Receipt Accounting Distributions task to view the receipt accounting

distributions that were created.

6. On the Review Receipt Accounting Distributions page, search for transactions that have a Transaction Status of

Final Accounted and a Transaction Type of Receipt into Receiving Inspection.

7. Click on the Distributions tab, and click the Detach button to view the details on a new page.

8. Click on the Journal Entries tab to view the journal entries for the accounting distributions. Click the Detach

button to view the details on a new page.

Creating Uninvoiced Receipt Accruals

If receipts aren't marked for automatic accrual on receipt, you can run the Create Uninvoiced Receipt Accruals process.

This will accrue all receipts that aren't yet invoiced in Accounts Payable. You can run this job more than once during the

period close process. At a minimum it should be run after the Accounts Payable period is closed and all the Accounts

Payable invoices are interfaced to Cost Management, and before the General Ledger period is closed. For period end

accrual, the accounted date always falls on the last date of the period selected.

You can specify a cutoff date within the accounting period for accounting purposes. Then, period end accrual for

uninvoiced receipts is created on the cutoff date. This enables you to ensure that when you have multiple ledgers with

different calendar period end dates, the period end accrual is booked in the same period that they're accrued.

When you have a primary general ledger and multiple secondary ledgers with different calendar periods, do the

following:

• If there are two ledgers running on different calendar period end dates, choose the lesser period end date as

the cutoff date. For example, if the secondary ledger ends on the 27th day of the month and the fiscal ledger

ends on the 30th day, choose the 27th day as the cutoff date.

• If you're specifying a cutoff date, ensure that it's set to a date that's before the period end date. Else, you will get

errors.

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• If you have configured the application to automatically reverse and post in general ledgers, the reversal

accounting entries are automatically posted to the journals. However, if you haven't opted for automatic

reversal, you must manually reverse the period-end accrual that was already booked and post it in the next

period. For more information about configuring automatic reversal in general ledgers, see the Oracle Fusion

Cloud Financials Using General Ledger guide on the Oracle Help Center.

• Once the accounting period is closed, in all ledgers, move the cutoff date to a date that's in the next period.

To create uninvoiced receipt accruals, complete the following steps.

1. Navigate to the Receipt Accounting work area, and select the Create Uninvoiced Receipt Accruals task.

2. On the Create Uninvoiced Receipt Accruals page, complete the Bill-to Business Unit and Accounting Period

fields.

3. Select a Period End Accrual Cutoff and Accounting Date. If you don't select any date, the last date of the

accounting period is taken as the cutoff and accounting date.

4. Click Submit.

5. On the Review Receipt Accounting Distributions page, search for transactions with a Transaction Type of Period

End Accrual.

6. Scroll down and select the Distributions and Journal Entries tabs to view the accounting details.

Related Topics

•

Receipt Accrual, Reconciliation, and Clearing

•

Receipt Accounting Cutoff Dates

•

Accrual Reversals

•

Oracle Fusion Subledger Accounting Predefined Reports

Cost Management for Internal Material Transfers

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.

Oracle Self-Service Procurement, Oracle Supply Chain Financial Orchestration, and Oracle Cost Accounting 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.

Lot and Serial Level Costing for Transfers

When using the actual or average cost methods, lot and serial level costing helps you to accurately retain and track cost

information across transfers ensuring a complete picture of the production costs. You can track this cost information

for cost-based transfers, when goods are transferred from one organization to another or within an organization when

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transfer flow isn't orchestrated by Supply Chain Financial Orchestration. Knowing the cost throughout the supply chain

allows for better decision making with reference to cost visibility, tracking, and pricing.

You can track the costs for transfers using the cost method and valuation unit combinations listed here:

• Perpetual average cost method with granular valuation structure having valuation unit at the Serial or Lot level.

• Actual cost method with any valuation unit where summarization at the Lot or Serial level isn't enabled.

This cost tracking is supported by the business flows listed here:

• Inventory destination cost-based transfers from one inventory organization to another inventory organization.

• Expense destination cost-based transfers from inventory organization to an expense location.

Note: Do note these points regarding cost tracking during transfers:

• Items with different inventory control in source and destination organizations are average costed. For

example, the item is lot or serial controlled in the shipping organization and no control in the destination

organization or vice versa.

• Expense destination transfers without receipt having multiple distributions are average costed.

• Transfer order receipt transactions to expense destination are average costed because the receipt doesn't

have visibility of lot or serial data. The actual cost is used when booking expense on receipt delivery event.

Receipt Accounting for Outside Processing

Receipt Accounting 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 Receipt Accounting under the Destination Type of Manufacturing.

Accounting Distributions Created for Outside Processing

Cost Accounting supports the Purchase Order Receipt 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

•

How Outside Processing Costs are Planned, Accounted, and Reviewed

•

How Items Are Set Up for Outside Processing

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Receipt Accounting for Manual Procurement of Items for

Work Orders

Receipt Accounting supports creating accruals and processing of purchase order receipts for items directly procured

from a maintenance or manufacturing work order and are received against the Work Order destination type.

Accounting Distributions for Manual Procurement of Items for Work

Orders

For all purchase orders with the Work Order destination type, these accounting entries are created for the Receipt

transaction.

Accounting Line Type Transaction Type

Receiving Inspection

Debit

Accruals

Credit

Receipt Accounting for Drop Shipments

Global drop shipment is an order fulfillment strategy where the seller does not keep products in the inventory. The seller

relies on suppliers or contract manufacturers to build, store, and ship orders to the customers.

When a customer places an order for a drop shipped product, the seller issues a purchase order for the item. The seller

also provides instructions to the suppliers to ship directly to the customer. The supply chain financial orchestration

process routes the orchestration flow of drop shipments through one or more business units within the corporation.

These business units can belong to the same legal entity or may occur across legal entities.

The financial flow starts when the supplier sends the advanced shipment notice, or when the supplier matches the

invoice with the purchase order for the drop shipment. The flow creates cost accounting distributions and intercompany

invoices for the ownership transfers that occur between parties, including supplier, one or more organizations, and the

customer. Supply Chain Financial Orchestration sends a request to the receiving system to create a drop ship receipt

on the supplier invoice that references the purchase order. Receiving creates a logical receipt, and then notifies Order

Management to start customer billing. This automation helps to reduce billing cycle time.

Receipt Accounting Distributions for Drop Shipments

You can review the receipt accounting distributions for drop shipments on the Review Receipt Accounting Distributions

page. The following accounting line types are created for single busnisess unit drop shipment events.

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Event Transaction Subledger Accounting Line Dr/Cr

Invoice Validation

Supplier Invoice

Accounts Payable

Accrual

Debit

Invoice Validation

Supplier Invoice

Accounts Payable

Liability

Credit

Drop Ship Receipt

Receipt

Receipt Accounting

Receiving Inspection

Debit

Drop Ship Receipt

Receipt

Receipt Accounting

Accrual

Credit

For the corresponding cost accounting distribution, see Cost Accounting for Drop Shipments.

Receipt Accounting Distributions for Drop Shipment Invoice Cancellation

or Correction

For customer drop ship with payables invoice as the ownership change event, sometimes you may need to cancel the

supplier invoice. For example, when an incorrect purchase order is matched to the invoice or when the supplier has sent

an incorrect invoice. When the invoice is cancelled, the Oracle Supply Chain Financial Orchestration sends trade sales

return as a reversal to the trade sale issue created on invoice matching.

You can review the receipt accounting distributions for invoice cancellation or correction on the Review Receipt

Accounting Distributions page. The following accounting line types are created:

Event Transaction Subledger Accounting Line Dr/Cr

Invoice Cancellation

Supplier Invoice

Accounts Payable

Liability

Debit

Invoice Cancellation

Supplier Invoice

Accounts Payable

Accrual

Credit

Drop Ship Receipt

Correction

Receipt Correction

Receipt Accounting

Accrual

Debit

Drop Ship Receipt

Correction

Receipt Correction

Receipt Accounting

Receiving Inspection

Credit

For the corresponding cost accounting distribution, see Cost Accounting for Drop Shipments.

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Global Procurement

Overview of Global Procurement Trade Accounting

Companies often design their legal structure for financial efficiency as well as efficiency 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

Global Procurement Trade Flows

This figure illustrates a typical global procurement trade flow, in this case between a US corporation and its China

supplier. The US corporation has a central procurement business unit which creates trade agreements and purchase

orders on behalf of its subsidiaries.

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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.

Financial Trade Agreements and Accounting 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.

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The accounting rule sets define source documents and accounting that is required in the legal and financial flow, also

known as the ownership change event flow. A rule set is associated with a financial route, and financial routes can have

different accounting rule sets.

The following illustrates a trade agreement setup for the US corporation:

• Agreement #: GP001

• Type: Procurement

• Supplier Ownership Change: ASN (Advance Shipment Notice)

• Primary Trade Relationship #: PTR1

• Sold-to Legal Entity: China Ltd.

• Sold-to Business Unit: CN BU

• Deliver-to Legal Entity: US Inc.

• Deliver-to Business Unit: US West

• Financial Trade Relationship #: FTR1

• From Legal Entity: China Ltd.

• From Business Unit: CN BU

• From Organization: CN INV ORG

• To Legal Entity: US Inc.

• To Business Unit: US West

• To Organization: M1

• Profit Tracking: Yes

• Invoicing: Yes

• Obligation Currency: CNY

• Rate Type: Corporate

• Transfer Pricing: Purchase Order - 10%

• Purchase Order/Sales Order: No

Trade Agreement Converted to Purchase Orders

The trade agreement is used to create purchase orders. The following illustrates a purchase order created under the US

Corporation trade agreement # GP001:

• Document Type: Purchase Order

• Document #: PO-GP001

• Document Line #: 1

• Document Line Detail: 1.1

• Document Line Distribution #: 1.1.1

• Item: SFO-CST_ASSET

• Quantity: 100

• UOM: Each

• Currency: CNY

• Price: 650

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• Sold-to Legal Entity: China Ltd.

• Trade Organization: CN INV ORG

• Deliver-to Organization: M1

• Primary Trade Relationship #: PTR1

Global Procurement Common Terms

The following table describes the terms commonly used in global procurement trading:

Terms Definitions and Rules

buy-sell relationship

Relationship between two business units where one acts as a buyer and the other as a seller of

goods or services. The seller records the revenue, cost of sale, and receivables. The buyer records the

payables and inventory or expense. A buy-sell trade between internal business units is settled through

the transfer price.

asset item

Inventory item where the cost of acquisition is valued as an asset on the balance sheet. The inventory

cost is expensed when it is consumed or sold.

expense item

Inventory item whose cost of acquisition is booked as an expense.

transfer price

The unit price that one business unit charges another for goods or services traded within the

enterprise. The transfer price is typically based on the price list, cost plus or minus, or purchase price

plus or minus.

financial route

Designates how financial transactions are settled, can be different from the physical route, and may

involve one or more intermediary nodes. The intermediary nodes are internal business units that are

not part of the physical supply chain transaction but are part of the financial route.

Incoterms

A series of sales terms in international trade, used to define the rights and obligations of the trade

partners with respect to the delivery of goods sold. Incoterms are used to divide transaction costs and

responsibilities between buyer and seller, and to reflect transportation practices.

intercompany profit and loss

The internal profit or loss arising out of trade among business units in the enterprise. These internal

profits and losses are used for internal management but are typically eliminated when producing the

enterprise consolidated financial statements for external stakeholders.

intercompany trade

The trade of goods and services between organizations belonging to different legal entities within a

conglomerate.

intracompany trade

The trade of goods or services between two internal organizations within a legal entity.

ownership change event

The transfer of title of goods and services from one party to another. This results in accounting and the

creation of financial documents such as Accounts Receivable and Accounts Payable invoices.

price list

Contains the basic list information and pricing attributes for items or product groups.

pricing option

A method to compute the transfer price based on cost, source document price, or price list.

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Terms Definitions and Rules

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

Subledger entries created by Oracle Receipt Accounting and Oracle Cost Accounting for Oracle Supply

Chain Financial Orchestration trade transactions.

procurement business unit

Has central responsibility for the creation of trade agreements and purchase orders on behalf of legal

entities and business units under the holding company.

Related Topics

•

Example of Accounting of Global Procurement Trade Transactions into Inventory

•

Example of Accounting of Global Procurement Trade Transactions into Expense

•

Profit Center Business Units and Bill-to Business Units

Oracle Receipt Accounting and Oracle Cost Accounting create accounting distributions for trade transactions in the

supply chain. These accounting distributions are associated with two kinds of business units: profit center business

units and bill-to business units.

The following explains the different business units associated with trade transactions and the assumptions used to

derive them.

Profit Center Business Unit

A profit center business unit reports to a single legal entity and is responsible for measuring the profitability of inventory

organizations under that legal entity. All trade transactions are associated with a profit center business unit which, in

turn, is derived from the inventory organization that owns the trade transaction. Cost Accounting 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.

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Related Topics

•

How Cost Organizations, Inventory Organizations, and Cost Books Fit Together

Review Item Cost and Global Procurement Trade Transaction

Accounting

Oracle Receipt Accounting and Oracle Cost Accounting process and create accounting distributions for trade

transactions in the supply chain.

You must first run the Create Receipt Accounting Distributions process and the Create Cost Accounting Distributions

process for the supplier facing organization and associated primary cost book. You must then run these processes for

the receiving organization. The transactions of the supplier facing organization and primary cost book must be costed

before costing the transactions of the receiving organization.

The following explains how to review the results of global procurement trade transactions processed by Receipt

Accounting and Cost Accounting.

Receipt Accounting Results

In the Receipt Accounting work area, access the Review Receipt Accounting Distributions page. On this page you can

view accounting details by Source Document Number and Source Document Line Number. Source documents are

purchase order schedules, transfer orders, and sales orders.

Cost Accounting Results

In the Cost Accounting work area:

• Access the Review Item Costs page. On this page you can view a breakdown of the cost of items, cost

comparisons of items across organizations, and cost trends over time.

• Access the Review Cost Accounting Distributions page. On this page you can view accounting details of trade

transactions by Reference Document Number.

Related Topics

•

Receipt Accounting Tasks and Accounting Events

•

Review Item Costs

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Receipt Accounting Examples

Example of Consigned Inventory Accounting in a Simple Purchase

Order

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 Inventory Management into Oracle Cost Accounting and Oracle Receipt

Accounting.

• Accounting entries that Cost Accounting and Receipt Accounting generate for the forward flow.

• Accounting entries that Cost Accounting and Receipt Accounting 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:

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Transaction from Inventory Management

Cost Accounting and Receipt Accounting receive the following transaction from Inventory Management:

• Supplier Advanced Network Devices (AND-Fresno).

• Consignment Purchase Order #1000.

• Purchase Order price USD 100.

• Ship-to organization is M1-Seattle which is the contingent owner. Contingent owner assumes ownership from

the supplier when inventory is consumed.

• Receipt and put away transactions performed in M1-Seattle inventory organization in consigned status.

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• When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M1-

Seattle.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following diagram illustrates the accounting entries for the forward flow from supplier AND-Fresno to inventory

organization M1-Seattle.

Receipt Accounting and Cost Accounting generate accounting entries under inventory organization M1-Seattle for the

receipt of goods.

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The following table describes those accounting entries:

Subledger Event Type Accounting Line

Type

Transaction Type Amount in

Functional

Currency

Functional

Currency

Basis of Amount

Receipt Accounting

PO Receipt

Consigned

Clearing

Debit

100

USD

PO Price

Receipt Accounting

PO Receipt

Consigned Accrual

Credit

100

USD

PO Price

Cost Accounting

PO Delivery

Consigned

Inventory

Debit

100

USD

PO Price

Cost Accounting

PO Delivery

Consigned

Clearing

Credit

100

USD

PO Price

Receipt Accounting and Cost Accounting 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:

Subledger Event Type Accounting

Line Type

Transaction

Type

Amount in

Functional

Currency

Functional

Currency

Cost Element Basis of

Amount

Cost Accounting

Transfer to

Owned Issue

Consigned

Inventory Offset

Debit

100

USD

Material

PO Price

Cost Accounting

Transfer to

Owned Issue

Consigned

Inventory

Credit

100

USD

Material

PO Price

Receipt

Accounting

Consigned

Receipt

Consumption

Consigned

Accrual

Debit

100

USD

Not applicable

PO Price

Receipt

Accounting

Consigned

Receipt

Consumption

Consigned

Clearing

Credit

100

USD

Not applicable

PO Price

Receipt

Accounting

Trade Receipt

Accrual

Trade Clearing

Debit

100

USD

Not applicable

PO Price

Receipt

Accounting

Trade Receipt

Accrual

Credit

100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

Debit

100

USD

Material

PO Price

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Subledger Event Type Accounting

Line Type

Transaction

Type

Amount in

Functional

Currency

Functional

Currency

Cost Element Basis of

Amount

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

Credit

100

USD

Material

PO Price

Cost Accounting

Transfer to

Owned (Receipt)

Inventory

Valuation

Debit

100

USD

Material

PO Price

Cost Accounting

Transfer to

Owned (Receipt)

Trade In-Transit

Credit

100

USD

Material

PO Price

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.

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Chapter 2

Receipt Accounting

Receipt Accounting and Cost Accounting 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.

Subledger Event Type Accounting

Line Type

Transaction

Type

Amount in

Functional

Currency

Functional

Currency

Cost Element Basis of

Amount

Cost Accounting

Transfer to

Consigned

(Receipt)

Consigned

Inventory

Debit

100

USD

Material

PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting

Line Type

Transaction

Type

Amount in

Functional

Currency

Functional

Currency

Cost Element Basis of

Amount

Cost Accounting

Transfer to

Consigned

(Receipt)

Consigned

Inventory Offset

Credit

100

USD

Material

PO Price

Receipt

Accounting

Consigned

Receipt

Consumption

Consigned

Clearing

Debit

100

USD

Not applicable

PO Price

Receipt

Accounting

Consigned

Receipt

Consumption

Consigned

Accrual

Credit

100

USD

Not applicable

PO Price

Receipt

Accounting

Trade Return

Accrual

Debit

100

USD

Not applicable

PO Price

Receipt

Accounting

Trade Return

Accrual

Trade Clearing

Credit

100

USD

Not applicable

PO Price

Receipt

Accounting

Trade In-Transit

Return

Trade Clearing

Debit

100

USD

Not applicable

PO Price

Receipt

Accounting

Trade In-Transit

Return

Trade In-Transit

Credit

100

USD

Not applicable

PO Price

Cost Accounting

Transfer to

Consigned Issue

Trade In-Transit

Debit

100

USD

Material

PO Price

Cost Accounting

Transfer to

Consigned Issue

Cost Variance*

Debit

USD

Not applicable

Inventory is

received at

the current

cost, and the

difference

between

transfer price

and cost is

booked as cost

variance.

Cost Accounting

Transfer to

Consigned Issue

Inventory

Valuation

Credit

105

USD

Material

Current Cost

* Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance.

Receipt Accounting 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:

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Receipt Accounting

PO Return to Supplier

Consigned Accrual

100

USD

PO Price

Receipt Accounting

PO Return to Supplier

Consigned Clearing

-100

USD

PO Price

Receipt Accounting

PO Return to

Receiving

Consigned Clearing

100

USD

PO Price

Receipt Accounting

PO Return to

Receiving

Consigned Inventory

-100

USD

PO Price

Related Topics

•

What are the accounting distribution basis options for consigned inventory transactions?

•

Cost Profiles, Default Cost Profiles, and Item Cost Profiles

•

Consigned Inventory Lifecycle

•

Consigned Inventory

Example of Consigned Inventory Accounting of an

Interorganization Transfer Across Business Units

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 Cost Accounting and Oracle Receipt Accounting 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 Inventory Management and interfaced to Cost Accounting and Receipt

Accounting.

• Transactions captured in Oracle Supply Chain Financial Orchestration and interfaced to Cost Accounting and

Receipt Accounting.

• Accounting entries that Cost Accounting and Receipt Accounting generate for the forward flow.

• Accounting entries that Cost Accounting and Receipt Accounting generate for the return flow.

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.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Interfaced Transactions

Inventory Management sends the following transactions to Receipt Accounting and Cost Accounting:

• Supplier Advanced Network Devices (AND-Fresno).

• Consignment Purchase Order #1000.

• Purchase Order price USD 100.

• Ship-to organization is M1-Seattle which is the contingent owner. Contingent owner assumes ownership from

the supplier when inventory is consumed.

• Receipt 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.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

• When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M2-LA

through M1-Seattle.

Supply Chain Financial Orchestration sets up the trade agreement, accounting rule sets, and associated purchase

orders, and the information flows into Receipt Accounting and Cost Accounting. The transfer from M1-Seattle to M2-LA

is based on trade agreement SFO #123 which has the following terms:

• Intercompany transfer price is USD 120.

• Intercompany invoicing is set to Yes.

• Profit tracking is set to Yes.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following are accounting entries for the forward flow.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Receipt Accounting generates distributions under inventory organization M1-Seattle for the shipment from supplier

AND-Fresno to M1-Seattle.

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Receipt Accounting

PO Receipt

Consigned Clearing

100

USD

PO Price

Receipt Accounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

Receipt Accounting

PO Delivery

Consigned Inventory

100

USD

PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Receipt Accounting

PO Delivery

Consigned Clearing

-100

USD

PO Price

Cost Accounting generates distributions under inventory organization M1-Seattle for the interorganization transfer from

M1-Seattle to M2-LA.

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Cost Accounting

In-Transit Shipment

Consigned In-Transit

100

USD

PO Price

Cost Accounting

In-Transit Shipment

Consigned Inventory

-100

USD

PO Price

Cost Accounting

Consigned Trade In-

Transit Issue

Consigned Receivable

100

USD

PO Price

Cost Accounting

Consigned Trade In-

Transit Issue

Consigned In-Transit

-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the

interorganization transfer from M1-Seattle to M2-LA.

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Receipt Accounting

Consigned Trade

Receipt Accrual

Trade Clearing

100

USD

PO Price

Receipt Accounting

Consigned Trade

Receipt Accrual

Consigned In-Transit

-100

USD

PO Price

Receipt Accounting

Consigned Trade In-

Transit Receipt

Consigned Clearing

100

USD

PO Price

Receipt Accounting

Consigned Receipt

Consumption

Trade Clearing

-100

USD

PO Price

Cost Accounting

In-Transit Receipt

Consigned Inspection

100

USD

PO Price

Cost Accounting

In-Transit Receipt

Consigned In-Transit

-100

USD

PO Price

Cost Accounting

In-Transit Delivery

Consigned Inventory

100

USD

PO Price

Cost Accounting In-Transit Delivery Consigned Inspection -100 USD PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seattle for the change

of ownership from supplier AND-Fresno to M1-Seattle.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

100

USD

Not applicable

PO Price

Receipt Accounting

Trade Receipt

Accrual

-100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Issue

Intercompany Cost

of Goods Sold

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seattle for the change

of ownership from M1-Seattle to M2-LA.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

100

USD

Not applicable

PO Price

Receipt Accounting

Trade Receipt

Accrual

-100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-100

USD

Material

PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Trade In-Transit

Issue

Intercompany Cost

of Goods Sold

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the change of

ownership from M1-Seattle to M2-LA.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Transfer to Owned

Issue

Consigned

Inventory Offset

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned

Issue

Consigned

Inventory

-100

USD

Material

PO Price

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

120

USD

Not applicable

Transfer Price

Receipt Accounting

Trade Receipt

Accrual

Intercompany

Accrual

-120

USD

Not applicable

Transfer Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Profit in Inventory

Internal Markup

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-120

USD

Material

Transfer Price

Cost Accounting

Transfer to Owned

(Receipt)

Inventory

Valuation

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned

(Receipt)

Inventory

Valuation

USD

Profit in Inventory

Internal Markup

Cost Accounting

Transfer to Owned

(Receipt)

Trade In-Transit

-100

USD

Material

PO Price

Cost Accounting

Transfer to Owned

(Receipt)

Trade In-Transit

-20

USD

Profit in Inventory

Internal Markup

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

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

•

Example of Consigned Inventory Accounting in a Simple Purchase Order

•

Example of Consigned Inventory Accounting of an Interorganization Transfer Within the Same Business Unit

•

What are the accounting distribution basis options for consigned inventory transactions?

•

Consigned Inventory Lifecycle

•

Consigned Inventory

Example of Consigned Inventory Accounting of an

Interorganization Transfer Within the Same Business Unit

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 Cost Accounting and Oracle Receipt

Accounting for an interorganization transfer of goods within the same profit center business unit.

This example illustrates:

• Transactions captured in Oracle Inventory Management and interfaced to Cost Accounting and Receipt

Accounting.

• Accounting entries that Cost Accounting and Receipt Accounting generate for the forward flow.

• Accounting entries that Cost Accounting and Receipt Accounting generate for the return flow.

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.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Interfaced Transactions

Cost Accounting and Receipt Accounting receive the following transaction from Inventory Management:

• Consignment Purchase Order (PO) #1000.

• Purchase Order price USD 100.

• Ship-to organization is M3-NY which is also the contingent owner. Contingent owner assumes ownership from

the supplier when inventory is consumed.

• Receipt 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.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Cost Accounting 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

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following are accounting entries for the forward flow.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

The following table lists the distributions that Receipt Accounting generates under inventory organization M3-NY for

the shipment from supplier AND-Fresno to M3-NY.

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Receipt Accounting

PO Receipt

Consigned Clearing

100

USD

PO Price

Receipt Accounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

Receipt Accounting

PO Delivery

Consigned Inventory

100

USD

PO Price

Receipt Accounting

PO Delivery

Consigned Clearing

-100

USD

PO Price

The following table lists the distributions generated by Cost Accounting under inventory organization M3-NY for the

interorganization transfer from M3-NY to organization M4-NJ.

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Cost Accounting

In-Transit Shipment

Consigned In-Transit

100

USD

PO Price

Cost Accounting

In-Transit Shipment

Consigned Inventory

-100

USD

PO Price

Cost Accounting

Consigned Trade In-

Transit Issue

Consigned Receivable

100

USD

PO Price

Cost Accounting

Consigned Trade In-

Transit Issue

Consigned In-Transit

-100

USD

PO Price

Cost Accounting generates distributions under inventory organization M4-NJ for the interorganization transfer from

M3-NY to M4-NJ.

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Cost Accounting

Consigned Trade

Receipt Accrual

Consigned Clearing

100

USD

PO Price

Cost Accounting

Consigned Trade

Receipt Accrual

Consigned Payable

-100

USD

PO Price

Cost Accounting

Consigned Trade In-

Transit Receipt

Consigned In-Transit

100

USD

PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Cost Accounting

Consigned Trade In-

Transit Receipt

Consigned Clearing

-100

USD

PO Price

Cost Accounting

In-Transit Receipt

Consigned Inspection

100

USD

PO Price

Cost Accounting

In-Transit Receipt

Consigned In-Transit

-100

USD

PO Price

Cost Accounting

In-Transit Delivery

Consigned Inventory

100

USD

PO Price

Cost Accounting

In-Transit Delivery

Consigned Inspection

-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M3-NY for the change of

ownership from supplier AND-Fresno to M3-NY.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

100

USD

Not applicable

PO Price

Receipt Accounting

Trade Receipt

Accrual

-100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Issue

Interorganization

Receivable

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M4-NJ for the change of

ownership from M3-NY to M4-NJ.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Transfer to Owned

Issue

Consigned

Inventory Offset

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned

Issue

Consigned

Inventory

-100

USD

Material

PO Price

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

100

USD

Not applicable

Transfer Price

Receipt Accounting

Trade Receipt

Accrual

Interorganization

Payable

-100

USD

Not applicable

Transfer Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-100

USD

Material

PO Price

Cost Accounting

Transfer to Owned

(Receipt)

Inventory

Valuation

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned

(Receipt)

Trade In-Transit

-100

USD

Material

PO Price

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

•

Example of Consigned Inventory Accounting of an Interorganization Transfer Across Business Units

•

What are the accounting distribution basis options for consigned inventory transactions?

•

Consigned Inventory Lifecycle

•

Consigned Inventory

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Example of Consigned Inventory Accounting in a Global Purchase

Order

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 Receipt Accounting and Oracle Cost Accounting 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 Inventory Management into Cost Accounting and Receipt Accounting.

• Transactions that flow from Oracle Supply Chain Financial Orchestration into Cost Accounting and Receipt

Accounting.

• Accounting entries that Cost Accounting and Receipt Accounting generate for the forward flow.

• Accounting entries that Cost Accounting and Receipt Accounting 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.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Interfaced Transactions

Cost Accounting and Receipt Accounting receive the following transaction from Inventory Management:

• Consignment Purchase Order (PO) #1000.

• Purchase Order price USD 100.

• 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.

• Receipt 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.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

The trade agreement, accounting rule sets, and associated purchase orders are set up in Supply Chain Financial

Orchestration, and the transactions flow into Receipt Accounting and Cost Accounting. The shipment from supplier to

inventory organization M2-LA is based on trade agreement GP #123 which has the following terms:

• Intercompany transfer price is USD 120.

• Intercompany invoicing is set to Yes.

• Profit tracking is set to Yes.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following are accounting entries for the forward flow.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Receipt Accounting generates distributions under inventory organization M2-LA for the consigned shipment from

supplier AND-Fresno to M2-LA.

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Receipt Accounting

PO Receipt

Consigned Clearing

100

USD

PO Price

Receipt Accounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

Receipt Accounting

PO Delivery

Consigned Inventory

100

USD

PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Receipt Accounting

PO Delivery

Consigned Clearing

-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seattle for the change

of ownership from supplier AND-Fresno to M1-Seattle.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

100

USD

Not applicable

PO Price

Receipt Accounting

Trade Receipt

Accrual

-100

USD

Not applicable

PO Price

Receipt Accounting

Trade In-Transit

Receipt

Trade In-Transit

100

USD

Not applicable

PO Price

Receipt Accounting

Trade In-Transit

Receipt

Trade clearing

-100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit

Issue

Intercompany Cost

of Goods Sold

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the change of

ownership from M1-Seattle to M2-LA.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Transfer to Owned

Issue

Consigned

Inventory Offset

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned

Issue

Consigned

Inventory

-100

USD

Material

PO Price

Receipt Accounting

Consigned Receipt

Consumption

Consigned Accrual

100

USD

Not applicable

PO Price

Receipt Accounting

Consigned Receipt

Consumption

Consigned

Clearing

-100

USD

Not applicable

PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

120

USD

Not applicable

Transfer Price

Receipt Accounting

Trade Receipt

Accrual

Intercompany

Accrual

-120

USD

Not applicable

Transfer Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Profit in Inventory

Internal Markup

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-120

USD

Material

Transfer Price

Cost Accounting

Transfer to Owned

(Receipt)

Inventory

Valuation

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned

(Receipt)

Inventory

Valuation

USD

Profit in Inventory

Internal Markup

Cost Accounting

Transfer to Owned

(Receipt)

Trade In-Transit

-100

USD

Material

PO Price

Cost Accounting

Transfer to Owned

(Receipt)

Trade In-Transit

-20

USD

Profit in Inventory

Internal Markup

Organization M2-LA returns goods to supplier AND-Fresno. The following are accounting entries for the return flow.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the change of

ownership from M2-LA to M1-Seattle:

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Transfer to

Consigned Receipt

Consigned

Inventory

100

USD

Material

PO Price

Cost Accounting

Transfer to

Consigned Receipt

Consigned

Inventory Offset

-100

USD

Material

PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Return

Accrual

Intercompany

Accrual

120

USD

Not applicable

Transfer Price

Receipt Accounting

Trade Return

Accrual

Trade Clearing

-120

USD

Not applicable

Transfer Price

Cost Accounting

Trade In-Transit

Return

Trade Clearing

120

USD

Material

Transfer Price

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-20

USD

Profit in Inventory

Internal Markup

Cost Accounting

Consigned Receipt

Consumption

Consigned

Clearing

100

USD

Material

PO Price

Cost Accounting

Consigned Receipt

Consumption

Consigned Accrual

-100

USD

Material

PO Price

Cost Accounting

Transfer to

Consigned Issue

Inventory

Valuation

100

USD

Material

PO Price

Cost Accounting

Transfer to

Consigned Issue

Inventory

Valuation

USD

Profit in Inventory

Internal Markup

Cost Accounting

Transfer to

Consigned Issue

Inventory

Valuation

USD

Overhead

Not applicable

Cost Accounting

Transfer to

Consigned Issue

Trade In-Transit

-100

USD

Material

PO Price

Cost Accounting

Transfer to

Consigned Issue

Trade In-Transit

-20

USD

Profit in Inventory

Internal Markup

Cost Accounting

Transfer to

Consigned Issue

Cost Variance*

-10

USD

Material

Not applicable

*Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance.

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-LA for the change of

ownership from M1-LA to supplier AND-Fresno:

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Return

Accrual

100

USD

Not applicable

PO Price

Receipt Accounting

Trade Return

Accrual

Trade Clearing

-100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit

Return

Trade Clearing

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return Receipt

Intercompany Cost

of Goods Sold

-100

USD

Material

PO Price

Receipt Accounting generates distributions under inventory organization M2-LA for the return shipment from M2-LA to

supplier AND-Fresno:

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Receipt Accounting

PO Return to Supplier

Consigned Accrual

100

USD

PO Price

Receipt Accounting

PO Return to Supplier

Consigned Clearing

-100

USD

PO Price

Receipt Accounting

PO Return to

Receiving

Consigned Clearing

100

USD

PO Price

Receipt Accounting

PO Return to

Receiving

Consigned Inventory

-100

USD

PO Price

Related Topics

•

Overview of Global Procurement Trade Accounting

•

What are the accounting distribution basis options for consigned inventory transactions?

•

Consigned Inventory Lifecycle

•

Consigned Inventory

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Example of Accounting of Global Procurement Trade Transactions

into Inventory

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 Receipt Accounting and Oracle Cost Accounting process transactions for these global procurement trade events

and generate subledger journal entries.

The following is an example of accounting performed by Cost Accounting and Receipt Accounting for a global

procurement flow into inventory. It illustrates:

• Transactions that are captured in Oracle Supply Chain Financial Orchestration and interfaced to Receipt

Accounting and Cost Accounting.

• Accounting entries that Receipt Accounting and Cost Accounting generate for the forward flow of a shipment

from the supplier, through the intermediary distributor, to the final receiving organization.

• Accounting entries that Receipt Accounting and Cost Accounting 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 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 Receipt Accounting and Cost Accounting based on this

setup:

• Purchase Order (PO) price from China Supplier to China Ltd. is USD 50.

• Intercompany transfer price from China Ltd. to US Inc. is USD 100.

• Intercompany invoicing is set to Yes.

• Profit tracking is set to Yes.

• Overhead rule is configured in Cost Accounting for transaction type Trade in-Transit Receipt in Cost

Organization CO1.

• China Ltd books a profit of USD 40 (USD 100 transfer price - USD 50 PO price - USD 10 overhead).

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following figure illustrates accounting entries for the forward flow from legal entity China Ltd. to legal entity US Inc.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Receipt Accounting generates distributions under business unit CN and inventory organization M1. Cost Accounting

generates distributions under cost organization CO1 and inventory organization M1.

The following table describes those distributions.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

USD

Not Applicable

PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

-50

USD

Not Applicable

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-50

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Receipt

Expense

USD

Overhead

Overhead Rate

Cost Accounting

Trade In-Transit

Receipt

Overhead

Absorption

-10

USD

Overhead

Overhead Rate

Cost Accounting

Trade In-Transit

Issue

Intercompany

COGS

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-50

USD

Material

PO Price

Accounts

Receivable

Intercompany

Accounts

Receivable Invoice

Intercompany

Receivable

100

USD

Not Applicable

Transfer Price

Accounts

Receivable

Intercompany

Accounts

Receivable Invoice

Intercompany

Revenue

-100

USD

Not Applicable

Transfer Price

Receipt Accounting

Supplier Invoice

Accrual

USD

Not Applicable

PO Price

Receipt Accounting

Supplier Invoice

Liability

-50

USD

Not Applicable

PO Price

Receipt Accounting generates distributions under business unit US West and inventory organization M2. Cost

Accounting generates distributions under cost organization CO2 and inventory organization M2.

The following table describes those distributions.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

100

USD

Not Applicable

Transfer Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Intercompany

Accrual

-100

USD

Not Applicable

Transfer Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Material

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Overhead

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Profit in Inventory

Internal Markup

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-100

USD

Material

Transfer Price

Accounts Payable

Intercompany

Accounts Payable

Invoice

Intercompany

Accrual

100

USD

Not Applicable

Transfer Price

Accounts Payable

Intercompany

Accounts Payable

Invoice

Intercompany

Liability

-100

USD

Not Applicable

Transfer Price

Receipt Accounting

PO Receipt

Receiving

Inspection

100

USD

Not Applicable

Transfer Price

Receipt Accounting

PO Receipt

Trade In-Transit

-100

USD

Not Applicable

Transfer Price

Cost Accounting

PO Delivery

Inventory

Valuation

USD

Material

Sending

Organization Cost

Cost Accounting

PO Delivery

Inventory

Valuation

USD

Overhead

Sending

Organization Cost

Cost Accounting

PO Delivery

Inventory

Valuation

USD

Profit in Inventory

Internal Markup

Cost Accounting

PO Delivery

Receiving

Inspection

-100

USD

Not Applicable

Transfer Price

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.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Receipt Accounting generates distributions under business unit US West and inventory organization M2. Cost

Accounting generates distributions under cost organization CO2 and inventory organization M2.

The following table describes those distributions.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Return

Accrual

Intercompany

Accrual

100

USD

Not Applicable

Transfer Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Return

Accrual

Trade Clearing

-100

USD

Not Applicable

Transfer Price

Cost Accounting

Trade In-Transit

Return

Trade Clearing

100

USD

Material

Transfer Price

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-50

USD

Material

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-10

USD

Overhead

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-40

USD

Profit in Inventory

Internal Markup

Cost Accounting

Return to

Receiving

Inspection

100

USD

Material,

Overhead, and

Profit in Inventory

Transfer Price

Cost Accounting

Return to

Receiving

Inventory

Valuation

-50

USD

Material

Sending

Organization Cost

Cost Accounting

Return to

Receiving

Inventory

Valuation

-10

USD

Overhead

Sending

Organization Cost

Cost Accounting

Return to

Receiving

Inventory

Valuation

-40

USD

Profit in Inventory

Internal Markup

Receipt Accounting

Return to Supplier

Trade In-Transit

100

USD

Not Applicable

Transfer Price

Receipt Accounting

Return to Supplier

Receiving

Inspection

-100

USD

Not Applicable

Transfer Price

Receipt Accounting

Intercompany AP

Invoice

Intercompany

Liability

100

USD

Not Applicable

Transfer Price

Receipt Accounting

Intercompany AP

Invoice

Intercompany

Accrual

-100

USD

Not Applicable

Transfer Price

Receipt Accounting generates distributions under business unit CN and inventory organization M1. Cost Accounting

generates distributions under cost organization CO1 and inventory organization M1.

The following table describes those distributions.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Return

Accrual

USD

Not Applicable

PO Price

Receipt Accounting

Trade Return

Accrual

Trade Clearing

-50

USD

Not Applicable

PO Price

Cost Accounting

Trade In-Transit

Return

Trade Clearing

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return

Cost Variance*

USD

Not Applicable

Inventory is

depleted at the

current cost, and

the difference

between transfer

price and cost is

booked as cost

variance

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-50

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-10

USD

Overhead

Overhead Rate

Cost Accounting

Trade In-Transit

Return Receipt

Trade In-Transit

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return Receipt

Trade In-Transit

USD

Overhead

Overhead Rate

Cost Accounting

Trade In-Transit

Return Receipt

Intercompany

COGS

-50

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return Receipt

Intercompany

COGS

-10

USD

Overhead

Overhead Rate

Accounts

Receivable

Intercompany

Accounts

Receivable Invoice

Intercompany

Revenue

100

USD

Not Applicable

Transfer Price

Accounts

Receivable

Intercompany

Accounts

Receivable Invoice

Intercompany

Receivable

-100

USD

Not Applicable

Transfer Price

Receipt Accounting

Supplier Invoice

Liability

USD

Not Applicable

PO Price

Receipt Accounting Supplier Invoice Accrual -50 USD Not Applicable PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

*Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance.

Related Topics

•

Overview of Global Procurement Trade Accounting

•

Example of Accounting of Global Procurement Trade Transactions into Expense

•

Review Item Cost and Global Procurement Trade Transaction Accounting

Example of Accounting of Interorganization Transfers Across

Business Units

This example illustrates:

• Transactions that are captured in Oracle Supply Chain Financial Orchestration and interfaced to Oracle Receipt

Accounting and Oracle Cost Accounting.

• Accounting entries that Receipt Accounting and Cost Accounting 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 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 Receipt Accounting and Cost Accounting based on this setup:

• China Ltd. acquires goods locally at the cost of USD 50, plus USD 10 overhead on the receipt of goods.

• Intercompany transfer price from China Ltd. to US Inc. is USD 100.

• Intercompany invoicing is set to No.

• Profit tracking is set to Yes.

• Overhead rule is configured in Cost Accounting for transaction type Trade in-Transit Receipt in Cost

Organization CO1.

• China Ltd. books a profit of USD 40 (USD 100 transfer price - USD 50 acquisition cost - USD 10 overhead).

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the transfer of goods.

Accounting Entries

The following figure illustrates accounting entries for the shipment from legal entity China Ltd. to legal entity US Inc.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Cost Accounting generates distributions under cost organization CO1 and inventory organization M1.

The following table describes the distributions:

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

In-Transit

Shipment

Trade In-Transit

USD

Material

Current Cost

Cost Accounting

In-Transit

Shipment

Trade In-Transit

USD

Overhead

Current Cost

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

In-Transit

Shipment

Inventory

-50

USD

Material

Current Cost

Cost Accounting

In-Transit

Shipment

Inventory

-10

USD

Overhead

Current Cost

Cost Accounting

Trade In-Transit

Issue

Interorganization

Receivable

100

USD

Material, Overhead

Transfer Price

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-50

USD

Material

Current Cost

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-10

USD

Not applicable

Internal Markup

(Transfer Price

minus Current

Cost)

Cost Accounting

Trade In-Transit

Issue

Interorganization

Gain/Loss

-40

USD

Not applicable

Internal Markup

Receipt Accounting generates distributions under business unit US West and inventory organization M2. Cost

Accounting generates distributions under cost organization CO2 and inventory organization M2.

The following table describes those distributions.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

100

USD

Not applicable

Transfer Price

Receipt Accounting

Trade Receipt

Accrual

Interorganization

Payable

-100

USD

Not applicable

Transfer Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Material

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Overhead

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Profit in Inventory

Internal Markup

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-100

USD

Material,

Overhead, and

Profit in Inventory

Transfer Price

Receipt Accounting

Interorganization

Receipt

Receiving

Inspection

100

USD

Not applicable

Transfer Price

Receipt Accounting

Interorganization

Receipt

Trade In-Transit

-100

USD

Not applicable

Transfer Price

Cost Accounting

Interorganization

Delivery

Inventory

USD

Material

Sending

Organization Cost

Cost Accounting

Interorganization

Delivery

Inventory

USD

Overhead

Sending

Organization Cost

Cost Accounting

Interorganization

Delivery

Inventory

USD

Profit in Inventory

Internal Markup

Cost Accounting

Interorganization

Delivery

Receiving

Inspection

-100

USD

Material,

Overhead, and

Profit in Inventory

Transfer Price

Related Topics

•

Example of Accounting of Interorganization Transfers Within the Same Business Unit

•

Review Item Cost and Global Procurement Trade Transaction Accounting

Example of Accounting of Trade Transactions in Internal Drop

Shipments

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 Cost Accounting and Oracle Receipt Accounting for an

internal drop shipment. It illustrates:

• Transactions that are captured in Oracle Supply Chain Financial Orchestration and interfaced to Receipt

Accounting and Cost Accounting.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

• Accounting entries that Receipt Accounting and Cost Accounting generate for the drop shipment flow from the

selling organization to the customer of the buying organization.

• Accounting entries that Receipt Accounting and Cost Accounting 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 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 Receipt Accounting and Cost Accounting based on this setup:

• China Ltd. acquires goods locally at the cost of USD 50, plus USD 10 overhead on the receipt of goods.

• Intercompany transfer price from China Ltd. to US Inc. is USD 100.

• Intercompany invoicing is set to Yes.

• Overhead rule is configured in Cost Accounting for transaction type Trade in-Transit Receipt in Cost

Organization CO1.

• US Inc. books a profit of USD 40 (USD 100 transfer price - USD 50 PO price - USD 10 overhead).

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the transfer of goods.

Accounting Entries

The following figure illustrates accounting entries for the shipment from legal entity China Ltd. to legal entity US Inc.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Cost Accounting generates distributions under cost organization CO1 and inventory organization M1.

The following table describes the cost accounting entries.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Sales Order Issue

Trade In-Transit

USD

Material

Current Cost

Cost Accounting

Sales Order Issue

Trade In-Transit

USD

Overhead

Current Cost

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Sales Order Issue

Inventory

-50

USD

Material

Current Cost

Cost Accounting

Sales Order Issue

Inventory

-10

USD

Overhead

Current Cost

Cost Accounting

Trade In-Transit

Issue

Intercompany Cost

of Goods Sold

USD

Material

Current Cost

Cost Accounting

Trade In-Transit

Issue

Intercompany Cost

of Goods Sold

USD

Overhead

Current Cost

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-50

USD

Material

Current Cost

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-10

USD

Overhead

Current Cost

Accounts

Receivable

Intercompany

Accounts

Receivable Invoice

Intercompany

Receivable

100

USD

Not Applicable

Transfer Price

Accounts

Receivable

Intercompany

Accounts

Receivable Invoice

Intercompany

Revenue

-100

USD

Not Applicable

Transfer Price

Receipt Accounting generates distributions under business unit US West and inventory organization M2. Cost

Accounting generates distributions under cost organization CO2 and inventory organization M2.

The following table describes the receipt and cost accounting entries.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

100

USD

Not Applicable

Transfer Price

Receipt Accounting

Trade Receipt

Accrual

Intercompany

Accrual

-100

USD

Not Applicable

Transfer Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Material

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Overhead

Sending

Organization Cost

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Profit in Inventory

Internal Markup

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-100

USD

Material,

Overhead, and

Profit in Inventory

Transfer Price

Accounts Payable

Intercompany

Accounts Payable

Invoice

Intercompany

Accrual

100

USD

Not Applicable

Transfer Price

Accounts Payable

Intercompany

Accounts Payable

Invoice

Intercompany

Liability

-100

USD

Not Applicable

Transfer Price

Cost Accounting

Trade Sales Issue

Deferred Cost of

Goods Sold

USD

Material

Sending

Organization Cost

Cost Accounting

Trade Sales Issue

Deferred Cost of

Goods Sold

USD

Overhead

Sending

Organization Cost

Cost Accounting

Trade Sales Issue

Deferred Cost of

Goods Sold

USD

Profit in Inventory

Internal Markup

Cost Accounting

Trade Sales Issue

Trade In-Transit

-50

USD

Material

Sending

Organization Cost

Cost Accounting

Trade Sales Issue

Trade In-Transit

-10

USD

Overhead

Sending

Organization Cost

Cost Accounting

Trade Sales Issue

Trade In-Transit

-40

USD

Profit in Inventory

Internal Markup

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).

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Receipt Accounting generates distributions under business unit US West and inventory organization M2. Cost

Accounting generates distributions under cost organization CO2 and inventory organization M2.

The following table describes those receipt and cost accounting entries.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Return

Accrual

Intercompany

Accrual

100

USD

Not Applicable

Transfer Price

Receipt Accounting

Trade Return

Accrual

Trade Clearing

-100

USD

Not Applicable

Transfer Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Trade In-Transit

Return

Trade Clearing

100

USD

Split into three

lines (Material,

Overhead, and

Profit in Inventory)

Transfer Price

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-50

USD

Material

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-10

USD

Overhead

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-40

USD

Profit in Inventory

Internal Markup

Accounts Payable

Intercompany

Accounts Payable

Debit Memo

Intercompany

Liability

100

USD

Not Applicable

Transfer Price

Accounts Payable

Intercompany

Accounts Payable

Debit Memo

Intercompany

Accrual

-100

USD

Not Applicable

Transfer Price

Cost Accounting

Trade Sales Return

Receipt

Trade In-Transit

USD

Material

Sending

Organization Cost

Cost Accounting

Trade Sales Return

Receipt

Trade In-Transit

USD

Overhead

Sending

Organization Cost

Cost Accounting

Trade Sales Return

Receipt

Trade In-Transit

USD

Profit in Inventory

Internal Markup

Cost Accounting

Trade Sales Return

Receipt

Deferred RMA

Gain/Loss

-50

USD

Material

Sending

Organization Cost

Cost Accounting

Trade Sales Return

Receipt

Deferred RMA

Gain/Loss

-10

USD

Overhead

Sending

Organization Cost

Cost Accounting

Trade Sales Return

Receipt

Deferred RMA

Gain/Loss

-40

USD

Profit in Inventory

Internal Markup

Receipt Accounting generates distributions under business unit CN and inventory organization M1. Cost Accounting

generates distributions under cost organization CO1 and inventory organization M1.

The following table describes those accounting entries.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

RMA Receipt

Inventory*

USD

Material

Current Cost

Cost Accounting

RMA Receipt

Inventory

USD

Overhead

Current Cost

Cost Accounting

RMA Receipt

Trade In-Transit

-50

USD

Material

Current Cost

Cost Accounting

RMA Receipt

Trade In-Transit

-10

USD

Overhead

Current Cost

Cost Accounting

Trade In-Transit

Return Receipt

Trade In-Transit

USD

Material

Current Cost

Cost Accounting

Trade In-Transit

Return Receipt

Trade In-Transit

USD

Overhead

Current Cost

Cost Accounting

Trade In-Transit

Return Receipt

Intercompany Cost

of Goods Sold

-50

USD

Material

Current Cost

Cost Accounting

Trade In-Transit

Return Receipt

Intercompany Cost

of Goods Sold

-10

USD

Overhead

Current Cost

Accounts

Receivable

Intercompany

Accounts

Receivable Credit

Memo

Intercompany

Revenue

100

USD

Not Applicable

Transfer Price

Accounts

Receivable

Intercompany

Accounts

Receivable Credit

Memo

Intercompany

Receivable

-100

USD

Not Applicable

Transfer Price

* Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance.

Related Topics

•

Overview of Global Procurement Trade Accounting

•

Review Item Cost and Global Procurement Trade Transaction Accounting

•

Example of Accounting of Global Procurement Trade Transactions into Inventory

•

Promise Sales Orders in Your Drop Ship Flow

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Example of Accounting of Global Procurement Trade Transactions

into Expense

Oracle Receipt Accounting and Oracle Cost Accounting process transactions and create distributions for global

procurement purchases that are received into expense destinations rather than inventory, and for services that are

expensed.

The following is an example of accounting performed by Cost Accounting and Receipt Accounting for a global

procurement flow into expense. It illustrates:

• Transactions that are captured in Oracle Supply Chain Financial Orchestration and interfaced to Receipt

Accounting and Cost Accounting.

• Accounting entries that Receipt Accounting and Cost Accounting generate for the forward flow of goods or

services from the supplier, through the intermediary distributor, to the final receiving organization.

• Accounting entries that Receipt Accounting and Cost Accounting 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 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 Receipt Accounting and Cost Accounting based on this

setup:

• Purchase Order (PO) price from China Supplier to China Ltd is USD 50.

• Intercompany transfer price from China Ltd to US Inc is USD 100.

• Intercompany invoicing is set to Yes.

• Profit tracking is set to Yes.

• Overhead rule is configured in Cost Accounting for transaction type Trade in-Transit Receipt in cost

organization CO1.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following figure illustrates the accounting entries for the forward flow from China Ltd (sold-to legal entity) to US Inc

(receiving legal entity).

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Receipt Accounting generates distributions under business unit CN and inventory organization M1. Cost Accounting

generates distributions under cost organization CO1 and inventory organization M1.

The following table describes those receipt and cost accounting entries.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

USD

Not Applicable

PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

-50

USD

Not Applicable

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-50

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Overhead

Overhead Rate

Cost Accounting

Trade In-Transit

Receipt

Overhead

Absorption

-10

USD

Overhead

Overhead Rate

Cost Accounting

Trade In-Transit

Issue

Intercompany

COGS

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-50

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Issue

Intercompany

COGS

USD

Overhead

Overhead Rate

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-10

USD

Overhead

Overhead Rate

Accounts

Receivable

Intercompany

Accounts

Receivable Invoice

Intercompany

Receivable

100

USD

Not Applicable

Transfer Price

Accounts

Receivable

Intercompany

Accounts

Receivable Invoice

Intercompany

Revenue

-100

USD

Not Applicable

Transfer Price

Receipt Accounting

Supplier Invoice

Accrual

USD

Not Applicable

PO Price

Receipt Accounting

Supplier Invoice

Liability

-50

USD

Not Applicable

PO Price

Receipt Accounting generates distributions under business unit US West and inventory organization M2. Cost

Accounting generates distributions under cost organization CO2 and inventory organization M2.

The following table describes those receipt and cost accounting entries.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

100

USD

Not Applicable

Transfer Price

Receipt Accounting

Trade Receipt

Accrual

Intercompany

Accrual

-100

USD

Not Applicable

Transfer Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

100

USD

Material

Transfer Price

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-100

USD

Material

Transfer Price

Accounts Payable

Intercompany

Accounts Payable

Invoice

Intercompany

Accrual

100

USD

Not Applicable

Transfer Price

Accounts Payable

Intercompany

Accounts Payable

Invoice

Intercompany

Liability

-100

USD

Not Applicable

Transfer Price

Receipt Accounting

PO Receipt

Receiving

Inspection

100

USD

Not Applicable

Transfer Price

Receipt Accounting

PO Receipt

Trade In-Transit

-100

USD

Not Applicable

Transfer Price

Receipt Accounting

PO Delivery

Expense

100

USD

Not Applicable

Transfer Price

Receipt Accounting

PO Delivery

Receiving

Inspection

-100

USD

Not Applicable

Transfer Price

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 .

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Receipt Accounting generates distributions under business unit US West and inventory organization M2. Cost

Accounting generates distributions under cost organization CO2 and inventory organization M2.

The following table describes those receipt and cost accounting entries.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Return

Accrual

Intercompany

Accrual

100

USD

Not Applicable

Transfer Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Return

Accrual

Trade Clearing

-100

USD

Not Applicable

Transfer Price

Cost Accounting

Trade In-Transit

Return

Trade Clearing

100

USD

Material

Transfer Price

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-100

USD

Material

Transfer Price

Receipt Accounting

Return to

Receiving

Inspection

100

USD

Not Applicable

Transfer Price

Receipt Accounting

Return to

Receiving

Expense

-100

USD

Not Applicable

Transfer Price

Receipt Accounting

Return to Supplier

Trade In-Transit

100

USD

Not Applicable

Transfer Price

Receipt Accounting

Return to Supplier

Receiving

Inspection

-100

USD

Not Applicable

Transfer Price

Accounts Payable

Intercompany

Accounts Payable

Invoice

Intercompany

Liability

100

USD

Not Applicable

Transfer Price

Accounts Payable

Intercompany

Accounts Payable

Invoice

Intercompany

Accrual

-100

USD

Not Applicable

Transfer Price

Receipt Accounting generates distributions under business unit CN and inventory organization M1. Cost Accounting

generates distributions under cost organization CO1 and inventory organization M1.

The following table describes those receipt and cost accounting entries.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Return

Accrual

Intercompany

Accrual

USD

Not Applicable

PO Price

Receipt Accounting

Trade Return

Accrual

Trade Clearing

-50

USD

Not Applicable

PO Price

Cost Accounting

Trade In-Transit

Return

Trade Clearing

USD

Material

PO Price

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Trade In-Transit

Return

Cost Variance*

USD

Overhead

Overhead Rate

Cost Accounting

Trade In-Transit

Return

Trade In-Transit

-50

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return

Trade Clearing

-10

USD

Overhead

Overhead Rate

Cost Accounting

Trade In-Transit

Return Receipt

Trade In-Transit

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return Receipt

Trade In-Transit

USD

Overhead

Overhead Rate

Cost Accounting

Trade In-Transit

Return Receipt

Intercompany Cost

of Goods Sold

-50

USD

Material

PO Price

Cost Accounting

Trade In-Transit

Return Receipt

Intercompany Cost

of Goods Sold

-10

USD

Overhead

Overhead Rate

Accounts

Receivable

Intercompany

Accounts

Receivable Invoice

Intercompany

Revenue

100

USD

Not Applicable

Transfer Price

Accounts

Receivable

Intercompany

Accounts

Receivable Invoice

Intercompany

Receivables

-100

USD

Not Applicable

Transfer Price

Receipt Accounting

Supplier Invoice

Liability

USD

Not Applicable

PO Price

Receipt Accounting

Supplier Invoice

Accrual

-50

USD

Not Applicable

PO Price

*Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance.

Related Topics

•

Example of Accounting of Global Procurement Trade Transactions into Inventory

•

Overview of Global Procurement Trade Accounting

•

Review Item Cost and Global Procurement Trade Transaction Accounting

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Example of Accounting of Interorganization Transfers Within the

Same Business Unit

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 Cost Accounting creates the trade events and they do not flow through Oracle Supply Chain Financial

Orchestration.

The following is an example of accounting performed by Oracle Receipt Accounting and Cost Accounting 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 USD 50 plus overhead of USD 10.

Analysis

Receipt Accounting and Cost Accounting create accounting entries for the transfer of goods.

The following figure illustrates those accounting entries.

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Accounting Entries

Receipt Accounting generates distributions under business unit US West and inventory organization M1. Cost

Accounting generates distributions under cost organization CO1 and inventory organization M1.

The following table describes the cost accounting entries.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

In-Transit

Shipment

Trade In-Transit

USD

Material

Current Cost

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

In-Transit

Shipment

Trade In-Transit

USD

Overhead

Current Cost

Cost Accounting

In-Transit

Shipment

Inventory

-50

USD

Material

Current Cost

Cost Accounting

In-Transit

Shipment

Inventory

-10

USD

Overhead

Current Cost

Cost Accounting

Trade In-Transit

Issue

Interorganization

Receivable

USD

Material +

Overhead

Current Cost

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-50

USD

Material

Current Cost

Cost Accounting

Trade In-Transit

Issue

Trade In-Transit

-10

USD

Overhead

Current Cost

Receipt Accounting generates distributions under business unit US West and inventory organization M2. Cost

Accounting generates distributions under cost organization CO2 and inventory organization M2.

The following table describes the receipt and cost accounting entries.

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

USD

Not Applicable

Sending

Organization Cost

Receipt Accounting

Trade Receipt

Accrual

Interorganization

Payable

-60

USD

Not Applicable

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Material

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Overhead

Sending

Organization Cost

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-60

USD

Material +

Overhead

Sending

Organization Cost

Receipt Accounting

Interorganization

Receipt

Receiving

Inspection

USD

Not Applicable

Sending

Organization Cost

100

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Interorganization

Receipt

Trade In-Transit

-60

USD

Not Applicable

Sending

Organization Cost

Cost Accounting

Interorganization

Delivery

Inventory

USD

Material

Sending

Organization Cost

Cost Accounting

Interorganization

Delivery

Inventory

USD

Overhead

Sending

Organization Cost

Cost Accounting

Interorganization

Delivery

Receiving

Inspection

-60

USD

Material +

Overhead

Sending

Organization Cost

Related Topics

•

Example of Accounting of Interorganization Transfers Across Business Units

Tax Accounting for Receipt Transactions

To comply with tax regulations, calculate taxes and generate tax distributions for all receipt transactions. You can

capture item prices, inclusive and exclusive taxes on your purchases. Receipt costs are adjusted to account inclusive

taxes that were included in the item purchase price. Inclusive taxes are booked to a tax liability or recovery account.

You configure the tax point basis and tax point date in Oracle Fusion Cloud Financials. Based on this configuration,

taxes are calculated either on delivery or invoice generation. For more information about configuring and calculating

taxes, see the Oracle Fusion Cloud Financials Using Tax guide available on the Oracle Help Center.

Prerequisites

You must assigned a role with the privileges listed here:

• Create Tax Processing Options (ZX_CREATE_TAX_PROCESSING_OPTIONS_PRIV)

This allows creation of configuration owner tax options to differentiate setup from the predefined event class

setup.

• Update Tax Processing Options (ZX_UPDATE_TAX_PROCESSING_OPTIONS_PRIV)

This allows update of configuration owner tax options to differentiate setup from the predefined event class

setup.

• Verify Tax Configuration (ZX_VERIFY_TAX_CONFIGURATION_PRIV)

This allows verification of tax configuration for taxes that are enabled for transactions or for simulation by

simulating real-time transactions.

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Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Configure the following to automatically calculate and account taxes.

• In the Offerings work area, enable the Tax Calculation on Receipt Accounting Distributions feature at the

Financials offering level.

• Enable delivery-based tax calculation for invoices:

a. In the Setup and Maintenance work area, go to the following:

- Offering: Financials

- Functional Area: Transaction Tax

- Task: Manage Configuration Owner Tax

b. From the Configuration Owner drop-down list, select the relevant business unit.

c. From the Application Name drop-down list, select Payables.

d. From the Event Class drop-down list, select Standard Invoices.

e. From the Tax Point Basis drop-down list, select Invoice.

f. From the Tax Point Date drop-down list, select Receipt Date.

For more information about configuring and calculating taxes, see the Oracle Fusion Cloud Financials

Using Tax guide available on the Oracle Help Center.

• Configure the application to automatically calculate taxes for trade receipt accrual:

a. In the Setup and Maintenance work area, go to the following:

- Offering: Manufacturing and Supply Chain Materials Management

- Functional Area: Supply Chain Financial Flows

- Task: Manage Supply Chain Financial Orchestration System Options

b. Select Calculate tax for trade receipt accrual.

• Configure the application to automatically calculate and account nonrecoverable taxes on intercompany

invoices:

a. Navigate to the Financial Orchestration work area.

b. In the Tasks pane, click Manage Documentation and Accounting Rules.

c. Click the required documentation and accounting rule.

d. Under Required Tasks, select Intercompany Invoices.

How Taxes are Calculated and Accounted

Here's how taxes are calculated and accounted for different combinations of tax point basis and tax point dates:

Tax Point Basis Tax Point Date Tax Calculation Tax Accounting Variance Calculation and

Accounting

Delivery

Receipt Date

Taxes are calculated on

goods receipt

Recoverable and

nonrecoverable taxes are

accounted on goods receipt

Not Applicable

Invoice

Receipt Date

Taxes are calculated on

goods receipt

• Nonrecoverable taxes

are accounted on

goods receipt

Not Applicable

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Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Tax Point Basis Tax Point Date Tax Calculation Tax Accounting Variance Calculation and

Accounting

• Recoverable taxes are

accounted on invoice

generation

Invoice

Invoice Date

Taxes are calculated on

invoice generation

Recoverable and

nonrecoverable taxes

are accounted on invoice

generation

Tax variance is calculated

and accounted for

difference in the taxes

estimated on purchase

order and final tax

calculated on invoice

Oracle Receipt Accounting receives transactions and related tax determinants from outside sources such as Oracle

Receiving, Oracle Inventory Inventory, and Oracle Accounts Payable. The following discusses:

• Import of tax determinants into Receipt Accounting

• Tax distributions created by Receipt Accounting

• Tax distributions by Oracle Cost Accounting

• Review of tax distributions

103

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Import Tax Determinants

Here's how you can import transactions and related tax determinants from outside sources on the Scheduled Processes

page in the Scheduled Processes work area.

• Select the Transfer Transactions from Receiving to Receipt Accounting process to import receipt transactions

into Receipt Accounting.

• Select the Transfer Costs to Cost Management process to import accounts payable transactions into Receipt

Accounting and Cost Accounting.

104

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Tax Distributions by Receipt Accounting

The Receipt Accounting 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 Receipt Accounting Processor on the Create Receipt Accounting Distributions page in the Receipt Accounting

work area.

Tax Distributions by Cost Accounting

The Cost Accounting Processor uses tax results generated by Receipt Accounting to calculate inventory acquisition

costs including nonrecoverable taxes.

Run the Cost Accounting Processor on the Create Cost Accounting Distributions page in the Cost Accounting work area.

Review Tax Distributions

On the Review Receipt Accounting Distributions page in the Receipt Accounting work area view results of the Receipt

Accounting Processor:

• Distributions and journal entries for receipt transactions

• Tax determinants accessed by clicking the links in the Tax Determinants column

• Transaction taxes accessed by clicking the Transaction Unit Cost links in the Cost Information tab

On the Review Cost Accounting Distributions page in the Cost Accounting work area view results of the Cost Accounting

Processor:

• Distributions and journal entries for inventory transactions

• Inventory unit costs including taxes in the Cost Information tab

Related Topics

•

Example of Tax Accounting for a Simple Procurement Transaction

•

Example of Tax Accounting for a Consigned Inventory Transaction

•

Example of Tax Accounting for a Purchase Order Retroactive Price Change

•

Example of Tax Accounting for Interorganization Transfers Across Business Units

•

Example of Tax Accounting for Internal Drop Shipments

Example of Tax Accounting for a Simple Procurement Transaction

This example illustrates tax accounting performed by Oracle Receipt Accounting and Oracle Cost Accounting for a

simple procurement transaction that uses a tax point basis of delivery, that is, taxes are accounted at receipt of the

goods.

105

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Scenario

The supplier makes a shipment to the inventory organization based on a purchase order (PO) for USD 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 Receipt 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 USD 75 (that is, USD 1,000 * 15% * 50%).

• Tax B invoice basis = 25%, which is changed from 20% estimated at the time of PO. Recoverable and

nonrecoverable portions are both 50%, which is equal to USD 125 (that is, USD 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 USD 150.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions when the goods are received and when the

invoice is accounted.

Tax Accounting Entries

Receipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt:

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

PO Receipt

Receiving

Inspection

1,000

USD

Material

PO Price

Receipt Accounting

PO Receipt

Receiving

Inspection

USD

Tax

Tax A Delivery-

Based

Nonrecoverable:

USD 1,000 * 15% *

50%

Receipt Accounting

PO Receipt

Tax Recoverable

USD

Tax

Tax A Delivery-

Based Recoverable:

USD 1,000 * 15% *

50%

106

Oracle Fusion Cloud SCM

Using Supply Chain Cost Management

Chapter 2

Receipt Accounting

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

PO Receipt

Receiving

Inspection

125

USD

Tax

Tax B Invoice-

Based

Nonrecoverable:

USD 1,000 * 25% *

50%

Receipt Accounting

PO Receipt

Supplier Accrual

-1,275

USD

Not applicable

Cost Accounting

PO Delivery

Inventory

Valuation

1,200*

USD

Not applicable

Cost Accounting

PO Delivery

Receiving

Inspection

-1,200*

USD

Not applicable

*PO price plus nonrecoverable taxes A and B.

Accounts Payable generates the following accounting entries for the supplier when invoice is created:

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

1,275

USD

Not applicable

Accounts Payable

Invoice

Tax Recoverable

150

USD

Tax

Tax B Invoice-

Based Recoverable:

USD 1,000 * 30% *

50%

Accounts Payable

Invoice

Tax B Rate

Variance*

USD

Not applicable

Difference between

tax estimated at

25% and actual

calculated at 30%

Accounts Payable

Invoice

Supplier Liability

-1,450

USD

Not applicable

*Tax variance due to the difference between rates at time of delivery versus invoice.

Receipt Accounting and Cost Accounting generate the following accounting entries when invoice is accounted:

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency

Receipt Accounting

Invoice Price

Receiving Inspection

USD

Receipt Accounting Invoice Price Adjustment Tax B Rate Variance* -25 USD

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Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency

Cost Accounting

Acquisition Cost

Adjustment

Inventory Valuation**

USD

Cost Accounting

Acquisition Cost

Adjustment

Receiving Inspection

-25

USD

*Tax variance due to the difference between tax rates at time of delivery versus invoice.

**Inventory acquisition cost adjustment for nonrecoverable tax B.

Related Topics

•

Tax Accounting for Receipt Transactions

•

What's a tax point basis?

•

What's a tax point date?

•

When are nonrecoverable taxes calculated on Intercompany transactions?

Example of Tax Accounting for a Consigned Inventory Transaction

This example illustrates tax accounting performed by Oracle Receipt Accounting and Oracle Cost Accounting 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

USD 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 Receipt and Invoice

Tax details at the consigned receipt of goods are:

• Item value = USD 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 USD 75, that is, USD 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 USD 125, that is, USD 1,000 * 25% * 50%.

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Tax details at the time of invoice are:

• Item value = USD 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 USD 150.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions when the consigned good are received, when

the status changes from consigned to owned, and when the invoice is accounted.

Tax Accounting Entries

Receipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt of consigned

goods:

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Consigned PO

Receipt

Consigned

Clearing

1,000

USD

Material

PO Price

Receipt Accounting

Consigned PO

Receipt

Consigned

Clearing

USD

Tax

Tax A Delivery-

Based

Nonrecoverable:

USD 1,000 * 15% *

50%

Receipt Accounting

Consigned PO

Receipt

Consigned

Clearing

125

USD

Tax

Tax B Invoice-

Based

Nonrecoverable:

USD 1,000 * 25% *

50%

Receipt Accounting

Consigned PO

Receipt

Consigned Accrual

-1,200

USD

Not applicable

Cost Accounting

Consigned PO

Delivery

Consigned

Inventory*

1,200

USD

Not applicable

Receipt Accounting

Consigned PO

Delivery

Consigned

Clearing

-1,200

USD

Not applicable

*PO price plus nonrecoverable taxes A and B.

Receipt Accounting and Cost Accounting generate the following accounting entries at the time of change of status from

consigned to owned stock:

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Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Consigned Receipt

Consumption

Consigned Accrual

1,000

USD

Material

PO Price

Receipt Accounting

Consigned Receipt

Consumption

Consigned Accrual

USD

Not applicable

Tax A Delivery-

Based

Nonrecoverable:

USD 1,000 * 15% *

50%

Receipt Accounting

Consigned Receipt

Consumption

Consigned Accrual

125

USD

Not applicable

Tax B Invoice-

Based

Nonrecoverable:

USD 1,000 * 15% *

50%

Receipt Accounting

Consigned Receipt

Consumption

Consigned

Clearing

-1,200

USD

Not applicable

Cost Accounting

Transfer to Owned

Issue

Consigned

Inventory Offset

1,000

USD

Material

PO Price

Cost Accounting

Transfer to Owned

Issue

Consigned

Inventory Offset

USD

Nonrecoverable

Tax

Tax A Delivery-

Based

Nonrecoverable

Cost Accounting

Transfer to Owned

Issue

Consigned

Inventory Offset

125

USD

Nonrecoverable

Tax

Tax B Invoice-

Based

Nonrecoverable

Cost Accounting

Transfer to Owned

Issue

Consigned

Inventory

-1,200

USD

Not applicable

PO Price

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

1,000

USD

Not applicable

PO Price

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

USD

Not applicable

Tax A Delivery-

Based

Nonrecoverable

Receipt Accounting

Trade Receipt

Accrual

Trade Clearing

125

USD

Not applicable

Tax B Invoice-

Based

Nonrecoverable

Receipt Accounting

Trade Receipt

Accrual

Tax Recoverable*

USD

Not applicable

Tax A Delivery-

Based Recoverable

Receipt Accounting

Trade Receipt

Accrual

Supplier Accrual

-1,275

USD

Not applicable

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Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

1,000

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

USD

Not applicable

Tax A Delivery-

Based

Nonrecoverable

Cost Accounting

Trade In-Transit

Receipt

Trade In-Transit

125

USD

Not applicable

Tax B Invoice-

Based

Nonrecoverable

Cost Accounting

Trade In-Transit

Receipt

Trade Clearing

-1,200

USD

Not applicable

Cost Accounting

Transfer to Owned

(Receipt)

Inventory

Valuation

1,000

USD

Material

PO Price

Cost Accounting

Transfer to Owned

(Receipt)

Inventory

Valuation

USD

Nonrecoverable

Tax

Tax A Delivery-

Based

Nonrecoverable

Cost Accounting

Transfer to Owned

(Receipt)

Inventory

Valuation

125

USD

Nonrecoverable

Tax

Tax B Invoice-

Based

Nonrecoverable

Cost Accounting

Transfer to Owned

(Receipt)

Trade In-Transit

-1,200

USD

Not applicable

*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:

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

1,275

USD

Not applicable

Accounts Payable

Invoice

Tax B Recovery

150

USD

Tax B Invoice-Based

Recoverable

Accounts Payable

Invoice

Tax B Rate Variance*

USD

Not applicable

Accounts payable Invoice Supplier Liability -1,450 USD Not applicable

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Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

*Tax variance due to the difference between tax rates at time of delivery versus invoice.

Receipt Accounting and Cost Accounting generate the following accounting entries when invoice is accounted:

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency

Receipt Accounting

Invoice Price Adjustment

Trade Clearing

USD

Receipt Accounting

Invoice Price Adjustment

Tax B Rate Variance*

-25

USD

Cost Accounting

Acquisition Cost

Adjustment

Inventory Valuation**

USD

Cost Accounting

Acquisition Cost

Adjustment

Trade Clearing

-25

USD

*Tax variance due to the difference between tax rates at time of delivery versus invoice.

**Inventory acquisition cost adjustment for nonrecoverable tax B.

Related Topics

•

Tax Accounting for Receipt Transactions

•

What's a tax point basis?

•

What's a tax point date?

Example of Tax Accounting for a Purchase Order Retroactive Price

Change

This example illustrates tax accounting performed by Oracle Receipt Accounting and Oracle Cost Accounting 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 USD 100. After receipt of the goods, a partial invoice is created for 2 units at USD 100 per unit.

The purchase order price changes retroactively from USD 100 to USD 120. The remaining balance of 8 units is invoiced

at USD 120 per unit.

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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

Receipt Accounting and Cost Accounting create accounting distributions at the time of receipt of goods, after the

retroactive purchase order price change, and for the differential invoice.

Tax Accounting Entries

Receipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt of goods:

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

PO Receipt

Receiving

Inspection

1,000

USD

Material

PO Price

Receipt Accounting

PO Receipt

Receiving

Inspection

100

USD

Tax

Tax A Delivery-

Based

Nonrecoverable:

USD 1,000 * 20% *

50%

Receipt Accounting

PO Receipt

Tax Recoverable

(Tax A)

100

USD

Tax

Tax A Delivery-

Based Recoverable:

USD 1,000 * 20% *

50%

Receipt Accounting

PO Receipt

Receiving

Inspection

150

USD

Tax

Tax B Invoice-

Based

Nonrecoverable:

USD 1,000 * 30% *

50%

Receipt Accounting

PO Receipt

Supplier Accrual

-1,350

USD

Material

Not applicable

Cost Accounting

PO Delivery

Inventory

Valuation

1,250*

USD

Not applicable

Cost Accounting

PO Delivery

Receiving

Inspection

-1,250*

USD

Not applicable

*PO price plus nonrecoverable taxes A and B.

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Accounts Payable generates the following accounting entries for the supplier when partial invoice is accounted:

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

270*

USD

Not applicable

Item Price plus

Nonrecoverable

Taxes A and B for

2 units = USD 1,

350/10 * 2

Accounts Payable

Invoice

Tax Recoverable

USD

Tax

Tax B Invoice-

Based Recoverable:

USD 200 * 30% *

50%

Accounts Payable

Invoice

Supplier Liability

-300

USD

Not applicable

*Accrual is debited to the extent quantity is invoiced, which is 2 units.

Receipt Accounting and Cost Accounting generate the following accounting entries after the retroactive purchase order

price change:

Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Receipt Accounting

Retroactive Price

Adjustment

Receiving

Inspection

160*

USD

Material

USD 120 - USD

100 * uninvoiced

quantity of 8 units

Receipt Accounting

Retroactive Price

Adjustment

Receiving

Inspection

USD

Tax

Tax A Delivery-

Based

Nonrecoverable:

USD 160 * 20% *

50%

Receipt Accounting

Retroactive Price

Adjustment

Tax Recoverable

(Tax A)

USD

Tax

Tax A Delivery-

Based Recoverable:

USD 160 * 20% *

50%

Receipt Accounting

Retroactive Price

Adjustment

Receiving

Inspection

USD

Tax

Tax B Invoice-

Based

Nonrecoverable:

USD 160 * 20% *

50%

Receipt Accounting

Retroactive Price

Adjustment

Supplier Accrual

-216

USD

Material

Not applicable

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Subledger Event Type Accounting Line

Type

Amount in

Functional

Currency +Dr/-Cr

Functional

Currency

Cost Element Basis of Amount

Cost Accounting

Acquisition Cost

Adjustment

Inventory

Valuation

200**

USD

Not applicable

Cost Accounting

Acquisition Cost

Adjustment

Receiving

Inspection

-200

USD

Not applicable

*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:

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

960

USD

Item Price USD 120 * 8

Accounts Payable

Invoice

Supplier Accrual

USD

Tax A Delivery-Based

Nonrecoverable: USD

120 * 8 * 20% * 50%

Accounts Payable

Invoice

Supplier Accrual

USD

Tax A Delivery-Based

Recoverable: USD 120

* 8 * 20% * 50%

Accounts Payable

Invoice

Supplier Accrual

144

USD

Tax B Invoice-Based

Nonrecoverable: USD

120 * 8 * 30% * 50%

Accounts Payable

Invoice

Recoverable Tax B

144

USD

Tax B Invoice-Based

Recoverable: USD 120

* 8 * 30% * 50%

Accounts Payable

Invoice

Supplier Liability

-1,440

USD

Not applicable

Accounts Payable generates the following accounting entries for the original invoice quantity of 2 units at the revised

PO price:

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Accounts Payable

Invoice

Invoice Price Variance

USD

Difference in PO Item

Price USD 20 * 2

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Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency Basis of Amount

Accounts Payable

Invoice

Tax Invoice Price

Variance Tax A

USD

Tax A Delivery-Based

Nonrecoverable

Accounts Payable

Invoice

Tax Invoice Price

Variance Tax B

USD

Tax B Invoice-Based

Nonrecoverable

Accounts Payable

Invoice

Recoverable Tax A

USD

Tax A Delivery-Based

Recoverable

Accounts Payable

Invoice

Recoverable Tax B

USD

Tax B Invoice-Based

Recoverable

Accounts Payable

Invoice

Supplier Liability

-60

USD

Not applicable

Cost Accounting and Receipt Accounting generate the following accounting entries for the differential invoice:

Subledger Event Type Accounting Line Type Amount in Functional

Currency +Dr/-Cr

Functional Currency

Receipt Accounting

Invoice Price Adjustment

Receiving Inspection

USD

Receipt Accounting

Invoice Price Adjustment

-40

USD

Receipt Accounting

Invoice Price Adjustment

Tax Invoice Price

Adjustment

-10*

USD

Cost Accounting

Acquisition Cost

Adjustment

Inventory Valuation

50**

USD

Cost Accounting

Acquisition Cost

Adjustment

Receiving Inspection

-50

USD

*Nonrecoverable taxes A and B on the differential invoice price.

**Difference between invoice price and nonrecoverable taxes A and B.

Related Topics

•

Tax Accounting for Receipt Transactions

•

What's a tax point basis?

•

What's a tax point date?

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Example of Tax Accounting for Interorganization Transfers Across

Business Units

This example illustrates tax accounting performed by Oracle Receipt Accounting and Oracle Cost Accounting for

interorganization transfers across business units.

Scenario

Vision Operations ships the goods to Singapore Operations. The organizations are in two different profit center business

units.

Transactions from Oracle 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 Receipt Accounting and Cost Accounting based on this setup:

• Vision Operations acquires goods locally at the cost of USD 12.

• Intercompany transfer price from Vision Operations to Singapore Operations is USD 15, with the following tax

details:

◦

Exclusive Tax A = 1.5 USD.

◦

Recoverable and nonrecoverable portions are both same, that is, 50%.

• Order is for 1 unit.

• Profit tracking is set to Yes.

• Intercompany Invoicing is set to Yes.

• Vision Operations books a profit of USD 3 (USD 15 transfer price - USD 12 acquisition cost).

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the transfer of goods.

Accounting Entries

Accounting entries are created for shipment of goods from the legal entity Vision Operations to the other legal entity

Singapore Operations.

The following table describes the accounting entries for the shipping organization, that is, for Vision Operations:

Subledger Event Type Account Line Type Cost Element Amount in Functional

Currency +Dr/-Cr

Cost Accounting

Transfer Order Shipment

Trade In-Transit

Item Cost

Cost Accounting

Transfer Order Shipment

Inventory Valuation

Item Cost

-12

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Subledger Event Type Account Line Type Cost Element Amount in Functional

Currency +Dr/-Cr

Cost Accounting

Trade In-Transit Issue

Intercompany Cost of

Goods Sold

Item Cost

Cost Accounting

Trade In-Transit Issue

Trade In-Transit

Item Cost

-12

Accounts Receivable

Intercompany Accounts

Receivable Invoice

Intercompany Receivable

Transfer Price

Accounts Receivable

Intercompany Accounts

Receivable Invoice

Intercompany Revenue

Transfer Price

-15

Accounts Receivable

Intercompany Accounts

Receivable Invoice

Intercompany Receivable

Total Tax

1.5

Accounts Receivable

Intercompany Accounts

Receivable Invoice

Tax Liability

Total Tax

-1.5

The following table describes the accounting entries for the receiving organization, that is, for Singapore Operations:

Event Event Type Account Line Type Cost Element Amount in Functional

Currency +Dr/-Cr

Receipt Accounting

Trade Receipt Accrual

Trade Clearing

Transfer Price

Receipt Accounting

Trade Receipt Accrual

Trade Clearing

Nonrecoverable Tax

0.75

Receipt Accounting

Trade Receipt Accrual

Intercompany Accrual

Transfer Price

-15

Receipt Accounting

Trade Receipt Accrual

Intercompany Accrual

Nonrecoverable Tax

-0.75

Receipt Accounting

Transfer Order Receipt

Receiving Inspection

Transfer Price

Receipt Accounting

Transfer Order Receipt

Receiving Inspection

Nonrecoverable Tax

0.75

Receipt Accounting

Transfer Order Receipt

Trade In-Transit

Transfer Price

-15

Receipt Accounting

Transfer Order Receipt

Trade In-Transit

Nonrecoverable Tax

-0.75

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

Item Cost

Cost Accounting

Trade In-Transit Receipt

Trade Clearing

Item Cost

-12

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Event Event Type Account Line Type Cost Element Amount in Functional

Currency +Dr/-Cr

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

Nonrecoverable Tax

0.75

Cost Accounting

Trade In-Transit Receipt

Trade Clearing

Nonrecoverable Tax

-0.75

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

Profit In Inventory

Cost Accounting

Trade In-Transit Receipt

Trade Clearing

Profit In Inventory

-3

Cost Accounting

Transfer Order Receipt

Inventory Valuation

Item Cost

Cost Accounting

Transfer Order Receipt

Receiving Inspection

Item Cost

-12

Cost Accounting

Transfer Order Receipt

Inventory Valuation

Nonrecoverable Tax

0.75

Cost Accounting

Transfer Order Receipt

Receiving Inspection

Nonrecoverable Tax

-0.75

Cost Accounting

Transfer Order Receipt

Inventory Valuation

Profit In Inventory

Cost Accounting

Transfer Order Receipt

Receiving Inspection

Profit In Inventory

-3

Accounts Payable

Intercompany Accounts

Payable Invoice

Intercompany Accrual

Transfer Price

Accounts Payable

Intercompany Accounts

Payable Invoice

Intercompany Liability

Transfer Price

-15

Accounts Payable

Intercompany Accounts

Payable Invoice

Intercompany Accrual

Nonrecoverable Tax

0.75

Accounts Payable

Intercompany Accounts

Payable Invoice

Intercompany Liability

Nonrecoverable Tax

-0.75

Accounts Payable

Intercompany Accounts

Payable Invoice

Tax Recoverable

Recoverable Tax

0.75

Accounts Payable

Intercompany Accounts

Payable Invoice

Intercompany Liability

Recoverable Tax

-0.75

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Related Topics

•

Tax Accounting for Receipt Transactions

•

What's a tax point basis?

•

What's a tax point date?

Example of Tax Accounting for Internal Drop Shipments

This example illustrates tax accounting performed by Oracle Receipt Accounting and Oracle Cost Accounting for

internal drop shipment.

Scenario

Vision Operations drop ships the goods to the customer of Singapore Operations.

Transactions from Oracle 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 Receipt Accounting and Cost Accounting based on this setup:

• Vision Operations acquires goods locally at the cost of USD 12.

• Intercompany transfer price from Vision Operations to Singapore Operations is USD 15, with the following tax

details:

◦

Exclusive Tax A = 1.5 USD.

◦

Recoverable and nonrecoverable portions are both same, that is, 50%.

• Order is for 1 unit.

• Profit tracking is set to Yes.

• Intercompany Invoicing is set to Yes.

• Vision Operations books a profit of USD 3 (USD 15 transfer price - USD 12 PO price).

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the transfer of goods.

Accounting Entries

Accounting entries are created for shipment of goods from the legal entity Vision Operations to the other legal entity

Singapore Operations.

The following table describes the accounting entries for the shipping organization, that is, for Vision Operations:

Subledger Event Type Account Line Type Cost Element Amount in Functional

Currency +Dr/-Cr

Cost Accounting

Sales Order Shipment

Trade In Transit

Item Cost

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Subledger Event Type Account Line Type Cost Element Amount in Functional

Currency +Dr/-Cr

Cost Accounting

Sales Order Shipment

Inventory Valuation

Item Cost

-12

Cost Accounting

Trade In Transit Issue

Intercompany Cost of

Goods Sold

Item Cost

Cost Accounting

Trade In Transit Issue

Trade In Transit

Item Cost

-12

Accounts Receivable

Intercompany Accounts

Receivable Invoice

Intercompany Receivable

Transfer Price

Accounts Receivable

Intercompany Accounts

Receivable Invoice

Intercompany Revenue

Transfer Price

-15

Accounts Receivable

Intercompany Accounts

Receivable Invoice

Intercompany Receivable

Total Tax

1.5

Accounts Receivable

Intercompany Accounts

Receivable Invoice

Tax Liability

Total Tax

-1.5

The following table describes the accounting entries for the receiving organization, that is, for Singapore Operations:

Subledger Event Type Account Line Type Cost Element Amount in Functional

Currency +Dr/-Cr

Receipt Accounting

Trade Receipt Accrual

Trade Clearing

Transfer Price

Receipt Accounting

Trade Receipt Accrual

Trade Clearing

Nonrecoverable Tax

0.75

Receipt Accounting

Trade Receipt Accrual

Intercompany Accrual

Transfer Price

-15

Receipt Accounting

Trade Receipt Accrual

Intercompany Accrual

Nonrecoverable Tax

-0.75

Cost Accounting

Trade In Transit Receipt

Trade In Transit

Item Cost

Cost Accounting

Trade In Transit Receipt

Trade Clearing

Item Cost

-12

Cost Accounting

Trade In Transit Receipt

Trade In Transit

Nonrecoverable Tax

0.75

Cost Accounting

Trade In Transit Receipt

Trade Clearing

Nonrecoverable Tax

-0.75

Cost Accounting

Trade In Transit Receipt

Trade In Transit

Profit In Inventory

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Subledger Event Type Account Line Type Cost Element Amount in Functional

Currency +Dr/-Cr

Cost Accounting

Trade In Transit Receipt

Trade Clearing

Profit In Inventory

-3

Cost Accounting

Trade Sales Issue

Deferred Cost of Goods

Sold

Item Cost

Cost Accounting

Trade Sales Issue

Trade In Transit

Item Cost

-12

Cost Accounting

Trade Sales Issue

Deferred Cost of Goods

Sold

Nonrecoverable Tax

0.75

Cost Accounting

Trade Sales Issue

Trade In Transit

Nonrecoverable Tax

-0.75

Cost Accounting

Trade Sales Issue

Deferred Cost of Goods

Sold

Profit In Inventory

Cost Accounting

Trade Sales Issue

Trade In Transit

Profit In Inventory

-3

Cost Accounting

Cost of Goods Sold

Recognition

Cost of Goods Sold

Item Cost

Cost Accounting

Cost of Goods Sold

Recognition

Deferred Cost of Goods

Sold

Item Cost

Cost Accounting

Cost of Goods Sold

Recognition

Cost of Goods Sold

Nonrecoverable Tax

0.75

Cost Accounting

Cost of Goods Sold

Recognition

Deferred Cost of Goods

Sold

Nonrecoverable Tax

-0.75

Cost Accounting

Cost of Goods Sold

Recognition

Cost of Goods Sold

Profit In Inventory

Cost Accounting

Cost of Goods Sold

Recognition

Deferred Cost of Goods

Sold

Profit In Inventory

-3

Accounts Payable

Intercompany Accounts

Payable Invoice

Intercompany Accrual

Transfer Price

Accounts Payable

Intercompany Accounts

Payable Invoice

Intercompany Liability

Transfer Price

-15

Accounts Payable

Intercompany Accounts

Payable Invoice

Intercompany Accrual

Nonrecoverable Tax

0.75

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Subledger Event Type Account Line Type Cost Element Amount in Functional

Currency +Dr/-Cr

Accounts Payable

Intercompany Accounts

Payable Invoice

Intercompany Liability

Nonrecoverable Tax

-0.75

Accounts Payable

Intercompany Accounts

Payable Invoice

Tax Recoverable

Recoverable Tax

0.75

Accounts Payable

Intercompany Accounts

Payable Invoice

Intercompany Liability

Recoverable Tax

-0.75

Note: Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost

variance.

Related Topics

•

Tax Accounting for Receipt Transactions

•

What's a tax point basis?

•

What's a tax point date?

Reports and Analytics for Receipt Accounting

You can use the Reports and Analytics work area to access predefined reports and analytics that are related to your role.

The reports available for Receipt Accounting are listed here. You can generate these reports for a specific business unit.

You can optionally specify an item range or item category range, supplier, and supplier site to filter the information in

the reports.

• Accrual Clearing Report

The Accrual Clearing Report provides a list of accrual clearing transactions, for a purchase order and accrual

account, that have been automatically or manually cleared. As a cost accountant, you would typically use

this report during period end to review the accruals cleared. You must specify a date range within which the

transactions occurred will be considered for generating the report. You can optionally specify the accrual

account for which the report must be generated.

• Accrual Reconciliation Report

The Accrual Reconciliation Report provides information for reviewing and reconciling accrual balances. You can

manage the balance of accrued supplier liabilities for a business unit. As a cost accountant, you would typically

use this report during period end to review balances in the accrual account.

You must specify a date range within which the transactions occurred will be considered for generating the

report. You can optionally specify the accrual account for which the report must be generated.

You can also opt to specify an accrual tolerance amount and a comparison operator. For example, if Accrual

Tolerance Amount > 0 means the received amount is greater than the invoiced amount. If Accrual Tolerance

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Amount = 0 means invoiced and received amounts are same. If Accrual Tolerance Amount < 0 means invoiced

amount is greater than received amount.

You can either generate a Detail report or a Summary report by specifying the layout during report generation.

• Uninvoiced Receipt Accrual Report

The Uninvoiced Receipt Accrual Report provides information for reviewing uninvoiced purchase order receipts

due for accrual or already accrued in a business unit for a given period. As a cost accountant, you would

typically use this report during period end to review the receipt accruals.

You must specify the accounting period for which you want to generate the report. You can also opt to specify

an accrual tolerance amount and a comparison operator. For example, if Accrual Tolerance Amount > 0 means

the received amount is greater than the invoiced amount. If Accrual Tolerance Amount = 0 means invoiced and

received amounts are same. If Accrual Tolerance Amount < 0 means invoiced amount is greater than received

amount.

You can either generate a Detail report or a Summary report by specifying the layout during report generation.

As a best practice, you must run the Create Uninvoiced Receipt Accruals process in the Report mode, to view

the report data and then run the Create Uninvoiced Receipt Accruals in the Accounting Mode after the numbers

are clean.

You can also manually generate these reports or schedule automatic generation of these reports from the Scheduled

Processes work area.

Predefined OTBI Reports

You can also use the various predefined OTBI reports to generate, review, and analyze the relevant information.

These reports, which you can modify as per your requirements, can be accessed from Shared Folders/Supply Chain

Management/Cost Management/Transactional Analysis Samples.

• Goods Received Not Invoiced: This dashboard is available under the Receipt Accounting Distributions

subfolder.

• Receipt Accounting Period End Validation Error Transactions: This dashboard is available under the Period End

subfolder.

• Receipt Accounting Period End Validation Summary: This dashboard is available under the Period End

subfolder.

• Uninvoiced Period End Receipt Accruals: This dashboard provides these reports:

◦

Uninvoiced Receipts Period End Accrual Summary

◦

Uninvoiced Receipts Period End Accrual Details

◦

Accrue at Period End Purchases Receipt Details

◦

Accrue at Period End Purchases Invoice Details

You must run the Create Uninvoiced Receipt Accruals process either in the Report or Accounting mode for the

data to be available for analyzing and reporting in OTBI.

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OTBI Subject Areas

In addition to the predefined reports, you can generate custom reports and analytics by using the subject areas listed

here:

• Receipt Accounting Real Time

• Receipt Accounting Period Close Real Time

• Receipt Accounting Uninvoiced Receipt Accruals 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.

Related Topics

•

Overview of Creation and Administration of SCM Analytics and Reports

•

Oracle Supply Chain Management Cloud: View Supply Chain Management Reports and Analyses

•

Business Intelligence Catalog

•

SCM Subject Areas in Oracle Transactional Business Intelligence

FAQ for Receipt Accounting Reports

Why is the Accrual Reconciliation Report not populated with any

data?

To ensure that the report is populated with the appropriate data, you must perform these tasks:

1. Receive purchase order lines.

2. Run the processes listed here from the Scheduled Processes work area:

◦

Transfer from Receiving to Cost Management

◦

Transfer from Inventory to Cost Management

◦

Transfer Cost to Cost Management (ensure that the invoices are final accounted)

3. Run the Create Receipt Accounting Distributions process for the business unit.

4. Run the Create Accounting process with the Subledger Application set to Receipt Accounting and Accounting

Mode set to Final.

5. Run the Match Receipt Accruals process.

6. Generate the Accrual Reconciliation Report.

Also, ensure that you generate the report for a requisition business unit.

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Why aren't some of the purchase orders not appearing in the

Accrual Reconciliation Report?

The Accrual Reconciliation Report lists only purchase orders that are set to accrue at receipt.

To review information about purchase orders that are set to accrue at period end, you can perform one of these tasks:

• Run the Uninvoiced Receipt Accruals Report from the Reports and Analytics work area. This report helps you to

review the uninvoiced purchase order receipts due for accrual for a given period.

• Run the Create Uninvoiced Receipt Accruals process to create the accounting distributions that can be reviewed

on the Review Receipt Accounting Distributions page. On the Review Receipt Accounting Distributions page,

search for transactions with the transaction type Period End Accrual. You can scroll down on the page and

select the Distributions and Journal Entries tabs to view the accounting details.

Does the Accrual Reconciliation Report provide all the accrual

information?

No. The Accrual Reconciliation Report provides accrual information for only purchase orders that are set to accrue at

receipt. This report doesn't contain information for purchase orders that are set to accrue at period end, intercompany

accruals, and consigned accruals.

Can I use the Receipt Accounting Real Time subject area for accrue

at receipt and accrue at period end purchases?

Yes. You can use the Receipt Accounting Real Time subject area to analyze purchases that accrue at receipt and

purchases that accrue at period end. You can also use the subject area for intercompany and consigned purchases.

FAQs for Receipt Accounting

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 Receipt Accounting process. Interfaces receipt transactions.

◦

Transfer Costs from Payables to Cost Management process. Interfaces accounts payable transactions.

2. Receipt accounting:

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◦

Receipt Accounting Distribution process.

◦

Clear Receipt Accrual Balances process. Executes only if you have predefined accrual clearing rules.

Marks purchase orders for automatic clearing.

◦

Receipt Accounting Distribution process. Creates distributions for cleared accrual balances.

3. Subledger accounting:

◦

Create Accounting process.

4. Reconciliation and reporting:

◦

Match Receipt Accruals process. Matches purchase order receipt accruals with invoices from the payables

application. Perform at period close or as needed for internal reporting and reconciliation.

Note: You can also perform this step before running the subledger accounting process to know the

approximate accrual amount for reconciliation.

◦

Audit Receipt Accrual Clearing Balances process. Audit the General Ledger accounted accrual balances.

Related Topics

•

Receipt Accounting Tasks and Accounting Events

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.

How do I set up accounts for different receipt accounting events?

You can define account rules to assign general ledger accounts to accounting events. Also, you can create mapping sets

to define a segment or account combination value for one or more transaction or reference attribute values.

Related Topics

•

Set Up User-Defined Account Rules

•

Mapping Sets

•

Use Predefined Mapping Sets

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Why do I see a receipt inspection balance for the purchase orders?

If you're using dual units of measure and the delivered quantity of the purchase order item is more that the received

quantity, this will create a receipt inspection balance. You must put away the received quantity so that a receiving

inspection imbalance isn't created.

To change the quantity after you put away the received quantity, perform a miscellaneous inventory transaction.

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 a tax point date?

Tax point date is the date on which the tax is calculated. Tax point date can be either the receipt date or invoice date. Tax

rate as on the tax point date is considered for tax calculation.

Tax point date is used in conjunction with tax point basis. For more information about configuring and calculating taxes,

see the Oracle Financials Cloud Using Tax guide available on the Oracle Help Center.

When are nonrecoverable taxes calculated on Intercompany

transactions?

When trade receipt accrual occurs in the receiving organization, the receipt accounting distributions are created for:

• internal material transfers

• internal drop shipments

• intercompany returns

When creating receipt accounting distributions, both recoverable and nonrecoverable taxes are calculated and

accounted. The item cost includes both transfer price and nonrecoverable exclusive tax accrued in the receiving

organization.

For material return transactions, tax is calculated only if the referenced transaction has taxes on it.

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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: USD 100

• Inclusive tax rate: 10%

• Tax: 100/1.10 = USD 9.09 (distribution amount divided by (1 + tax rate))

Exclusive taxes are added to the purchase price or assessable value. For example:

• PO amount: USD 100

• Exclusive tax rate: 10%

• Tax: 100*0.10 = USD 10.00 (distribution amount multiplied by tax rate)

How can I create subledger account rules and subledger journal

entry rule sets for receipt accounting?

Create your subledger account rules on the Manage Account Rules page. It is recommended that you highlight the

account rules predefined by Oracle, copy, and modify them as needed.

Create your subledger journal entry rule sets on the Manage Subledger 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

Subledger Journal Entry Rule Sets task in the Manufacturing and Supply Chain Materials 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.

Is the currency conversion rate on receipt required for foreign

currency purchases that are matched to receipt?

If the Match Option is set to Receipt, the conversion rate is derived at the time of receipt creation. However, if the

conversion rate isn't available when the receipt is created, then Receipt Accounting considers the rate from General

Ledger while the invoice uses the conversion rate in the purchase order.

This can create an imbalance in accounting with open accruals in Receipt Accounting after processing the variances.

These open accruals must be manually adjusted in Receipt Accounting.

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Is there a separate transfer price for the transfer in secondary

ledger?

Transfer price is calculated for the primary ledger and the same is used be for the secondary ledger. Any mismatch

between the primary and secondary ledgers must be managed through manual adjustments in the secondary ledger.

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3 Cost Planning

Cost Planning Process

Cost Management provides robust support for planning, costing, and analysis of manufacturing costs. You can

determine which work definitions to use in costing, efficiently enter and import material, resource, and overhead costs

using spreadsheet, and perform cost rollup.

You can simultaneously use multiple costs; for example, one for official external reporting and one for internal

simulations. By creating cost profiles, you can define flexible account defaulting rules and valuation policies. In terms of

cost analysis, you can view costs by work order, operation, cost element, and variances.

You start cost planning by creating a cost scenario and then defining the various standard costs for items, the resource

rates, and the overhead rates. Next, you roll up these costs for a cost scenario to generate the unit cost for assemblies.

By creating multiple costs scenarios, you can compare and analyze the costs before you publish the costs. After

you're satisfied with the generated costs, you publish the costs so that they can be used for costing the corresponding

transactions.

Configuring Item Attributes to Enable Costing

You must configure these costing prerequisite settings on the Manage Items page of the Product Information

Management work area:

• Costing Enabled - Set this attribute to Yes to ensure that item costs are reported, valued, and accounted.

• Include in Rollup - Set this attribute to Yes to ensure that items are included in the cost rollup. If this attribute

isn't set, the Roll up Costs process defaults it to Yes. To ensure that an item cost isn't considered for cost rollup,

you must explicitly set this attribute to No.

For more information on configuring Product Information Management settings for Cost Planning, see the guide Using

Product Master Data Management.

Related Topics

•

Create a Cost Scenario for Regular Items

•

Manage Standard Costs in a Spreadsheet

•

Cost Analysis

Supply Chain Cost Rollup

Supply chain cost rollup supports multi-level item structure where items at different levels might be manufactured in or

procured from different organizations.

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You can perform supply chain cost rollup for all manufactured products across multiple organizations, whether you use

discrete manufacturing, process manufacturing, or mixed mode manufacturing. However, you can't perform the cost

rollup for configured products.

This is useful when:

• You have a multi-level BOM structure spanning across manufacturing organizations where a subassembly is

manufactured one plant and then transferred to another plant to manufacture the finished good and both the

plants belong to different business units.

• You source the components from multiple sources, say 50% make and 50% buy in an organization. Or you

could be doing a 60% buy and 40% transfer from another organization. You can include the blended cost of

components for calculating the cost of finished goods.

Supply chain cost rollup considers the sourcing rules to determine whether an item or subassembly is:

• procured from the supplier

• transferred from an internal organization

• manufactured in the current organization

This sourcing rule with rank 1 is used in determining the cost of the item. The sourcing rules can be blended for

determining the weighted average cost of an item in the organization, in case there are multiple sourcing rules with a

percent allocation.

Note:

• Sourcing rules for items with the supply type set to Phantom are ignored.

• Sourcing rules for items yielded as by-products from process manufacturing work definitions are ignored.

The costs of these items would be rolled up using their process manufacturing work definitions.

• For output items that are by-products in the process manufacturing work definitions, costs are calculated

assuming 100% make sourcing rule. Any other sourcing rule type is disregarded for these items.

Prerequisites for Supply Chain Cost Rollup

You need to complete the pre-requisites listed here:

• Create active sourcing rules for your items based on your sourcing decisions.

• Assign the sourcing rules to the assignment set.

• Run the Extract Supply Sources process for the assignment set. The sourcing rules in this assignment set can

now be used to roll up the costs.

After the sourcing rules are extracted, you can create cost scenarios that are enabled for running supply chain cost

rollup. In a supply chain cost rollup enabled scenario, you can select a cost rollup group to specify the organizations in

which you want to roll up the costs. You can also select the assignment set that includes your sourcing rules and these

rules would be used for calculating the product costs. In addition, if you want to incur transportation charges when your

items are transferred across organizations, you can include the transfer charge rule set. Supply chain cost rollup will use

the sourcing rule for a combination of item, inventory organization, assignment set, and effective date.

How the Costs are Rolled Up

All products with active work definitions will be rolled up by the supply chain cost rollup process. The standard cost for

these products is equal to their rolled-up costs from the work definitions.

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The cost rollup process starts by determining if the first level subassembly or components have sourcing rules defined.

If not defined, it expects a cost to be set up in the organization associated with the cost scenario. If a sourcing rule is

available for the component item, it may be a make item or a buy item in the source organization.

• If the component is a buy item in the source organization, the sourcing rules for the item in the source

organization is used.

• In case of a make item, the cost to use is determined based on whether the rollup option is single-level or full

cost rollup.

◦

For single-level rollup, the latest cost of the item is used. In the case of actual cost, where multiple layers

with different costs are available, the average of the layers is used.

◦

For full cost rollup, the cost of the subassembly is first rolled up.

When multiple sourcing rules (rank = 1) are defined:

Standard cost of product = (User entered buy cost * Buy sourcing rule allocation) + (Rolled-up cost from work definition

* Make sourcing rule allocation) + (Transfer cost * Transfer sourcing rule allocation)

Related Topics

•

Create a Cost Scenario for Supply Chain Cost Rollup

•

Roll Up Costs

Manage Cost Rollup Groups

A cost rollup group encompasses multiple combinations of cost organization and cost book enabling you to roll up the

costs of your products across organizations using a cost scenario.

You need to define a cost rollup group with the cost organization and cost book combinations for which you want

to roll up the costs. A cost organization can be used only once in a rollup group. That's to say you can't have a cost

organization with two different cost books added to the cost rollup group. Also, you can only add cost organizations that

you have access to.

You can create multiple cost rollup groups based on your business needs. A cost rollup group can be used across

multiple cost scenarios. After you add a cost rollup group to a cost scenario you can't delete it.

To create a cost rollup group, perform these steps:

1. In the Cost Accounting work area, click the Manage Cost Rollup Groups task.

2. Click Create on the Cost Rollup Groups page.

3. Enter a name and description for the rollup group and then click Add.

4. Select the required cost organization and cost book.

Repeat steps 3 and 4 for each cost organization and cost book combination that you want to add to the cost

rollup group.

5. Click Create.

You can also use the REST APIs to create the cost rollup groups with cost organization and cost book combinations.

After you create a cost rollup group you edit or delete it. However, you can't delete a cost rollup group after it's used to

create a cost scenario. You can delete such a rollup group only after it's disassociated from the cost scenario.

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To edit a cost rollup group, click the edit icon corresponding to the group in the Actions column on the Cost Rollup

Groups page. You can add or remove cost organization and cost book combinations when editing a cost rollup group. A

cost rollup group must contain at least one cost organization and cost book combination.

Manage Transfer Charge Rules and Rule Sets

Transfer charge rules let you define the charges for transferring an item from one organization to another.

Transfer charge rules are defined within a rule set. A transfer charge rule set can be used across multiple scenarios. You

can define multiple transfer charge rule sets for different business requirements or for simulation purposes.

Within a rule set, you can define multiple transfer charge rules. A rule must be unique for a given source organization,

destination organization, and effective date. You can end date a rule and create a new rule with revised charges in a rule

set. You can't edit a transfer charge rule after it has been used by the Roll up Costs process to calculate transfer costs of

items.

You can only calculate transfer charges as a percentage of the standard cost of the item in the source organization. All

cost elements at all levels participate in calculating the transfer charge.

Standard cost of item in destination organization = Standard cost of item in source organization + Transfer charges.

Note: The standard cost of the item in destination organization won't carry over the expense pool associated with the

standard cost of the item in source organization.

To create a transfer charge rule set, perform these steps:

1. In the Cost Accounting work area, click the Manage Transfer Charge Rule Sets task.

2. Click Create on the Transfer Charge Rule Sets page.

3. Enter a name and description for the rule set and click the save icon.

After you create a rule set, you can add transfer charge rules to it. To create a transfer charge rule, perform these steps:

1. In the Cost Accounting work area, click the Manage Transfer Charge Rules task.

2. Click Create on the Transfer Charge Rules page.

3. Select the transfer charge rule set to which you want to add the transfer charge rule.

4. Select the source and destination organizations.

5. Set the effective start and end date for the rule.

6. Click Add.

7. Select the cost element and expense pool and set the charge value.

The charge value is a percentage of the standard cost of the item. Define the transfer charges for all the

required cost elements by repeating steps 6 and 7.

8. Click Create to save the transfer charge rule.

You can also use the REST API to create the transfer charge rule sets and rules.

Transfer charge rules are required if you want to apply markup on the costs of materials when they are transferred

across organizations. You can select the transfer charge rule set in your supply chain cost rollup enabled cost scenario.

The rollup process would use the transfer charge rules which are effective as of the scenario effective date in the rule

set.

Let's consider an example of transfer charge rule set. The source organization is Vision Operations and the destination

organization in Seattle.

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Cost Element Expense Pool Charge Type Value

Freight Transfer EP Percentage 1.0%

Here's the source assignment for item ABC:

Planning Organization Sourcing Rule Type Rule Allocation Source Organization

Seattle Transfer From 100% Vision Operations

The standard cost ABC in Vision Operations is $3.00 as summed up in this table.

Cost Element Expense Pool Unit Cost

ZCST-Material $1.00

ZCST-Electrical MFG Exp Pool $1.50

ZCST-Rent MFG Exp Pool $0.50

With the transfer charge applied, standard cost of item ABC in Seattle as calculated by the Roll up Costs process is listed

in the table.

Cost Element Expense Pool Unit Cost

Material $1.00

Electrical $1.50

Rent $0.50

Freight Transfer EP $0.03

The standard cost for ABC is $3.03 in Seattle.

Standard cost of item in destination organization = Standard cost of item in source organization + transfer charges

Make Sourcing Variance

If you've defined multiple sourcing rules for a manufactured item, after costing the work order close event for such an

item, you'll see Make sourcing variance reported by the application.

Make sourcing variance = (Latest rolled-up cost from work definition - Weighted average cost used for product

completion and product return transactions reported during work order execution) * Total completion quantity

A simple example to calculate the make sourcing variance would be as follows:

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Assume that the rolled-up cost of your item using its work definition is $15.00. You have manufactured 10 units of this

item and the standard cost used to revalue inventory was $10.00. Also, 2 units of the item were returned subsequently,

and the standard cost of the item was recalculated as $12.00.

Here, weighted average cost = ($10.00*10.0 + $12.00*2.0)/(10.0+2.0) = $124.00/12.0 = $10.33

Therefore, the make sourcing variance = ($15.00 - $10.33) * 8 = $37.36

You can view the variances on the Variance Amounts tab in the Work Order Detailed Balances page. You can access this

page from the Review Work Order Costs page.

Cost Scenario

Cost Rollup Scope

Cost rollup is the process of adding the material, resource, and overhead costs to obtain the total manufacturing cost

per unit. When creating a cost scenario, you can set one of these cost rollup scopes that the Roll up Costs process must

consider.

• All Items - The process rolls up costs of all the items with an active work definition in the production plant. This

rollup scope is only applicable in the case of cost scenarios for regular items.

• Unprocessed Purchase Orders and Work Orders - The process rolls up costs of manufactured configured items

and procured configured items if new work orders and purchase orders are generated, respectively. This rollup

scope is only applicable in the case of cost scenarios for configured items.

With this rollup scope you can also define a date from which work orders and purchase orders must be

considered for cost rollup. Only work orders with a start date on or after the defined date and purchase orders

with an approval date on or after the defined date will be considered for cost rollup.

• Selected Items - The process rolls up costs of only the selected items. In the case of cost scenarios for

configured items, if you select a base model, the costs of all configured items associated with the base model

get rolled up.

• Selected Item Categories - The process rolls up costs of the items from the selected category.

• Where Used - The process rolls up costs of only those manufactured items that have changes in the

component costs or resource rates. This is especially useful when you want to avoid changing standard costs of

items that aren't impacted by component cost changes. In the case of cost scenarios for configured items, you

can select the items and resources to ensure that only configured items which consume the selected items and

resources are considered for cost rollup.

This rollup scope is also helpful for simulations that help you understand the impact of component costs

change on the costs of the manufactured items, while keeping the costs unaffected by manufacturing work

definition changes.

Additionally, in the case of cost scenarios for regular items, you can define whether the cost rollup is for a single level or

not. If you choose single-level rollup, the process rolls up the cost of only the first level of the item structure for selected

items. This helps in calculating the cost of specific items without recalculating cost of its sub-assemblies. When creating

a cost scenario, if you don't select single level rollup, the process rolls up the costs of the selected items and all the

corresponding subassembly.

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Note: Rollup applies only to work definitions of type Standard. Work definitions of type Rework and Transform won't

be rolled up.

Use Latest Work Definitions for Cost Rollup

When defining a cost scenario, you can specify whether the latest or active work definitions must be used to calculate

the costs by the Roll up Costs process.

In a cost scenario, you can select the Use Latest Work Definitions options to indicate that the Roll up Costs process

must consider the current active work definition from Manufacturing to calculate the costs. In the case of configured

items, the process uses the latest configuration options based on the active work definition of the base models.

If this option isn't selected, the Roll up Costs process uses the work definition structure used to calculate the current

standard cost of the regular items. For configured items, the process uses the configuration options used to calculate

the current standard cost.

In the case of a cost scenario for regular items, this option is applicable only if the cost rollup scope is set to All Item,

Selected Items, or Selected Item Categories. In the case of a cost scenario for configured items, this option is applicable

only if the cost rollup scope is set to Selected Items, Selected Item Categories, or Where Used.

The table here lists the impact of selecting or not selecting this option in the case of cost scenarios for configured items.

Rollup Scope Use Latest Work Definitions Selected Use Latest Work Definitions Not Selected

Selected Items Costs of manufactured configured items are

rolled up based on the latest configuration

options and active work definitions of base

models.

Costs of manufactured and procured

configured items are rolled up with the

configuration options used in the prior cost

scenarios to rollup the current standard costs.

Selected Item Categories Costs of manufactured configured items are

rolled up based on the latest configuration

options and active work definitions of base

models.

Costs of manufactured and procured

configured items are rolled up with the

configuration options used in the prior cost

scenarios to rollup the current standard costs.

Where Used Costs of manufactured configured items are

rolled up when the active work definitions

of the base models include the specified

components and resources.

Costs of manufactured and procured

configured items are rolled up when the

configuration options used in the prior cost

scenarios to rollup the current standard costs

include the specified component and resources.

Effective Date

The effective date of a cost scenario is the date when the estimated standard costs for materials, resources, and

overheads are effective as published frozen standard costs.

The effective date is usually a future date, but can also be the current date or a past date. Multiple cost scenarios can

have the same effective date.

To process a work definition, the work definition must be active in the manufacturing organization and the effective

date of the cost scenario must be same as or later than that of the work definition date.

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In the case of cost scenario for configured items, to process a new work order, the planned start date of the work order

must be same as or later than that of the scenario effective date. The material costs and resource rates rolled up for the

configured items are the published costs as of the scenario effective date. Similarly, to process a new purchase order,

the approval date of the purchase order must be same as or later than that of the scenario effective date.

If you schedule the Roll up Costs process to run on a recurring basis for a cost scenario of type configured items, then

the scenario effective date gets defaulted to the system date when the process in run.

Create a Cost Scenario for Regular Items

You can define the cost scope for cost organization and cost book combinations by using a cost scenario. While

planning costs, you can define separate cost scenarios for regular items and configured items.

If you’re using a periodic average cost enabled cost book, then you can define only one cost scenario for a cost

organization, cost book, and period combination.

1. In the Cost Accounting work area, click the Manage Cost Scenarios task.

2. Click on the Add icon.

3. On the Create Cost Scenario page, enter a name for the cost scenario and select the appropriate Cost

Organization and Cost Book.

If you select a periodic average cost enabled cost book, then you can save the cost scenario after performing

this step. Tasks mentioned from step 4 onwards aren’t applicable for a periodic average cost enabled cost book.

a. Select the Period for which you’re creating the cost scenario.

You can select only a period that’s in the open, pending close, or never opened status. The effective date

for the cost scenario is automatically set to the first day of the selected period and the scenario type is set

to Regular Items.

b. Click Save and Close.

4. Select the Effective Date for the cost scenario.

5. Select Regular items as the Scenario Type.

6. Select the cost rollup scope to identify the items for cost rollup.

If you set the rollup scope as Selected Items or Selected Item Categories, then click the Add icon to search

and select the required items from the Select and Add: Items dialog or the Select and Add: Item Categories

dialog respectively.

If you set the rollup scope as Where Used, then the Use Latest Work Definitions parameter is ignored.

7. Specify whether the cost rollup is for a single level or not.

The Single-level Cost Rollup parameter is available only when you set the Rollup Scope as Selected Items or

Selected Item Categories.

8. Define the criteria to select the work definitions for the cost rollup by using these parameters.

Field Description

Use Latest Work Definitions

Select this check box to ensure that the Roll Up Costs process checks for the latest work

definition changes from Manufacturing.

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Field Description

If not selected, the process uses the work definitions used to calculate the cost of make items in

the prior published scenarios, instead of using the latest work definitions that are active on the

scenario effective date.

Work Definition Priority

The priority determines which work definition must be used to calculate the costs when

multiple work definitions exist for a make assembly. Define the priority for selecting the work

definition by using any combination of these options:

◦

Top production priority

◦

Top costing priority

◦

Work definition name

When you select multiple options, you can reorder them using the up and down arrow buttons.

Work Definition

If you selected Work definition name for the Work Definition Priority parameter, select the

work definition that the Roll up Costs process must use.

9. Click Save and Close.

After you create a cost scenario, you can define the material, resource, and overhead rates in the cost scenario. Then,

you can manually run the processes such as Roll up Costs and Update Standard Costs from the cost scenario.

If you want to make changes to the published costs, you can run the Undo Cost Update process after you have

published the costs. The costs can be unpublished and changed only if they haven't been used for costing transactions.

Note: For a periodic average cost enabled cost book, you cannot update the cost scenario:

• If the corresponding period status is closed or permanently closed.

• After you’ve published it. Also, such a published cost scenario can’t be unpublished. However, for a published

cost scenario, you can add or update standard costs and resource rates, as long as the corresponding period is

in the open or pending close status. You can't delete published standard costs and resource rates.

Related Topics

•

Cost Planning Process

•

Cost Rollup Scope

•

Use Latest Work Definitions for Cost Rollup

•

Manage Standard Costs in a Spreadsheet

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Create a Cost Scenario for Configured Items

You can define the cost scope for cost organization and cost book combinations by using a cost scenario. While

planning costs, you can define separate cost scenarios for regular items and configured items.

1. In the Cost Accounting work area, click the Manage Cost Scenarios task.

2. Click on the Add icon.

3. On the Create Cost Scenario page, enter a name for the cost scenario and select the appropriate Cost

Organization and Cost Book.

4. Select the Effective Date for the cost scenario.

5. Select Configured items as the Scenario Type.

6. Select the cost rollup scope to identify the items for cost rollup.

If you set the rollup scope as Selected Items or Selected Item Categories, then click the Add icon to search

and select the required items from the Select and Add: Items dialog or the Select and Add: Item Categories

dialog respectively.

If you set the rollup scope as Where Used, then click the Add icon to search and select the required items and

resources from the Select and Add: Items and Resources dialog. Only the configured items that consume the

selected items and resources will be considered for cost rollup.

7. If you set the rollup scope as Unprocessed Purchase Orders and Work Orders, you must set the Include

Orders From date.

This date determines the purchase orders and work orders that will be considered for cost rollup. Only work

orders with a start date on or after the set date and purchase orders with an approval date on or after the set

date will be considered for cost rollup. The default date is 30 days prior to the scenario effective date. You can

change this date as per your business needs.

8. Select Use Latest Work Definitions to ensure that the Roll Up Costs process checks for the latest work

definition changes from Manufacturing.

If not selected, the process uses the work definitions used to calculate the cost of make items in the prior

published scenarios, instead of using the latest work definitions that are active on the scenario effective date.

This option isn't applicable if the rollup scope is set to Unprocessed Purchase Orders and Work Orders.

9. Click Save and Close.

After you create a cost scenario, you can define the material, resource, and overhead rates in the cost scenario.

Then, you can manually run the processes such as Roll up Costs and Update Standard Costs from the cost scenario.

Alternatively, you can schedule these processes to run at periodic intervals.

If you want to make changes to the published costs, you can run the Undo Cost Update process after you have

published the costs. The costs can be unpublished and changed only if they haven't been used for costing transactions.

Note: You can't use a periodic average cost enabled cost book with cost scenarios for configured items.

Related Topics

•

Cost Planning Process

•

Cost Rollup Scope

•

Use Latest Work Definitions for Cost Rollup

•

Manage Standard Costs in a Spreadsheet

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Create a Cost Scenario for Supply Chain Cost Rollup

You can define cost scenario to perform standard cost rollup of all manufactured products across multiple

organizations, whether you use discrete manufacturing, process manufacturing, or mixed mode manufacturing. This is

available only if you have opted in to this feature.

If you’re using a periodic average cost enabled cost book, then you can define only one cost scenario for a cost

organization, cost book, and period combination.

1. In the Cost Accounting work area, click the Manage Cost Scenarios task.

2. Click on the Add icon.

3. On the Create Cost Scenario page, enter a name for the cost scenario.

4. Select Enable Supply Chain Cost Rollup.

The supply chain cost rollup can be used only for regular items. The Scenario Type will default to Regular items

when this option is selected.

5. Set the organization context to specify whether the cost rollup would be for a cost organization and cost book

combination or for a group of cost organization and cost book combinations.

6. If you've set the Organization Context as Group then select the Cost Rollup Group else select the appropriate

Cost Organization and Cost Book.

You can't select a periodic average cost book.

7. Select the Effective Date for the cost scenario.

8. Select the Assignment Set Name and Transfer Charge Rule Set.

Assignment Set Name is mandatory for the scenario. You need to run the Extract Supply Sources process for

the assignment set before running the Roll up Costs process.

Transfer Charge Rule Set is optional. You can use this configuration when you want to apply transfer charges

to material costs when materials get transferred across organizations. To apply a transfer charge rule, the cost

scenario effective date should be between the effective start date and effective end date of the transfer charge

rule.

9. Select the cost rollup scope to identify the items for cost rollup.

If you set the rollup scope as Selected Items or Selected Item Categories, then click the Add icon to search

and select the required items from the Select and Add: Items dialog or the Select and Add: Item Categories

dialog respectively.

10. Define the criteria to select the work definitions for the cost rollup by using these parameters.

Field Description

Use Latest Work Definitions

Select this check box to ensure that the Roll Up Costs process checks for the latest work

definition changes from Manufacturing.

If not selected, the process uses the work definitions used to calculate the cost of make items in

the prior published scenarios, instead of using the latest work definitions that are active on the

scenario effective date.

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Field Description

Work Definition Priority

The priority determines which work definition must be used to calculate the costs when

multiple work definitions exist for a make assembly. Define the priority for selecting the work

definition by using any combination of these options:

◦

Top production priority

◦

Top costing priority

◦

Work definition name

When you select multiple options, you can reorder them using the up and down arrow buttons.

Work Definition

If you selected Work definition name for the Work Definition Priority parameter, select the

work definition that the Roll up Costs process must use.

11. Click Save and Close.

After you create a cost scenario, you can define the material, resource, and overhead rates in the cost scenario. Then,

you can manually run the processes such as Roll up Costs and Update Standard Costs from the cost scenario.

If you want to make changes to the published costs, you can run the Undo Cost Update process after you have

published the costs. The costs can be unpublished and changed only if they haven't been used for costing transactions.

Related Topics

•

Supply Chain Cost Rollup

•

Manage Cost Rollup Groups

•

Manage Transfer Charge Rules and Rule Sets

State and Status of Cost Scenario

After a cost scenario is created, the state of the cost scenario determines the actions that you can perform on the costs

scenario.

The image here illustrates the various states that a cost scenario goes through and the tasks that you can perform on

the cost scenario in each state. However, for cost scenarios created using periodic average cost enabled cost books, not

all the states are applicable and what tasks you can perform in each state differs. These differences are mentioned in

the text following the image

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The cost scenario can be in one of these states:

• New - When a cost scenario is created it's in the New state. You can define standard costs, resource rates,

and overhead rates when the cost scenario is in this state. In the case of cost scenarios created using periodic

average cost enabled cost books, you can define standard costs and resource rates. You then run Update

Standard Costs to publish the scenario. For such cost scenarios, creating overhead rates and running Roll up

Costs aren’t applicable.

• Costs Rolled Up - After you run the Roll up Costs process for a cost scenario, the state changes to Costs Rolled

Up. In this state, you can analyze and compare the costs. If you're satisfied with the costs generated by the Roll

up Costs process, you can run the Update Standard Costs process for a cost scenario that's in this state. This

state isn’t applicable for cost scenarios created using periodic average cost enabled cost books.

• Redo Costs Rolled Up - If you update the standard costs for a cost scenario that's in the Costs Rolled Up state,

the state is updated to Redo Costs Rolled Up. You must run the Roll up Costs process for such a cost scenario

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to change the state back to Costs Rolled Up. This state isn’t applicable for cost scenarios created using periodic

average cost enabled cost books.

• Costs Published - When you run the Update Standard Costs process, the cost scenario state is changed to Costs

Published. The published standard costs are now available to cost the transactions in Cost Accounting based on

the effective date of the cost scenario.

• Published Costs Undone - If some unintended costs are published for a cost scenario, you can run the Undo

Costs Update process. After you run the process, the cost scenario is in the Published Costs Undone state. You

can now update the costs and run the Roll up Costs process again. This state isn’t applicable for cost scenarios

created using periodic average cost enabled cost books.

• Redo Update Costs Required - This is applicable only for cost scenarios created using periodic average cost

enabled cost books. For an already published cost scenario, if you add any new standard costs and resource

rates, you must run Update Standard Costs to republish the cost scenario. You don't need to republish a cost

scenario after updating existing standard costs and resource rates. Updated standard costs and resource rates

for a published cost scenario are automatically processed by the cost processor as long as the period is in the

open or pending close status.

The status of the cost scenario indicates whether you have ran any processes on the cost scenario and if they

completed successfully or not. Status can take one of these values:

• New - When the cost scenario is in the New state, the status is also New.

• Completed Successfully - After you run the Roll up Costs process or the Update Standard Costs process for a

cost scenario, the status is changed to Completed Successfully if the process completes without any exceptions.

• Completed with Warnings - If you run a process and it encounters exceptions, then the status for the cost

scenario is changed to Completed with Warnings. You can review the messages in View Scenario Exceptions

page and take corrective actions before running the process again.

• In Error - If the process encounters an error, the status is updated to In Error. You must review the exceptions

logged by the process and take necessary actions.

Cost Scenario for Periodic Average Cost Enabled Cost Book

You can define cost scenarios using periodic average cost enabled cost books. However, you can create only one cost

scenario for such a cost book, cost organization, and period combination.

The period must be in the open, pending close, or never opened status. You can’t create cost scenarios for closed or

permanently closed periods.

You can define standard costs and resource rates for the cost scenario. Overheard rates aren’t applicable for such a cost

scenario.

For cost scenarios using periodic average cost enabled cost books, you can’t set the work definition related parameters,

and, therefore, roll up costs isn’t applicable for such cost scenarios. After you have defined the standard costs and

resource rates you can publish the cost scenario by running the Update Standard Costs process. You can only publish a

cost scenario if the corresponding period is in the open or pending close status.

A published cost scenario can’t be unpublished. But you can update and delete existing standard costs and resource

rates for a published cost scenario. You can also add new standard costs and resource rates for a published cost

scenario. You need to run the Update Standard Costs process to republish cost scenarios for the new standard costs and

resource rates to be considered by the cost processor.

If you want to update the standard costs and resource rates for a cost organization and cost book combination but

for a different period, you must first create a new cost scenario for the cost organization, cost book, and new period

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combination. You can then define the new standard costs and resource rates and publish the cost scenario. This will end

date the existing standard costs and resource rates based on the effective start date of the new cost scenario.

The table here lists the actions that you can perform for an unpublished cost scenario based on the period status.

Action Never Opened Open Pending Close Closed Permanently Closed

Create cost

scenario

Yes Yes Yes No No

Update

unpublished cost

scenario

Yes Yes Yes No No

Create, edit, and

delete standard

costs

Yes Yes Yes No No

Create, edit, and

delete resource

rates

Yes Yes Yes No No

Run Update

Standard Costs

process (publish

cost scenario)

No Yes Yes No No

The table here lists the actions that you can perform for a published cost scenario based on the period status. You can’t

publish a cost scenario if the corresponding period is in the never opened status. Therefore, the never opened period

status is not applicable for this table.

Action Open Pending Close Closed Permanently Closed

Unpublish cost scenario No No No `No

Update cost scenario No No No No

Edit and delete published

standard costs

Yes Yes No No

Create standard costs Yes Yes No No

Edit and delete published

resource rates

Yes Yes No No

Create resource rates Yes Yes No No

Run Update Standard Costs

process (republish cost

scenario)

Yes Yes No No

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Standard Costs

Estimating Standard Costs

You can use the Manage Standard Costs task in the Cost Accounting work area to create estimated standard costs for

all purchased items. The standard costs are created for a scenario that's already mapped to a cost organization and cost

book.

The cost estimation process includes these functionality:

• Cost estimates for purchased items can be shared across all of the inventory organizations mapped to the cost

organization and pointing to the same valuation unit.

• Estimated costs for purchased items can be entered directly in the UI or imported using a spreadsheet.

• You can enter estimates that include one or more cost elements.

• If you enter a cost estimate for an overhead cost element, you must specify an expense pool.

• If you want to absorb costs against multiple expense pools, you can enter multiple rows for overhead costs.

• Standard cost material overheads can be defined for CTO model work definitions. The CTO model overhead is

applied to configured items created from the model's work definition.

• The logical receipt for a drop shipped standard costed item is costed at its effective standard cost. The

valuation of logical receipts is aligned with the valuation of physical purchase order receipts.

• Estimated costs for purchased items can have effective dates that are in the past, current, or future.

• Cost estimates for purchased items can be revised using the mass edit functionality and can be increased or

decreased by a percentage or a specific value.

• You can calculate standard costs for configurations on purchase order approval and use these costs to calculate

variances at purchase receipt.

• You can initiate and run multiple simultaneous standard cost roll ups. You can submit a request and run a cost

roll up for a cost organization even if a prior cost roll up for that organization hasn't yet completed.

• In the case of supply chain cost rollup, you can define the actual buy costs for procured items if the buy

sourcing rules exists for the item.

Estimating Standard Costs for Assemblies

The cost scenario is used to estimate the rolled-up cost of the manufactured items based on the selected work

definitions. You can perform incremental cost rollups to estimate manufactured item costs, and incorporate mid-period

corrections and rolling forecasts into estimates. You can use the Roll up Costs task on the Manage Cost Scenario page to

calculate the total product costs.

Note: If Cost Allocation is set to Fixed for an output item in the manufacturing work definition operation, you must

define a standard cost for this item. The standard cost method is used to cost all work order operation outputs that

have Cost Allocation set to Fixed, irrespective of the cost method set on the item cost profile. If a standard cost isn’t

defined for such an item, when processing the transactions, the cost processor will give an error stating the standard

cost is missing. Also, the Cost Allocation attribute is used only for process manufacturing.

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Standard Cost for Procured Items

In the case of supply chain cost rollup, you can define the actual buy costs for procured items when defining the

standard costs using the Buy Cost attribute in the Create Standard Costs page and the Import Standard Costs FBDI

or desktop spreadsheet. The buy cost will be used by the Roll up Costs process only if the cost scenario is enabled for

supply chain cost rollup and a buy sourcing rule exists for the item in the sourcing assignment. The process calculates

the standard cost of the item based on the sourcing rule and its allocation percentage.

If an item is sourced using 100% Buy From sourcing rule, its standard cost is equal to the buy cost. The standard cost

is used in cost accounting to process transactions. When you enter a buy cost, the status of the record is In process

within cost scenario and is available within that cost scenario to calculate the standard cost of the item and roll up the

costs of higher assemblies. When a buy cost is published using the Update Standard Costs process, it is used to roll

up the item cost in the subsequent cost scenarios. An item with the Buy From sourcing rule should have the buy cost

defined in the system, else the system would report an error.

Create Standard Costs

You can define standard costs for items and also define the associated valuation unit, cost element, and expense pool.

You must associate the standard cost with a cost scenario.

1. In the Cost Accounting work area, click the Manage Standard Costs task.

2. Click the Add icon.

3. On the Create Standard Cost page, select the cost scenario that you want to associate this standard cost with.

4. If your cost scenario has a cost rollup group, you need to select the cost organization and cost book

combination in the cost rollup group for which you want to enter the cost.

Note: If you use any of the bulk interfaces like FBDI or the desktop spreadsheet interface to enter these

standard costs, the cost organization and cost book must be specified for the incoming cost records.

5. Select the item and valuation unit for which you're defining the standard cost.

The item must be defined in the inventory organization before you can enter a cost for that item and valuation

unit.

6. Select Buy Cost if you're defining the cost for procured materials.

The buy cost will be used by the Roll up Costs process to calculate the standard cost of the item only if the

cost scenario is enabled for supply chain cost rollup and a buy sourcing rule exists for the item in the sourcing

assignment.

The buy cost is never used to cost inventory transactions in cost accounting.

7. In the Standard Cost Details region, click the Add Row icon.

8. Enter the values for Cost Element, Cost Element Type, Unit Cost, and Expense Pool (if applicable).

9. Click Save and Close.

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Note:

• When you publish a cost scenario, the buy cost gets published. However, this published buy cost isn't used

to cost transactions. Instead, it's used by the Roll up Costs process in the subsequent scenarios. Only the

published standard cost is used to value the inventory and cost transactions.

• For a periodic average cost enabled cost book, you can update or delete existing standard costs only if the

corresponding period for the cost scenario is in the Open, Pending Close, or Never Opened status and the

cost scenario is unpublished. After you publish a cost scenario, you can update the existing standard costs

but can't delete them.

Related Topics

•

Estimating Standard Costs

Manage Standard Costs in a Spreadsheet

If you need to work offline, then manage your standard costs using a Microsoft Excel spreadsheet. You can mass create

and update the material standard costs by using the Oracle Application Development Framework Desktop Integration

(ADFdi).

Here's how the ADFdi feature benefits you:

• After you download the standard costs to a spreadsheet, you can modify it even when you're disconnected

from the application.

• You can perform bulk entry and update of data with ease through a spreadsheet.

• You can upload the data and review the errors when you're online and connected to the costing application.

To manage standard costs in spreadsheet, you must first download and run the ADFdi Installer:

1. Click Navigator > Tools > Download Desktop Integration Installer.

2. Click Save File to download the desktop integration installer.

3. Double-click the executable file to install the ADF Desktop Integration Installer.

4. Click Install to proceed with the installation process.

5. Click Close to complete the installation process.

Then, download the standard costs data:

1. In the Cost Accounting work area, click the Manage Cost Scenarios task.

2. Search for and open the required cost scenario.

3. Select Manage Standard Costs from the Actions menu.

4. Click Manage in Spreadsheet to download the standard cost definitions spreadsheet.

5. Select the Open with option to open the standard cost definitions Excel file.

The file contains two worksheets, Create Standard Costs and Import Standard Costs.

6. Click Yes to connect to the application.

7. Login with your credentials and start working.

To upload a small batch of standard costs, up to 20 records, use the Create Standard Costs worksheet and to upload

higher volumes of standard costs, use the Import Standard Costs worksheet. Here's how you manage the standard

costs in a spreadsheet:

• To modify existing data, update the appropriate cells in each row that you want to update.

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• To add new standard costs, add rows in the worksheet and enter the values in the respective cells. Or, you can

copy and paste existing populated rows into the worksheet and then modify the necessary cells.

Note: You can only modify the values in the Item, Valuation Unit, Cost Element, Expense Pool, and Unit Cost columns.

All editable columns are mandatory, except Expense Pool.

When you update the information in a row, the Changed column of that row is automatically updated with a change

indicator icon. The inactive cells are read only fields and aren't included in the upload process.

After you have updated the worksheet, click Upload to synchronize the data in Cost Accounting. When you click Upload,

the Interface Standard Cost process in submitted. You can check the status of the process on the Scheduled Processes

page.

The Row Status column in the worksheet is updated with a success or error message for each changed row. In case of

errors, you can either rectify the rows that have errors and again upload the data, or delete the erroneous information

from the application by running the Delete Standard Costs from Interface process.

Related Topics

•

Create a Cost Scenario for Regular Items

•

Cost Planning Process

Import Standard Costs Using File-Based Data Import

You can use the Standard Costs Import Open Interface to import standard costs from external sources into Cost

Management. Once loaded, view the data in the Cost Accounting work area, on the Manage Standard Cost Import

Exceptions page.

Click Import Standard Costs to validate the data using the Interface Standard Costs process. You can view any errors

resulting from the validation process on the Manage Standard Cost Import Exceptions page. If there are any errors, take

the necessary corrective actions and rerun the Interface Standard Costs process.

After validation is complete, the data is loaded to the Standard Costs Interface table, and to the Manage Standard Costs

page in Cost Accounting.

For more information on file-based data import, see the chapter on Standard Costs Import in the File Based Data Import

guide for Oracle Supply Chain Management Cloud.

Complete these tasks before importing data using file-based data import:

• Set up the Default Cost Profile for Cost Accounting in the Setup and Maintenance work area, and set the New

Item Profile Creation option to Automatic.

• Set up a valuation unit using the Manage Valuation Units task in the Setup and Maintenance work area. Make a

note of the Valuation Unit Code, which is required for the CSV file.

• Set up overhead cost elements for Cost Accounting in the Setup and Maintenance work area using the Manage

Cost Elements task.

To Import Standard Costs Using File-Based Data Import

To import standard costs using File-Based Data Import, complete these steps.

1. In the Cost Accounting work area, click the Manage Cost Scenarios task.

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2. Click the Add icon and create a cost scenario.

Make a note of the scenario number, which is required for the CSV file.

3. Open the Standard Costs Import file-based data import template.

4. Complete the Standard Cost Headers and Standard Cost Details tabs using the instructions in the spreadsheet.

5. On the CSV Generation tab, click Generate CSV File.

6. From the Scheduled Processes work area, run the Interface Standard Costs process.

The process validates the data, creates the required cost profiles, and imports the costs into the Manage

Standard Costs page.

7. Review the imported data in the Cost Accounting work area, on the Manage Standard Cost Import Exceptions

page.

Correct any costs that have the status as Error, and then click Import Standard Costs.

8. Publish the cost scenarios to make the costs available for costing transactions.

Related Topics

•

Standard Cost Method

Resource Rates

Managing Resource Rates

You can enter resource rates when a resource is created in Manufacturing or enter them on the Manage Resource Rates

page in Cost Accounting.

Resources are set up in Manufacturing. To estimate resource rates in Cost Accounting, the costing enabled option in the

resource definition must be selected in Manufacturing.

Any pool of expenses can be absorbed by resource rates. You can define hourly rates for labor and for equipment. A

resource can have one or many rates, each absorbing a share of a pool of expenses. You can enter multiple rows of

resource rates to absorb multiple pools of expenses.

Note: If you've set the profile option Redwood Page for Resource Rates Enabled

(ORA_CST_RESOURCE_RATES_REDWOOD_ENABLED) to Yes at the Site level, you can manage the resource rates by

clicking the Resource Rates task in the Cost Accounting work area.

Create Resource Rates

When creating resource rates, you can define the associated plant, resource, cost element, expense pool, and rate. You

must associate the resource rate with a cost scenario.

1. In the Cost Accounting work area, click the Manage Resource Rates task.

2. Click the Add icon.

3. On the Create Resource Rate page, select the cost scenario that you want to associate this resource rate with.

4. Select the corresponding inventory organization and the resource for which you want to define the rate.

5. In the Details region, click the Add Row icon.

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6. Enter the values for Cost Element, Cost Element Type, Rate, and Expense Pool.

7. Click Save and Close.

Note: For a periodic average cost enabled cost book, you can update or delete existing resource rates only if the

corresponding period for the cost scenario is in the open, pending close, or never opened status and the cost scenario

is unpublished. After you publish a cost scenario, you can update the existing resource rates but can't delete them.

Manage Resource Rates in a Spreadsheet

If you need to work offline, then manage your resource rates using a Microsoft Excel spreadsheet. You can mass create

and update the resource rates by using the Oracle Application Development Framework Desktop Integration (ADFdi).

Before you start managing resource rates in a spreadsheet, you must download and install ADFdi.

To download the resource rates data:

1. In the Cost Accounting work area, click the Manage Cost Scenarios task.

2. Search for and open the required cost scenario.

3. Select Manage Resource Rates from the Actions menu.

4. Click Manage in Spreadsheet to download the resource rates spreadsheet.

5. Select the Open with option to open the resource rates Excel file.

6. Click Yes to connect to the application.

7. Login with your credentials and start working.

Here's how you manage the resource rates in a spreadsheet:

• To modify existing data, update the appropriate cells in each row that you want to update. You can search for

existing resource rates by using different parameters in the search panel of the spreadsheet.

• To add new resource rates, add rows in the worksheet and enter the values in the respective cells. Or, you can

copy and paste existing populated rows into the worksheet and then modify the necessary cells.

When you update the information in a row, the Changed column of that row is automatically updated with a change

indicator icon. The inactive cells are read only fields and aren't included in the upload process.

After you have updated the worksheet, click Upload to synchronize the data in Cost Accounting.

Overhead Rates

Managing Overhead Rates

You can define plant overheads and work center overheads. When defining work center overheads, you can specify the

resource type as equipment or labor.

Plant overheads, such as lighting and cooling, can be absorbed on the basis of the material cost. They can be of a fixed

or percentage value, with different absorption types available. Work center overheads, such as security, are absorbed by

the finished goods on the basis of a fixed rate or a percentage of resource cost incurred in the work center.

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You can use any combination of resource rates and overhead rates to absorb factory costs into the work in process and

finished goods inventory value. When you use overhead rates to absorb factory expenses, you can define rates as a

percentage of material or hourly work center rates.

Overhead absorption rates are date-effective, enabling you to set different absorption rates for each quarter. You can

have one or many rates at different levels, such as at inventory organization, item category, or item level. Each level

absorbs a share of the pool of expenses. These rates are used in cost roll up of an item and are published with the

rolled-up item cost. All the indirect costs modeled as overhead are absorbed by work in process product completion

when Cost Accounting uses the standard costs to process work execution transactions.

Note: Overhead rates will be applied only if the finished product is rolled up.

Note: If you've set the profile option Enable Standard Overhead Rate Redwood Page

(ORA_CST_STD_OVERHEAD_RATE_REDWOOD_ENABLED) to Yes at the Site level, you can manage the overhead

rates by clicking the Overhead Rates task in the Cost Accounting work area.

Overhead Absorption Type

When defining the overheads, you must mention the absorption type for the overheads. Depending on the overhead

type, plant overhead or work center overhead, the available absorption types are listed in this table.

Absorption Type Plant Overhead Work Center Overhead

Fixed

A fixed overhead value is applied to the unit

cost.

A fixed overhead value is applied to the unit

cost.

Percentage

Overhead is calculated using the specified

percentage of the material costs of the buy

items at this level.

The overhead is calculated using the specified

percentage of the resource costs.

Percentage of material cost at all levels

Overhead is calculated using the specified

percentage of the material costs of buy items

and sub-assemblies.

Not applicable.

Percentage of total cost excluding overhead at

this level

Overhead is calculated using the specified

percentage of the total cost minus the

overheads at this level.

Not applicable.

Percentage of total cost including overhead at

all levels

Overhead is calculated using the specified

percentage of the total cost including the

overheads at all levels.

Not applicable.

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Create Overhead Rates

When you create an overhead rate, you can specify the corresponding overhead rate type and absorption type. You

must associate the overhead rate with a cost scenario.

Overhead rates aren't applicable for cost scenarios created using periodic average cost enabled cost books.

1. In the Cost Accounting work area, click the Manage Overhead Rates task.

2. Click the Add icon.

3. On the Create Overhead Rate page, select the cost scenario that you want to associate this overhead rate with.

4. Select the corresponding inventory organization and specify whether you're defining a plant overheard or work

center overhead.

5. For a plant overhead, select the required Item Category and Item.

If you're defining a work center overhead, then select the required Work Center and Resource Type.

6. In the Details region, click the Add Row icon.

7. Select the appropriate Cost Element, Expense Pool, and Absorption Type.

8. Depending on the selected Absorption Type, enter the Rate for percentage values or the Value for a fixed

overhead absorption.

9. Click Save and Close.

Manage Overhead Rates in a Spreadsheet

You can manage the overhead rates using a Microsoft Excel spreadsheet. You can mass create and update the overhead

rates by using the Oracle Application Development Framework Desktop Integration (ADFdi).

Before you start managing overhead rates in a spreadsheet, you must download and install ADFdi.

To download the overhead rates data:

1. In the Cost Accounting work area, click the Manage Cost Scenarios task.

2. Search for and open the required cost scenario.

3. Select Manage Overhead Rates from the Actions menu.

4. Click Manage in Spreadsheet to download the overhead rates spreadsheet.

5. Select the Open with option to open the overhead rates Excel file.

6. Click Yes to connect to the application.

7. Login with your credentials and start working.

Here's how you manage the overhead rates in a spreadsheet:

• To modify existing data, update the appropriate cells in each row that you want to update. You can search for

existing overhead rates by using different parameters in the search panel of the spreadsheet.

• To add new overhead rates, add rows in the worksheet and enter the values in the respective cells. Or, you can

copy and paste existing populated rows into the worksheet and then modify the necessary cells.

When you update the information in a row, the Changed column of that row is automatically updated with a change

indicator icon. The inactive cells are read only fields and aren't included in the upload process.

After you have updated the worksheet, click Upload to synchronize the data in Cost Accounting.

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Cost Rollup

Roll Up Costs

After you're ready with your cost estimates for materials, direct labor, and indirect labor, you can run the Roll up Costs

process to calculate the standard costs of your make items.

The process uses your cost estimates and manufacturing work definitions, calculates overheads incurred as part of

the manufacturing processes, and generates the unit cost of the make items. The Roll up Costs process first calculates

the total cost as the fixed cost operations plus the variable costs (the unit resource cost multiplied by the quantity

consumed). Next, it calculates the per-unit cost as the total cost divided by the scaled quantity.

The cost roll-up experience is designed to facilitate an interactive cost estimation process. You can review errors

reported, review the work definitions being used for cost roll-up, change your work definition selection criteria, and

modify component purchase prices and the resource rate as many times as required.

When calculating the cost of make items, the process doesn't include the costs consumed in optional operations for

manufacturing work definitions. This is true for operations that are executed conditionally, for example, a rework

step based on inspection results in the previous operation. Similarly, output items yielded from optional operations in

process manufacturing are also not included in the cost rollup.

After you run the process, you can review the costs on the View Rolled-up Costs page. The page lists the calculated unit

cost of the make items, along with the costs of the individual components, resource rates, and overhead rates. You can

also review additional details like the work definition name, process name, operations, and other output items yielded,

in the case of process manufacturing.

Note: If you have set the profile value to No for the profile option code ORA_CST_REBUILD_ROLLEDUP_COSTS, then you

must run the Restore Rolled-up Costs process for a cost scenario after running the Roll up Costs process to view the

costs in the View Rolled-up Costs page.

The cost of a make item is rolled up only if the respective costs and rates are set in the cost scenario. You can review all

the exceptions encountered by the process on the View Scenario Exceptions page. In case of exceptions, to generate the

costs of make items, take the necessary corrective actions to resolve the errors and re-run the Roll up Costs process.

Note: The Roll up Costs process isn't applicable for cost scenarios created using periodic average cost enabled cost

books. After you define standard costs and resource rates for such a cost scenario, you run the Update Standard Costs

process to publish the cost scenario.

Supply Chain Cost Rollup

After you run the Roll up Costs process, you can validate the product costs using the View Rolled-up Costs page. On this

page, you can also verify the sourcing rules that were used to calculate the costs. Each sourcing rule node would have

the cost breakdown to validate the rolled-up costs.

When multiple sourcing rules (rank = 1) are defined:

Standard cost of product = (User entered buy cost * Buy sourcing rule allocation) + (Rolled-up cost from work definition

* Make sourcing rule allocation) + (Transfer cost * Transfer sourcing rule allocation)

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You can analyze these costs using the Costing - Supply Chain Cost Rollup Real Time subject area in OTBI. You can create

personalized analysis reports to verify the rolled-up costs of manufactured items. You can also design the report layout

and include information relevant to your business. Additionally, you can also use the Supply Chain Rollup Costed BOM

Report to analyze the rolled-up costs for your manufactured items. You can save this report locally and make necessary

changes to include information as per your business needs.

Related Topics

•

Supply Chain Cost Rollup

•

Why is the Roll up Costs process not including the resource cost while rolling up the cost of the item

•

Reports and Analytics for Cost Accounting

Cost Rollup for Process Manufacturing

Standard cost rollup supports process manufacturing work definitions with multiple outputs, where the production

method requires ways to manage variability that's inherent in materials and processes. This is useful if you require a

hybrid of discrete and process manufacturing capabilities.

You can specify the costing batch size to determine the standard cost of production batches and allocate costs based on

a fixed cost or a percentage of the total cost, for the primary product, co-products, and by-products.

The Roll up Costs process calculates the costs of output items with active work definitions, based on the cost allocation

defined on the work definition operations. When output items are setup with fixed cost allocation, the system expects

you to enter the costs of these items manually using the Standard Costs page or bulk interfaces. The entered costs are

used to process product completion transactions.

Phantom Items in Work Orders

If a subassembly in a work order has the supply type as Phantom, then you must ensure that it has an active item

structure as of the scenario effective date. For subassemblies with the supply type as Phantom in the work definition of

a higher assembly, the Roll up Costs process will follow this in the order listed:

• Check whether a work definition exists for the phantom item and use that to roll up the cost.

• If a work definition doesn’t exist for the phantom item, then the process would use the item structure of the

phantom item to roll up the cost.

• If neither a work definition exists nor an item structure for the phantom item, then the process will log an error.

Cost Rollup for Configured Items

For configured items, you can run the Roll up Costs process as and when the business needs, that's to say you can run

the process on-demand, allowing you to calculate and publish the latest costs for manufactured and procured items.

You can also calculate the costs of manufactured configured items before the transactions occur to plan for the costs.

That's to say, you can plan the costs for manufactured configured items without a work order.

Additionally, if you've set the rollup scope to Unprocessed Purchase Orders and Work Orders, you can schedule the Roll

up Costs process for configured items. This ensures that whenever a purchase order for a procured configured item is

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approved or a work order for a manufactured configured item is issued, the process rolls up the costs of that item for

the new purchase order or work order, using the effective component costs, resource rates, and overhead rates.

Co-Products and By-Products in Discrete Manufacturing

You can plan and account the costs of co-products and by-products in a discrete manufacturing work definition and

work order.

With the capability to yield multiple outputs from discrete work definitions, you can calculate the cost of your products

to closely reflect your actual production process. This eliminates the need for any alternate configurations in the

application, saving time and effort and increasing productivity. If you use the standard cost method to value your

inventory, you can analyze manufacturing variances in Cost Accounting to identify scope of improvement in your

production processes and make better decisions.

You can set the cost allocation factor for the additional products as either a fixed cost or apply a percentage of the total

accumulated costs at that operation. If you've multiple work definitions for the product in the manufacturing plant, set

the costing priority for your primary product and additional products to choose the appropriate work definition when

rolling up the costs of your products.

Note: In discrete manufacturing work definitions with multiple outputs, the assumption is that the primary product is

yielded after the completion of last operation.

When you run the Roll up Costs process, the standard costs of the primary product, co-products, and by-products are

calculated based on the planned cost. If you specify the costing batch output size in your work definition, the Roll up

Costs process will scale up (or down) the quantities of inputs (materials and resources) that are planned to be consumed

on a variable basis.

The View Rolled-up Costs page provides the breakdown of the rolled-up costs.

To calculate the cost of products, the Roll up Costs process increments the cumulative cost as inputs are consumed and

decrements the cumulative cost as outputs are yielded.

Cumulative Cost = Cumulative Extended Material Costs + Cumulative Extended Resource Costs + Cumulative Overhead

Costs - Output Costs

Output Cost of Additional Product (with cost allocation percentage) = Cost Allocation Percentage * Cumulative

Cost

Output Cost of Additional Product (with fixed cost) = Entered Unit Cost * Quantity Planned to be Yielded (scaled

quantity)

Output Cost of Primary Product = Cumulative Cost at the End of Last Operation

Unit Cost of Product = (Output Cost + Overhead Cost) / Quantity to be Yielded (scaled quantity)

The unit cost of product, with the cost element, expense pool, and level information is available on the Standard

Costs page. After you publish this standard cost, this cost is used to process product completion transactions in Cost

Accounting.

Related Topics

•

Cost Accounting for Manufacturing Work Orders

•

Review Work Order Costs

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Operation Yield for Estimating Losses during Work Order

Execution

You can include the impact of operation yield when calculating the standard cost of items using the Roll up Costs

process and when accounting discrete work orders.

Operation yield indicates the yield expected out of an operation. A value of 1 indicates that there isn't any loss. However,

any value less than 1 indicates a planned loss in that operation.

Let's consider an example of a work definition with four operations and the operation yields defined. The cumulative

yield and reverse cumulative yield are calculated as listed in the table.

Operation Operation Yield Cumulative Yield Reverse Cumulative Yield

10 0.9 0.9 0.648

20 0.8 0.72 0.72

30 1.0 0.72 0.9

40 0.9 0.648 0.9

For standard costed items, the Roll up Costs process includes the operation yield defined at each operation to scale

up the quantities of components and resources required. The View Rolled-up Costs page shows the Operation Yield

defined in the work definition and also the Reverse Cumulative Yield for each operation.

The rolled up cost shows the extra items and resources used to factor in the operation yield as Estimated Scrap

Loss. The Reverse Cumulative Yield is used to calculate the extra quantities that need to be considered based on the

operation yield defined in the work definitions.

The formula used is:

Estimated Scrap Loss (for an input) = [(1-Reverse Cumulative Yield) / Reverse Cumulative Yield] * Scaled

Quantity

In the View Rolled-up Costs page, the Estimated Scrap Loss node shows the quantities of input lost due to operation

yield. Every input (material and resource) with variable basis type has estimated scrap loss due to the operation yield.

The standard costs that are published show the Estimated Scrap Loss as a separate cost level.

Related Topics

•

Cost Accounting for Manufacturing Work Orders

•

Review Work Order Costs

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Cost Rollup Examples

Example of Cost Rollup

This example illustrates how the unit cost of a make item is calculated by the Roll up Costs process after the standard

costs, resource rates, and overhead rates are defined in the cost scenario.

Scenario

Your organization is manufacturing an item RS-ABCD that has a structure as shown in the image here. To make this

item, you first need to make RS-AB and RS-CD. RS-AB is made using the materials RS-A and RS-B. RS-CD is made using

the materials RS-C and RS-D. Apart from these materials, you also require various other resources to manufacture this

item.

For this item, you create these work definitions.

Item Work Definition Name Version Start Date

RS-AB

Main

9/1/2020

RS-CD

Main

9/1/2020

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Item Work Definition Name Version Start Date

RS-ABCD

Main

9/1/2020

Let's assume that the batch size of the work definition output is 1 each (primary UOM of these items).

Standard Costs, Resource Rates, and Overhead Rates

Now, to calculate the unit cost of RS-ABCD, you start by creating a cost scenario. You must make sure that the effective

start date of the cost scenario is same as or later than the work definition start date. So, set the effective start date as

9/1/2020.

Next, you must define the standard costs for the materials used, the rates for the various resources used when

manufacturing the item, and the overheads incurred. Define the standard costs, resource rates, and overhead rates for

this cost scenario as listed in these tables.

Standard Costs

Item Cost Element Cost Element Type Expense Pool Unit Cost

RS-A

CML Material

Material

1.00

CML Overhead

Overhead

CML Exp Pool

0.50

1.50

RS-B

OSPMatElement

Material

2.00

RS-C

0554-MatElement

Material

3.00

RS-D

P2P-Material-CE

Material

4.00

Resource Rates

Resource Cost Element Cost Element Type Expense Pool Unit Cost

Machine Operator

Direct Labor

Resource

MFG_Resources_EP

1.00

Fabrication Engineer

0554-ResElement

Resource

P2P_Res_Pool

1.50

ZCST-Electrical

Overhead

P2P_Exp_Pool

0.50

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Resource Cost Element Cost Element Type Expense Pool Unit Cost

2.00

Electrician

Direct Labor

Resource

3.00

Inspector

RS-Resource

Resource

4.00

Welding Torch

Direct Equipment

Resource

5.00

Overhead Rates

Overhead Rate

Type

Item Category Item Cost Element Expense Pool Absorption Type Rate

Plant Overhead

RS-ABCD

Manufacturing

Overheads

MFG_Resources_

Percentage of

Material Cost

Note: The overhead rate defined is only for the assembly of the item RS-ABCD.

Analysis

After you define the cost scenario and the corresponding standard costs, resource rates, overhead rates, run the Roll up

Costs process for the cost scenario.

Rolled Up Costs

Let's start with identifying the costs for the items RS-AB and RS-CD. To fabricate RS-AB, you need couple of machine

operators and fabrication engineers. The item cost calculation for RS-AB is as shown here.

Number Operation

Sequence

Item Item Description Unit Cost Quantity Extended Cost

Main (#V1)

RS-AB

9.50

Fabrication

9.50

RS-A

1.50

RS-B

2.00

Machine Operator

1.00

2.00

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Number Operation

Sequence

Item Item Description Unit Cost Quantity Extended Cost

Fabrication

Engineer

2.00

4.00

To make RS-CD, you need an electrician and the work must be inspected by an inspector. This is the item cost

calculation for RS-CD.

Number Operation

Sequence

Item Item Description Unit Cost Quantity Extended Cost

Main (#V1)

RS-CD

14.00

Electrical

10.00

RS-C

3.00

RS-D

4.00

Electrician

3.00

Inspection

4.00

Inspector

4.00

RS-ABCD is made by using RS-AC and RS-CD. You need welding torches and the work must be inspected by an

inspector. This is the item cost calculation for RS-ABCD.

Number Operation

Sequence

Item Item Description Unit Cost Quantity Extended Cost

Main (#V1)

RS-ABCD

37.60

Frame Assembly

33.50

RS-AB

9.50

RS-CD

14.00

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Number Operation

Sequence

Item Item Description Unit Cost Quantity Extended Cost

Electrician

5.00

10.00

Inspection

4.00

Inspector

4.00

Plant Overhead

0.10

Note: The plant overhead is defined as 1% of the total material costs, which is the sum of the material costs for RS-A,

RS-B, RS-C, and RS-D. The overhead for RS-A defined in the standard cost is excluded.

Cost details of the materials, resources, and overheads for the item RS-ABCD are summarized here.

Cost Element Cost Element Type Expense Pool Cost Level Unit Cost

ZCST-Electrical

Overhead

Lower Level

1.00

ZCST-Electrical

Overhead

This Level

0.00

CML Material

Material

Lower Level

1.00

CML Overhead

Overhead

Lower Level

0.50

CML Overhead

Overhead

This Level

0.00

OSPMatElement

Material

Lower Level

2.00

OSPMatElement

Material

This Level

0.00

RS-Resource

Resource

Lower Level

4.00

RS-Resource

Resource

This Level

4.00

P2P-Material-CE

Material

Lower Level

4.00

P2P-Material-CE

Material

This Level

0.00

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Cost Element Cost Element Type Expense Pool Cost Level Unit Cost

0554-MatElement

Material

Lower Level

3.00

0554-MatElement

Material

This Level

0.00

0554-ResElement

Resource

Lower Level

3.00

0554-ResElement

Resource

This Level

0.00

Direct Labor

Resource

Lower Level

5.00

Direct Labor

Resource

This Level

0.00

Direct Equipment

Resource

This Level

10.00

Manufacturing Overheads

Overhead

MFG_Resources_EP

This Level

0.10

37.60

Note: The expense pool for overheads incurred while manufacturing the assembly at this level is retained.

Example of Cost Rollup with Different Overhead Absorption Types

This example extends the previous example and illustrates how the unit cost of a make item is calculated by the Roll up

Costs process when overhead rates with different absorption types are defined in the cost scenario.

Scenario

You're defining a new plant overhead at the plant level that's absorbed by all the assemblies manufactured. Work

definitions, standard costs, and resource rates are same as defined earlier.

Revised Overhead Rates

These are the overhead rates defined in the cost scenario.

Overhead Rate

Type

Item Category Item Cost Element Expense Pool Absorption Type Rate

Plant Overhead

RS-ABCD

Manufacturing

Overheads

MFG_Resources_

Percentage of

Material Cost

Plant Overhead

P2P-Overhead-CE

P2P_Exp_Pool

Percentage of Total

Cost

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Note: The first overhead rate defined is only for the assembly of the item RS-ABCD. The second one is defined at the

plant level and will apply to all assemblies.

Analysis

After you define the cost scenario and the corresponding standard costs, resource rates, overhead rates, run the Roll up

Costs process for the cost scenario.

Rolled Up Costs

Let's start with identifying the revised costs for the items RS-AB and RS-CD after including the new plant overhead,

which is defined as 2% of the total cost.

To fabricate RS-AB, you need couple of machine operators and fabrication engineers. This is the item cost calculation

for RS-AB.

Number Operation

Sequence

Item Item Description Unit Cost Quantity Extended Cost

Main (#V1)

RS-AB

9.66

Fabrication

9.50

RS-A

1.50

RS-B

2.00

Machine Operator

1.00

2.00

Fabrication

Engineer

2.00

4.00

Plant Overhead

0.16

The plant overhead is 2% of the total cost, excluding the overheads for material RS-A and the fabrication engineer.

Therefore, the plant overhead is calculated as shown here:

0.02 x [Total material cost of (RS-A + RS-B) + Total resource rate of (Machine Operator + Fabrication Engineer)]

0.02 x [(1.00 + 2.00) + 2 x (1.00 + 1.50)] = 0.16

Note: The resource rate is multiplied by 2 because two machine operators and two fabrication engineers are required

to fabricate RS-AB.

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To make RS-CD, you need an electrician and the work must be inspected by an inspector. This is the item cost

calculation for RS-CD.

Number Operation

Sequence

Item Item Description Unit Cost Quantity Extended Cost

Main (#V1)

RS-CD

14.28

Electrical

10.00

RS-C

3.00

RS-D

4.00

Electrician

3.00

Inspection

4.00

Inspector

4.00

Plant Overhead

0.28

RS-ABCD is made by using RS-AC and RS-CD. You need welding torches and the work must be inspected by an

inspector. This is the item cost calculation for RS-ABCD.

Number Operation

Sequence

Item Item Description Unit Cost Quantity Extended Cost

Main (#V1)

RS-ABCD

38.80

Frame Assembly

33.94

RS-AB

9.66

RS-CD

14.28

Electrician

5.00

10.00

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Number Operation

Sequence

Item Item Description Unit Cost Quantity Extended Cost

Inspection

4.00

Inspector

4.00

Plant Overhead

0.10

Plant Overhead

0.76

The first plant overhead is defined as 1% of the total material costs, which is the sum of the material costs for RS-A, RS-

B, RS-C, and RS-D. The overhead for RS-A defined in the standard cost is excluded.

The second plant overhead is defined as 2% of the total cost. When calculating this overhead, the overhead for material

RS-A, the overhead for fabrication engineer, and the plant overhead calculated for RS-AB and RS-CD are considered.

Cost details of the materials, resources, and overheads for the item RS-ABCD are summarized here.

Cost Element Cost Element Type Expense Pool Cost Level Unit Cost

ZCST-Electrical

Overhead

Lower Level

1.00

CML Material

Material

Lower Level

1.00

CML Overhead

Overhead

Lower Level

0.50

OSPMatElement

Material

Lower Level

2.00

RS-Resource

Resource

Lower Level

4.00

RS-Resource

Resource

This Level

4.00

P2P-Overhead-CE

Overhead

P2P_Exp_Pool

This Level

0.76

P2P-Overhead-CE

Overhead

Lower Level

0.44

P2P-Material-CE

Material

Lower Level

4.00

0554-MatElement

Material

Lower Level

3.00

0554-ResElement Resource Lower Level 3.00

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Cost Element Cost Element Type Expense Pool Cost Level Unit Cost

Direct Labor

Resource

Lower Level

5.00

Direct Equipment

Resource

This Level

10.00

Manufacturing Overheads

Overhead

MFG_Resources_EP

This Level

0.10

38.80

Note: The expense pool for overheads incurred while manufacturing the assembly at this level is retained.

Example of Single Level Cost Rollup

This example extends the previous example and illustrates how the unit cost of a make item is calculated by the Roll up

Costs process when single level cost rollup is selected in the cost scenario.

Scenario

Your organization is now manufacturing an item RS-ABCDE that has a structure as shown in the image here. To make

this item, you need the item RS-ABCD and the material RS-E. You've published the cost for RS-ABCD (as calculated in

the earlier example) and it's available for cost planning.

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The start date of work definition is same as defined earlier.

Cost Scenario

Create a cost scenario with the rollup scope as Selected Items and also select the Single-level Cost Rollup option. You

want to use the already published costs for RS-ABCD and, therefore, you must select the Single-level Cost Rollup option.

If you don't select this option, the Roll up Costs process will recalculate the costs for RS-AB, RS-CD, and RS-ABCD.

Define the standard costs, resource rates, and overhead rates as mentioned in the previous examples. Additionally,

define this standard cost for the new material RS-E.

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Item Cost Element Cost Element Type Expense Pool Unit Cost

RS-E

CML-Material

Material

1.00

Analysis

After you define the cost scenario and the corresponding standard costs, resource rates, overhead rates, run the Roll up

Costs process for the cost scenario.

Rolled Up Costs

RS-ABCDE is made by using the item RS-ABCD and the material RS-E. You need welding torches and the work must be

inspected by an inspector. The item cost calculation for RS-ABCDE is shown in this table.

Number Operation

Sequence

Item Item Description Unit Cost Quantity Extended Cost

Main (#V1)

RS-ABCDE

54.876

Frame Assembly

49.80

RS-ABCD

38.80

RS-E

1.00

Welding Torch

5.00

10.00

Inspection

4.00

Inspector

4.00

Plant Overhead

1.076

Example of Supply Chain Cost Rollup for Discrete Manufacturing

This example illustrates how the unit cost of an item in discrete manufacturing is calculated by the Roll up Costs process

when using supply chain cost rollup.

Scenario

Organization ZQD is manufacturing the item SC_FP01. To manufacture this item, you need various other items. The

items, their sourcing rules, and quantities are listed in this table:

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Item Organization Sourcing Rule Source Organization Allocation Quantity

SC_FP01 ZQD Make N/A 100% 1

SC_F1 ZQD Buy N/A 100% 10

SC_SubPhantom1 ZQD Make N/A 100% 5

SC_Ph1 ZQD Buy N/A 100% 25

SC_Ph2 ZQD Buy N/A 100% 25

SC_SubAsmb1 ZQD Transfer M1 100% 1

The item SC_SubAsmb1 in the above table is made in the organization M1. The corresponding sourcing rules are listed in

this table:

Item Organization Sourcing Rule Source Organization Allocation Quantity

SC_SubAsmb1 M1 Make N/A 100% 1

SC_A1 M1 Buy N/A 100% 5

SC_A2 M1 Buy N/A 100% 5

As you can gather from the tables, the organization ZQD requires the items listed here to manufacture the finished item

SC_FP01:

• SC_F1 – ZQD buys this item and a standard or buy cost must be defined for this item.

• SC_SubPhantom1 – ZQD makes this item and needs these items:

◦

SC_Ph1 – ZQD buys this item and a standard or buy cost must be defined for this item.

◦

SC_Ph2 – ZQD buys this item and a standard or buy cost must be defined for this item.

• SC_SubAsmb1 – ZQD sources this from M1, which manufactures it with these items:

◦

SC_A1 – M1 buys this item and a standard or buy cost must be defined for this item.

◦

SC_A2 – M1 buys this item and a standard or buy cost must be defined for this item.

Apart from these materials, you also require various other resources to manufacture this item. Here's an image

illustrating the overall manufacturing flow for the finished item SC_FP01.

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For this item, you create the work definitions.

Item Work Definition Name Version Date

SC_FP01 ZQD_Final 1 11/1/2023

SC_SubAsmb1 Main 1 11/1/2023

Let's assume that the batch size of the work definition output is 1 each (primary UOM of these items).

Note: We haven't defined a work definition for the phantom subassembly SC_SubPhantom1. Only for phantom

subassemblies, the logic will roll up the cost without a work definition, using the item structure of the phantom.

However, if you create a work definition for the phantom, it takes precedence for cost rollup.

Cost Scenario, Standard Costs, Resource Rates, and Overhead Rates

Now, to calculate the unit cost of SC_FP01, you start by creating a cost scenario. You must make sure that the effective

start date of the cost scenario is same as or later than the work definition start date. Also, ensure that the settings listed

here are made in the cost scenario:

• Enable Supply Chain Cost Rollup – Select this option.

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• Organization Context – Group

• Cost Rollup Group – Select a cost rollup group that you've created with the cost organization and cost book

combinations for the ZQD and M1 organizations respectively.

• Effective Date – 11/1/2023

• Assignment Set Name – Select the assignment set in which you have set the sourcing type for all the items.

Also, ensure that you’ve defined the various sourcing rules. The sourcing rules must be planning enabled and

linked to the assignment set. Also, check whether active supply sourcing rules with total allocation of 100%

exist as of the scenario effective date.

Note: You must run the Extract Supply Sources process for the assignment set before running the Roll up

Costs process.

• Transfer Charge Rule Set – Select the rule set with the transfer charge rule for transfer from M1 to ZQD. Let’s

assume you've defined a 2% transfer charge rule.

• Rollup Scope – Select Items. Add the items listed here:

◦

SC_SubAsmb1

◦

SC_SubPhantom1

◦

SC_FP01

• Use Latest Work Definitions – Select this option to use the latest version of active work definition in the

manufacturing organization.

Next, you must define the standard costs for the materials used, the rates for the various resources used when

manufacturing the item, and the overheads incurred.

Standard Costs

Item Valuation Unit Buy Cost Cost Element Cost Element

Type

Expense Pool Unit Cost ($)

SC_F1 ZQD-Org1 Yes

P2P-Material Material 9.80

P2P-OH Overhead P2P_Exp_Pool 1.43

11.23

SC_Ph1 ZQD-Org1 No

P2P-Material Material 10.00

P2P-OH Overhead P2P_Exp_Pool 2.15

12.15

SC_Ph2 ZQD-Org1 Yes

P2P-Material Material 5.35

P2P-OH Overhead P2P_Exp_Pool 1.45

6.80

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Item Valuation Unit Buy Cost Cost Element Cost Element

Type

Expense Pool Unit Cost ($)

SC_A1 M1-Org1 Yes

P2P-Material Material 2.65

P2P-OH Overhead P2P_Exp_Pool 0.75

3.40

SC_A2 M1-Org1 Yes

P2P-Material Material 20.00

P2P-OH Overhead P2P_Exp_Pool 2.00

22.00

Note:

• For SC_Ph1, Buy Cost isn't selected. You are defining a standard cost for this item that can be used to cost

inventory transactions in Cost Accounting. When you select Buy Cost, the buy cost will be used by the Roll up

Costs process to calculate the standard cost of the item only if the cost scenario is enabled for supply chain

cost rollup and a buy sourcing rule exists for the item in the sourcing assignment. The buy cost is never used

to cost inventory transactions in Cost Accounting.

• Ensure that you select the appropriate cost organization and cost book combination for the items made or

used by the ZQD and M1 organizations respectively.

Resource Rates

Resource Plant Cost Element Cost Element Type Expense Pool Unit Cost ($)

SC_ZQD_Res1 ZQD-Mfg

P2P-Resource Resource P2P_Res_Pool 7.00

Res-OH-2 Overhead RS_OH_Exp 2.99

9.99

SC_M1_Res1 M1-Mfg

P2P-Resource Resource P2P_Res_Pool 5.00

Res-OH-2 Overhead RS_OH_Exp 0.35

5.35

Overhead Rates

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Plant Overhead Rate

Type

Item Cost Element Expense Pool Absorption Type Rate

M1-Mfg Work center

overhead

SC_SubAsmb1 Res-overhead WC-OH Percentage 10%

ZQD-Mfg Plant overhead N/A Plant_OH P1-OH Fixed $50.00

ZQD-Mfg Plant overhead N/A Plant_OH P1-OH Percentage 20%

Analysis

After you define the cost scenario and the corresponding standard costs, resource rates, overhead rates, run the Roll up

Costs process for the cost scenario.

Rolled Up Costs

Let's start with identifying the costs for the items SC_SubAsmb1, SC_SubPhantom1, and SC_FP01.

The item cost calculation for SC_SubAsmb1 is as shown here.

Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

SC_SubAsmb1 138.70 1 138.70

10 SC_A1 Material 2.65 5 13.25

Overhead 0.75 5 3.75

10 SC_A2 Material 20.00 5 100.00

Overhead 2.00 5 10.00

10 SC_M1_Res1 Resource 5.00 2 10.00

Overhead 0.35 2 0.70

10 Work center overhead Overhead 1.00 1 1.00

The item cost calculation for SC_SubPhantom1 is as shown here.

Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

SC_SubPhantom1 160.10 1 160.10

10 SC_Ph1 Material 10.00 5 50.00

Overhead 2.15 5 10.75

10 SC_Ph2 Material 5.35 5 26.75

Overhead 1.45 5 7.25

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Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

10 Plant overhead Overhead (Fixed) 50.00 1 50.00

10 Plant overhead Overhead

(Percentage)

15.35 1 15.35

The percentage plant overhead in the table is defined at 20%. That's 20% of the material cost. The material cost equates

to sum of the material cost multiplied by the quantity.

Overhead = 0.2 * [5 * (10.00 + 5.35)]

Overhead = 0.2 * [76.75] = 15.35

The item cost calculation for the final product SC_FP01 is as shown here.

Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

SC_FP01 817.10 1 817.10

10 SC_F1 Material 9.80 10 98.00

Overhead 1.43 10 14.30

10 SC_Ph1 Total cost from

phantom

60.75 5 303.75

10 SC_Ph2 Total cost from

phantom

34.00 5 170.00

10 SC_SubAsmb1 Total cost from

subassembly +

transfer charge rule

141.47 1 141.47

10 SC_ZQD_Res1 Resource 7.00 2 14.00

Overhead 2.99 2 5.98

10 Plant overhead Overhead (Fixed) 50.00 1 50.00

10 Plant overhead Overhead

(Percentage)

19.65 1 19.60

The percentage plant overhead in the table is defined at 20%. That's 20% of the material cost. The material cost equates

to sum of the material cost multiplied by the quantity.

Overhead = 0.2 * [10 * (9.8)]

Overhead = 0.2 * [98] = 19.60

Also, the cost for the item SC_SubAsmb1 must include the 2% transfer charge. So the item cost is,

1.02 * 138.70 = 141.47

When you view the rolled up cost for the product, you'll notice that the phantom subassembly isn't shown directly,

instead the phantom is expanded to show its components as if they're going into the higher-level assembly.

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Example of Supply Chain Cost Rollup for Process Manufacturing

This example illustrates how the unit cost of an item in process manufacturing is calculated by the Roll up Costs process

when using supply chain cost rollup.

Scenario

Organization ZQD is manufacturing the item SC_ABCDEF. Here's the overall output of the process manufacturing.

Item Sourcing Rule Output Source Allocation

Percentage

Quantity Cost Allocation in

Work Definition

SC_ABCDEF Make Primary product 70% 10 60%

SC_ABCDEF Buy Primary product 30% 10 N/A

SC_CoProd Make Co-product 100% 10 30%

SC_ByProd Make By-product 100% 10 10%

To manufacture the item SC_ABCDEF, you need various other items. The items, their sourcing rules, and quantities are

listed in this table:

Item Organization Sourcing Rule Source Organization Source Allocation

Percentage

Quantity

SC_ABCDEF ZQD Make N/A 70% 10

SC_ABCDEF ZQD Buy N/A 30% 10

SC_Y ZQD Transfer M1 100% 1

SC_X ZQD Transfer M1 100% 1

SC_F ZQD Buy N/A 100% 1

SC_PH3 ZQD N/A N/A 100% 2

SC_E ZQD Buy N/A 100% 2

SC_Ph2 ZQD N/A N/A 100% 4

SC_CD ZQD Buy N/A 40% 4

SC_CD ZQD Transfer M1 60% 4

SC_Ph1 ZQD N/A N/A 100% 8

SC_A ZQD Buy N/A 100% 16

SC_B ZQD Buy N/A 100% 8

In the above table, you will note that no sourcing rules are mentioned for the phantom items SC_Ph1, SC_Ph2, and

SC_PH3. The Roll up Costs process assumes that the phantom items will be 100% make items.

Apart from these materials, you also require the resource Labor-3 for 10 hours to manufacture the item SC_ABCDEF.

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The subassembly SC_CD in the above table is made in the organization M1. The corresponding sourcing rules are listed

in this table:

Item Organization Sourcing Rule Source Organization Allocation Quantity

SC_CD M1 Make N/A 20% 4

SC_CD M1 Buy N/A 80% 4

SC_C M1 Buy N/A 100% 8

SC_D M1 Buy N/A 100% 4

Apart from these materials, you also require the resource Mach-01 for 5 hours to manufacture the subassembly SC_CD.

As you can gather from the tables, the organization ZQD requires the items listed here to manufacture the finished item

SC_ABCDEF:

• SC_Ph1 – ZQD makes this item and needs these items:

◦

SC_A – ZQD buys this item and a standard or buy cost must be defined for this item.

◦

SC_B – ZQD buys this item and a standard or buy cost must be defined for this item.

• SC_Ph2 – ZQD makes this item and needs these items:

◦

SC_Ph1 – ZQD makes this item and the cost is rolled up based on the item structure defined.

◦

SC_CD – ZQD buys 40% of this item and a standard or buy cost must be defined for this item. The

remaining 60% is transferred from M1 with a 10% markup.

• SC_CD – M1 makes this item and needs these items and resources:

◦

SC_C – M1 buys this item and a standard or buy cost must be defined for this item.

◦

SC_D – M1 buys this item and a standard or buy cost must be defined for this item.

◦

Mach-01 – M1 uses this resource for 5 hours to make one SC_CD.

• SC_PH3 – ZQD makes this item and needs these items:

◦

SC_Ph2 – ZQD makes this item and the cost is rolled up based on the item structure defined.

◦

SC_E – ZQD buys this item and a standard or buy cost must be defined for this item.

• SC_ABCDEF – ZQD makes this item and needs these items and resources:

◦

SC_PH3 – ZQD makes this item and the cost is rolled up based on the item structure defined.

◦

SC_F – ZQD buys this item and a standard or buy cost must be defined for this item.

◦

SC_X – ZQD sources this item from M1.

◦

SC_Y – ZQD sources this item from M1.

◦

Labor-3 – ZQD uses this resource for 10 hours to make one SC_ABCDEF.

Note: If you've defined a buy sourcing rule for an item, system expects you to enter the buy cost and use that to

calculate the the standard cost. Alternately, you can enter a standard cost of the item to override the buy sourcing

rule.

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Here's an image illustrating the overall manufacturing flow for the finished item SC_FP01.

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For this item, you create the work definitions.

Item Work Definition Name Version Date

SC_ABCDEF ZQD_Final 1 11/1/2023

SC_CD M1_Sub 1 11/1/2023

Note: We haven't defined a work definition for the phantom subassemblies. Only for phantom subassemblies, the

logic will roll up the cost without a work definition, using the item structure of the phantom. However, if you create a

work definition for the phantom, it takes precedence for cost rollup.

Cost Scenario, Standard Costs, Resource Rates, and Overhead Rates

Now, to calculate the unit cost of SC_ABCDEF, you start by creating a cost scenario. You must make sure that the

effective start date of the cost scenario is same as or later than the work definition start date. Also, ensure that the

settings listed here are made in the cost scenario:

• Enable Supply Chain Cost Rollup – Select this option.

• Organization Context – Group

• Cost Rollup Group – Select a cost rollup group that you've created with the cost organization and cost book

combinations for the ZQD and M1 organizations respectively.

• Effective Date – 11/1/2023

• Assignment Set Name – Select the assignment set in which you have set the sourcing type for all the items.

Also, ensure that you’ve defined the various sourcing rules. The sourcing rules must be planning enabled and

linked to the assignment set. Also, check whether active supply sourcing rules with total allocation of 100%

exist as of the scenario effective date.

Note: You must run the Extract Supply Sources process for the assignment set before running the Roll up

Costs process.

• Transfer Charge Rule Set – Select the rule set with the transfer charge rule for transfer from M1 to ZQD. Define a

10% transfer charge rule.

• Rollup Scope – Select Items. Add the items listed here:

◦

SC_Ph1

◦

SC_Ph21

◦

SC_PH3

◦

SC_CD

◦

SC_ABCDEF

• Use Latest Work Definitions – Select this option to use the latest version of active work definition in the

manufacturing organization.

Next, you must define the standard costs for the materials used, the rates for the various resources used when

manufacturing the item, and the overheads incurred.

Standard Costs

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Item Valuation Unit Buy Cost Cost Element Cost Element

Type

Expense Pool Unit Cost ($)

SC_A ZQD-Org1 No

P2P-Material Material 135.00

P2P-OH Overhead P2P_Exp_Pool 15.00

150.00

SC_B ZQD-Org1 No

P2P-Material Material 180.00

P2P-OH Overhead P2P_Exp_Pool 20.00

200.00

SC_C M1-Org1 No

P2P-Material Material 720.00

P2P-OH Overhead P2P_Exp_Pool 80.00

800.00

SC_D M1-Org1 No

P2P-Material Material 810.00

P2P-OH Overhead P2P_Exp_Pool 90.00

900.00

SC_E ZQD-Org1 No

P2P-Material Material 1890.00

P2P-OH Overhead P2P_Exp_Pool 210.00

2100.00

SC_F ZQD-Org1 No

P2P-Material Material 4590.00

P2P-OH Overhead P2P_Exp_Pool 510.00

5100.00

SC_X M1-Org1 Yes

P2P-Material Material 1000.00

P2P-OH Overhead P2P_Exp_Pool 100.00

1100.00

SC_Y M1-Org1 No

P2P-Material Material 1300.00

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Item Valuation Unit Buy Cost Cost Element Cost Element

Type

Expense Pool Unit Cost ($)

P2P-OH Overhead P2P_Exp_Pool 200.00

1500.00

SC_CD M1-Org1 Yes

P2P-Material Material 3500.00

3500.00

SC_CD ZQD-Org1 Yes

P2P-Material Material 3500.00

3500.00

SC_ABCDEF ZQD-Org1 Yes

P2P-Material Material 3100.00

3100.00

Note:

• There are buy items for which Buy Cost hasn't been selected. You are defining a standard cost for these items

that can be used to cost inventory transactions in Cost Accounting. When you select Buy Cost, the buy cost

will be used by the Roll up Costs process to calculate the standard cost of the item only if the cost scenario is

enabled for supply chain cost rollup and a buy sourcing rule exists for the item in the sourcing assignment.

The buy cost is never used to cost inventory transactions in Cost Accounting.

• Ensure that you select the appropriate cost organization and cost book combination for the items made or

used by the ZQD and M1 organizations respectively.

Resource Rates

Resource Plant Cost Element Cost Element Type Expense Pool Unit Cost ($)

Mach-01 M1-Mfg

P2P-Resource Resource P2P_Res_Pool 60.00

60.00

Labor-3 ZQD-Mfg

P2P-Resource Resource P2P_Res_Pool 50.00

50.00

Overhead Rates

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Plant Overhead Rate Type Cost Element Expense Pool Absorption Type Rate

M1-Mfg Plant overhead Plant_OH M1P-OH Percentage 20%

M1-Mfg Plant overhead Plant_OH M1P-OH Fixed 50.00

ZQD-Mfg Plant overhead Plant_OH ZQDP-OH Fixed $1.00

ZQD-Mfg Plant overhead Plant_OH ZQDP-OH Percentage 20%

ZQD-Mfg Plant overhead Plant_OH ZQDP-OH Percentage of material

cost at all levels

ZQD-Mfg Plant overhead Plant_OH ZQDP-OH Percentage of total

cost including

overhead at all levels

Analysis

After you define the cost scenario and the corresponding standard costs, resource rates, overhead rates, run the Roll up

Costs process for the cost scenario.

Rolled Up Costs

Let's start identifying the costs for the items SC_CD, SC_Ph1, SC_Ph2, SC_PH3, and SC_ABCDEF.

The item cost calculation for SC_CD in the M1 organization is as shown here.

Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

SC_CD 3300.00 1 3300.00

10 SC_C Material 720.00 2 1440.00

Overhead 80.00 2 160.00

10 SC_D Material 810.00 1 810.00

Overhead 90.00 1 90.00

10 Mach-01 Resource 60.00 5 300.00

10 Plant overhead Overhead 20% 450.00

Plant overhead Overhead 50.00 50.00

The sourcing rules for SC_CD in the M1 organization are 20% make and 80% buy. So, the cost of SC_CD in the M1

organization is:

Unit Cost of SC_CD = [0.20 * (Make cost of SC_CD) + 0.80 * (Buy cost of SC_CD)]

We haven't defined a buy cost but a standard cost for SC_CD in M1, which we will use in this case. Therefore,

Unit Cost of SC_CD = [0.20 * (3300.00) + 0.80 * (3500.00)]

Unit Cost of SC_CD = [660.00 + 2800.00]

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Unit Cost of SC_CD = 3460.00

The item cost calculation for SC_Ph1 in the ZQD organization is as shown here.

Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

SC_Ph1 622.50 1 622.50

10 SC_A Material 135.00 2 270.00

Overhead 15.00 2 30.00

10 SC_B Material 180.00 1 180.00

Overhead 20.00 1 20.00

10 Plant overhead Overhead 20% 90.00

Plant overhead Overhead 4% 18.00

Plant overhead Overhead 3% 13.50

Plant overhead Overhead 1.00 1.00

The item cost calculation for SC_Ph2 in the ZQD organization is as shown here.

Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

SC_Ph2 4995.11 1 4995.11

10 SC_Ph1 Material 450.00 2 900.00

Overhead 50.00 2 100.00

10 SC_CD 3683.60 1 3683.60

10 Plant overhead Overhead 4% 170.00

Plant overhead Overhead 3% 140.51

Plant overhead Overhead 1.00 1.00

ZQD buys 40% of SC_CD and 60% is transferred from M1 with a 10% markup. So, in the above table the cost of SC_CD is

calculated as shown here:

Buy cost of SC_CD = 0.40 * 3500.00 = 1400.00

Transfer cost of SC_CD = 0.60 * [1.10 * (Cost of SC_CD in M1)]

Transfer cost of SC_CD = 0.60 * [1.10 * (3460)]

Transfer cost of SC_CD = 0.60 * [3806.00]

Transfer cost of SC_CD = 2283.60

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Unit Cost of SC_CD = Buy Cost + Transfer Cost = 1400.00 + 2283.60 = 3683.60

Also, the plant overhead of 170.00 is calculated by considering only the total material cost of SC_CD and SC_Ph1. The

plant overhead of 140.51 is calculated considering the total cost, that's material of SC_CD and material, resource, and

overhead of SC_Ph1.

The item cost calculation for SC_PH3 in the ZQD organization is as shown here.

Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

SC_PH3 12599.52 1 12599.52

10 SC_Ph2 4683.60 2 9367.20

10 SC_E Material 1890.00 1 1890.00

Overhead 210.00 1 210.00

10 Plant overhead Overhead 20% 378.00

Plant overhead Overhead 4% 415.60

Plant overhead Overhead 3% 337.72

Plant overhead Overhead 1.00 1.00

The cost of SC_Ph2 is taken as 4683.60 per unit. This is without the plant overhead that was applied when calculating

the make cost for it in the earlier table. Which is:

(Standard Cost of SC_Ph2) - (Sum of the plant overheads in manufacturing SC_Ph2)

(4995.11) - (170.00 + 140.51 + 1.00)

(4995.11) - (311.51) = 4683.60

The plant overhead of 378.00 is calculated using only the material cost at this level, which is the material cost of SC_E.

Also, the plant overhead of 415.60 is calculated by considering only the total material cost of SC_E and SC_Ph2 from the

lower level. The plant overhead of 337.72 is calculated considering the total cost, that's material of SC_E and material,

resource, and overhead of SC_Ph2.

Now, let's identify the costs involved in manufacturing the final product SC_ABCDEF in the ZQD organization.

Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

10 SC_PH3 11467.20 2 22934.40

10 SC_F Material 4590.00 1 4590.00

Overhead 510.00 1 510.00

20 SC_X Material 1000.00 1 1000.00

Overhead 100.00 1 100.00

Overhead 10% 1 110.00

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Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

30 SC_Y Material 1300.00 1 1300.00

Overhead 200.00 1 200.00

Overhead 10% 1 150.00

Labor-3 Resource 50.00 10 500.00

Plant overhead Overhead 20% 918.00

Plant overhead Overhead 4% 1054.80

Plant overhead Overhead 3% 926.53

Plant overhead Overhead 1.00 10 10.00

In the above table the overhead of 10% for SC_X and SC_Y is the transfer markup for these items from M1.

The output of operation 20 is SC_ByProd. Let's first calculate the cost of SC_ByProd.

Operation Sequence Component/

Resource

Cost Element Type Unit Cost Quantity Amount

10 SC_PH3 11467.20 2 22934.40

10 SC_F Material 4590.00 1 4590.00

Overhead 510.00 1 510.00

20 SC_X Material 1000.00 1 1000.00

Overhead 100.00 1 100.00

Overhead 10% 1 110.00

Plant overhead Overhead 20% 918.00

Plant overhead Overhead 4% 1054.80

Plant overhead Overhead 3% 862.03

Plant overhead Overhead 1.00 10 10.00

In the above table the plant overheads are calculated as shown here:

• 0.20 * (material cost of SC_F) = 0.20 * 4590.00 = 918.00

• 0.04 * (total material cost of SC_PH3, SC_F, and SC_X)

0.04 * (20780.00 + 4590.00 + 1000.00)

0.04 * (26370.00) = 1054.80

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• 0.03 * (material cost of SC_F + total cost of SC_PH3 + total cost of SC_X)

0.03 * (4590.00 + 22934.40 + 1210.00)

0.03 * (28734.4) = 862.03

The output SC_ByProd has a cost allocation of 10% in the work definition and the batch size is 10. So the unit cost

calculation for SC_ByProd is as shown here:

{{[(Total cost of material and corresponding overheads) + (Total cost of plant overheads)] * 0.10} + Fixed plant

overhead for SC_ByProd} / 10

{{[(22934.40 + 4590.00 + 510.00 + 1000.00 + 100.00 + 110.00) + (918.00 + 1054.80 + 862.03)] * 0.10} + 10.00} /

{{[(29244.40) + (2834.83)] * 0.10} + 10.00} / 10

{{[32079.23 * 0.10]} + 10.00} / 10

{{3207.92 + 10.00} / 10

{3217.92 / 10} = 321.79

One of the outputs of operation 30 is SC_CoProd. Let's calculate the cost of SC_CoProd.

The output SC_CoProd has a cost allocation of 30% in the work definition and the batch size is 10.

To calculate the cost of SC_CoProd, you start by calculating 90% of the material and corresponding overhead cost of

items in operations 10 and 20. The reason is that 10% of the cost is allocated for SC_ByProd, the output after operation

20.

0.90 * (item costs in operations 10 and 20) = 0.90 * (29244.40) = 26319. 96

To this we next add the item costs and resource costs for operation 30.

26319.96 + 1300.00 + 200.00 + 150.00 + 500.00 = 28469.96

Now, let's add the variable plant overheads to this cost. Again, we will be considering only 90% of the material costs of

items consumed in operations 10 and 20 when calculating the plant overheads.

28469.96 + [(0.20 * 4131.00) + (0.04 * 25033.00) + (0.03 * 28010.96)]

28469.96 + [(826.20) + (1001.32) + (840.33)]

28469.96 + 2667.85 = 31137.81

So, the unit cost of SC_CoProd is:

[(0.30 * 31137.81) + 10.00] / 10 = [9341.34 + 10.00] / 10 = 9351.34 / 10 = 935.13

Similarly, the unit cost to make SC_ABCDEF is:

{[(0.60 + 0.10) * (31137.81)] + 10.00} / 10

Here, 60% is the cost allocation in the work definition for SC_ABCDEF and 10% is the residual cost, as shown in the

image earlier.

{[(0.70) * (31137.81)] + 10.00} / 10

{[21796.40] + 10.00} / 10

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{21806.40} / 10 = 2180.64

As per the sourcing rules defined for SC_ABCDEF in the ZQD organization, the unit cost is:

[(0.70 * 2180.64) + (0.30 * 3100.00)] = [1526.45 + 930.00] = 2456.45

Cost Analysis

Cost simulation tools help you with detailed analysis of the rolled-up costs. You can compare costs across scenarios

or compare scenario costs with the current published costs, to review the differences in cost and inventory value

adjustments.

You can view the rolled-up costs for your items by using the tree view or by using the graphical hierarchical view on

the View Rolled-up Costs page. Both views allow you to drill down into the details used for the item costs calculation.

By creating different scenarios to represent different manufacturing and cost variables, you can compare the results.

After you're satisfied with the cost calculations, you can publish the scenario so that the costs are available for cost

accounting.

Some of the information available on this page include:

• The operation sequence number is prefixed to the operation name in the operation nodes.

• The materials, resources, and overheads will show the respective costs and rates in the node description.

◦

For materials used in discrete work definitions, Material + Resource + Overhead = Entered Unit Cost

◦

For materials used in process work definitions, Material + Resource + Overhead = Entered Unit Cost *

Cost Allocation Factor of the output.

◦

For products, Material + Resource + Overhead = Per Unit Cost.

• The Entered Unit Cost attribute is available and populated when user has entered the cost manually. This clearly

distinguishes from the Per Unit Cost attribute which is the system calculated unit cost. Note that all item costs

are reported in the context of the unit of measure specified for costing in the cost profile setup.

• For operation nodes, the material, resource, and overhead costs are sum of all material costs, sum of all

resource costs, and sum of all overhead costs incurred in that operation, respectively. An exception to this

would be an operation in process manufacturing work definition which doesn’t yield the output. Such an

operation won't display the breakdown of material, resource, and overhead costs.

In the case of supply chain cost rollup, you can validate the product costs and verify the sourcing rules that were used to

calculate the costs. Each sourcing rule node has the cost breakdown to validate the rolled-up costs. The View Rolled-up

Costs page shows this additional information for the sourcing rule nodes:

• Source Allocated Material - Material cost breakdown from the sourcing rule

• Source Allocated Resource - Resource cost breakdown from the sourcing rule

• Source Allocated Overhead - Overhead cost breakdown from the sourcing rule

• Source Allocated Unit Cost - Unit cost from the sourcing rule

When multiple sourcing rules (rank = 1) are defined:

Standard cost of product = (User entered buy cost * Buy sourcing rule allocation) + (Rolled-up cost from work definition

* Make sourcing rule allocation) + (Transfer cost * Transfer sourcing rule allocation)

Per Unit Cost of the product = SUM (Source allocated unit cost from sourcing rule nodes)

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Source Allocated Unit Cost = Unit cost calculated using the sourcing rule * Sourcing rule allocation

If you're interested in analytics for cost planning, you can use the Rolled-up Costs Real Time Subject Area in OTBI if you

don't use supply chain cost rollup. You can also use these seeded reports in OTBI for your business:

• Costed BOM Report

• Costed BOM (Cost Details) Report

• Scenario Exceptions Report

• Where Used Report

Related Topics

•

Create a Cost Scenario for Regular Items

•

Create a Cost Scenario for Supply Chain Cost Rollup

•

Supply Chain Cost Rollup

•

Manage Standard Costs in a Spreadsheet

Publish Costs

After you're satisfied with the results of the cost calculations and analysis, you can publish the costs by running the

Update Standard Costs task from the Manage Cost Scenarios page.

The cost update process automatically implements the new standard costs defined in the cost scenario on the date set

as the effective date of the cost scenario. You can perform standard cost updates for any date, including a past or future

date.

1. In the Cost Accounting work area, click the Manage Cost Scenario task.

2. Search for and select the cost scenario that you want to publish costs for.

If you select a cost scenario with a periodic average cost enabled cost book, then steps 3 through 5 are not

applicable. You can directly perform step 6.

3. On the View Cost Scenario page, select Roll up Costs from the Actions menu.

4. On the Roll up Costs dialog box, select the Notify me when this process ends option and click Submit.

5. Click Done.

6. After the Roll up Costs process is successfully completed, run the Update Standard Costs process from the

Actions menu.

7. On the Update Standard Costs dialog box, select the Notify me when this process ends option and click

Submit.

Additionally, you can schedule this process for configured items. This ensures that whenever there's a rolled-up cost for

a configured item, the process publishes its cost to be used for processing the transactions.

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Note:

• For a new item that doesn't have a prior published cost, the first published cost for the item and valuation unit

combination will be effective as of 01-Jan-1900. This is to ensure that all transactions for the item prior to the

cost scenario effective date are costed.

• You can use the Undo Cost Update task to reverse the effects of any unintended cost updates. This isn’t

applicable for cost scenarios created using periodic average cost enabled cost books.

• You can't unpublish the cost scenario or delete the standard costs after they have been used in any

transactions. If you want to change the standard cost for an item, you must create and publish a new costs

scenario with the appropriate dates.

• You can't unpublish cost scenarios created using periodic average cost enabled cost books.

• You can't delete published standard costs and resource rates for periodic average cost enabled cost books.

• If you add any new standard costs and resource rates to a published cost scenario created using a periodic

average cost enabled cost book, the scenario state changes to Redo Update Costs Required. You must run

Update Standard Costs to republish the cost scenario. You don't need to republish a cost scenario after

updating existing standard costs and resource rates. Updated standard costs and resource rates for a published

cost scenario are automatically processed by the cost processor as long as the period is in the open or pending

close status.

• In the case of a supply chain cost rollup enabled cost scenario, when a buy cost is published using the Update

Standard Costs process, it will be used to roll up the item cost in the subsequent cost scenarios.

• In the case of a supply chain cost rollup enabled cost scenario, the Update Standard Costs process will publish

the costs and rates to multiple cost organization and cost books, if the cost scenario references a cost rollup

group.

FAQs for Cost Planning

Does a standard cost include overhead costs?

Yes. When you define standard costs you can include overhead cost components. The overhead cost components are

processed as part of the total standard cost, at the time of transaction costing.

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Why is the valuation unit not listed on the Create Standard Cost

page?

The Create Standard Cost page will list the valuation unit only if the conditions listed here are satisfied:

• The item is assigned to the cost organization related to the inventory organization.

• On the Manage Item Cost Profile page, either the item cost profile is created or the default cost profile is

enabled.

Why are the costs for my make items not getting rolled up?

Check the effective dates in Oracle Manufacturing and Oracle Cost Accounting. For the work definition costs to be

processed, the start date of a work definition must be the same as or prior to the effective date of the cost scenario.

Why are standard costs not being created for my make items, after

the costs are rolled up?

You have set the rollup scope as All Items in the cost scenario and the costs for your existing make items are rolled up.

However, some of these items don't get a standard cost because the cost planning process is optimized to prevent

generating standard cost records when the rolled-up cost is the same as the last published cost of the item. This

optimization reduces cluttering of the application with redundant standard costs and also prevents unnecessary

standard cost adjustments.

Can I roll up costs for a make item with work definition of type

Rework?

No. The standard cost rollup process includes only work definitions of type Standard. Work definitions of types Rework

and Transform are considered to be one-time activities and, therefore, are outside the scope of standard cost planning.

How do I set up a standard cost that's effective from a past date?

You can create a cost scenario with an effective date in the past and create standard costs for this scenario.

You can then roll up the costs and publish them, as long as the newly published costs don't conflict with any already

published costs for the corresponding items.

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Note: When you publish the cost of an item for the first time in costing, the effective start date is 01-01-1900,

irrespective of the effective date of cost scenario. This ensures that you don't have to manually backdate the cost to

process any transactions.

What does the status of a standard cost signify?

The status of a standard cost signifies the scope for which the standard cost is available. Status can take one of these

values:

• In Process - The cost isn't yet published and can be used within the cost scenario for planning.

• Published - The cost is published with an effective start date and will be used to process costing transactions

based on this date.

• Excluded from Publish - The cost can't be published because it conflicts with an already published cost for the

item.

• Rejected - The published cost was rejected during processing in Cost Accounting. You can rectify this error by

either defining the cost or rolling up the cost for this item in a different cost scenario with appropriate effective

date.

Why am I getting standard cost exists error although the FBDI

upload is successful?

You would be getting this error if records exist for the import combination of cost organization, cost book, item,

valuation unit, and effective start date in the Manage Standard Costs page.

On the Manage Standard Cost Import Exceptions page, look for the impacted data to fetch the record. Click the Error

link to view the exceptions for the import process. Delete the existing values from the Manage Standard Costs Import

Exceptions page and then reload the item costs.

Why is the valuation unit invalid message shown when uploading

standard costs?

While uploading standard costs, you must confirm that the correct valuation unit is associated with the item and the

valuation unit belongs to the cost organization for which you are defining the standard costs.

Else, on the Manage Standard Cost Import Exceptions page you will see the message "The valuation unit is invalid."

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How do I view the cost adjustments resulting from a standard cost

update?

You can review the cost adjustments for a standard cost update on the Review Cost Accounting Distributions page.

Can I update, deactivate, or delete a standard cost?

Yes. You can update, deactivate, or delete a standard cost created in a cost scenario as long as it hasn't yet been used to

cost transactions.

Can I delete a cost scenario?

You can delete a cost scenario if the scenario was created for simulation purposes and you don't intend to publish the

underlying costs.

Why are the rolled up costs for some of the older cost scenarios

not getting displayed in the View Rolled-up Costs page?

The View Rolled-up Costs page might not list the rolled up costs for some of the older cost scenarios, even though you

have successfully rolled up the costs and published them.

In this case, you must run the Restore Rolled-up Costs process for such cost scenarios. This one-time task ensures that

you can view the rolled-up costs for these cost scenarios on the View Rolled-up Costs page.

Why is the Roll up Costs process not including the resource cost

while rolling up the cost of the item

If the cost of the resource isn't considered by the Roll up Costs process, check whether costing is enabled for the

resource.

Also, check whether the product is a phantom item. For phantom items, set the Phantom Operation Inheritance

parameter to Materials and Resources in the Manage Plant Parameters task from the Setup and Maintenance work area.

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4 Cost Accounting

Overview of Cost Accounting

The Manage Cost Accounting business process is used by cost accountants to calculate inventory transaction costs,

maintain inventory valuation, generate accounting distributions for inventory transactions, analyze product costs,

analyze usage of working capital for inventory, and analyze gross margins.

The following image lists the Cost Accounting tasks.

• Manage Period End. Manage the timing of transaction processing, and perform validations in preparation for

accounting period close.

• Manage Inventory Valuation. Adjust the cost of items to address inventory obsolescence, price changes, and

other variances.

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• Record, Audit, and Review Cost Accounting. Create cost accounting distributions for transaction data that's

received from external sources, view and address any processing exceptions, and review results.

• Analyze Product Costs: View the perpetual average cost, actual cost, and standard cost details of an item, chart

its cost trend, compare costs across items, analyze usage of working capital and gross margins.

Cost Accounting Infolets

The Overview page of the Cost Accounting work area displays some infolets. These infolets are visible by default. You

can configure which infolets should be displayed on the page from My Infolets.

You can set the View By option on the page to view the information for a specific cost organization or for all the cost

organizations that you have access to. Only the data corresponding to the primary cost book is used to populate the

infolets.

The table lists the infolets available in the Cost Accounting work area.

Note: The Asset Inventory Valuation and Consigned Inventory Valuation infolets are available only if you opt-in

for the Use Enhanced Period Inventory Valuation and Gross Margin Reporting feature. These infolets replace the

Inventory Valuation infolet.

Infolet Description

Asset Inventory Valuation

The list of asset inventory valuation for the current period for each cost organization and primary cost

book that you have access to. When viewing the information for a specific cost organization, the infolet

shows the trend for last three months, if data is available.

Consigned Inventory Valuation

The list of consigned inventory valuation for the current period for each cost organization and primary

cost book that you have access to. When viewing the information for a specific cost organization, the

infolet shows the trend for last three months, if data is available.

Gross Margin

The details of the recognized revenue, cost of goods sold, and gross margin for the selected cost

organization over the last seven days.

Inventory Valuation

The total inventory valuation and a break up by valuation structure type. If you have access to more

than one cost organization, you can flip the infolet to view the list of inventory value by valuation

structure type for all the cost organizations that you have access to.

Last Cost Rollup

The results of the last Roll up Costs process for the selected cost organization. It includes the count of

rolled up and not rolled up items and is restricted to sub-assemblies and finished products.

Purchase Price Variance

The details of the purchase price variances logged for the selected cost organization over the last

seven days.

Recent Exceptions

The errors reported by the last run of the Create Cost Accounting Distributions process.

Recent Processes

The information about the recent cost accounting process that were run for the selected cost

organizations. This includes the process ID and the corresponding status such as success, warning,

error, and so on.

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Infolet Description

Transaction Status

The details of transactions that have errors or need your attention for the selected cost organizations.

Work in Process Balances

The total Work in Process balances for all plants and the Work in Process balances based on the

work order statuses Completed, Released, and On Hold. If you have access to more than one cost

organization, you can flip the infolet to view the details for all the cost organizations that you have

access to.

Work Order Costs

Summarized view of the metrics for work order costs, such as scrap and variances, over the last seven

days for all the plants that are mapped to the selected cost organizations.

You can choose to not list and display one or more of the infolets on the Overview page by setting the profile option

code ORA_CST_HIDE_INFOLETS on the Manage Cost Accounting Profile Options page in the Setup and Maintenance work

area.

Related Topics

•

Manage Cost Accounting Profile Options

•

Hide Cost Accounting Infolets

Scheduled Processes for Cost Accounting

You can use the Scheduled Processes Overview page in the Tools work area to run the scheduled processes that you

have access to. You can schedule these processes to run automatically at predefined frequencies, or to run on request.

This table describes the scheduled processes for Oracle Cost Accounting.

Task Description

Transfer Transactions from Inventory to

Costing

Transfers transaction data from Inventory to Cost Accounting. You must transfer the transaction

from Inventory so that they're costed and accounted as a prerequisite for the Create Cost Accounting

Distributions scheduled process.

You must have data access to the appropriate cost organization and the inventory organization must

be assigned to the cost organization to successfully run this scheduled process. If you don't have

access to the selected cost organization for the process, the process ends with a Warning status.

If you've scheduled the process without selecting a cost organization, the process transfers data

for only those cost organizations to which you have data access. It logs error messages for cost

organizations that you don't have access to.

Transfer Transactions from Production to

Costing

Transfers work order transactions and events such as resource usage, scrap, work order completion,

and close transactions to costing as a prerequisite for the Create Cost Accounting Distributions

scheduled process

Transfer Costs to Cost Management

Transfers Accounts Payable invoice information to Cost Management as a prerequisite for the Create

Cost Accounting Distributions scheduled process. Accounts Payable invoice information is input into

Receipt Accounting for reconciling receipt accrual amounts, determining uninvoiced receipt quantity,

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Task Description

reconcile estimated landed cost amounts with actuals, and to adjust the cost of receipts. Accounts

Payable invoice information is also input into Cost Accounting for inventory value adjustments.

Transfer Transactions from Receiving to

Costing

Transfers purchase order and transfer order receipt information to Cost Management as a prerequisite

for the Create Cost Accounting Distributions scheduled process. Receipt information is input into

Receipt Accounting for reconciling receipt accrual amounts, determining uninvoiced receipt quantity or

amount (service purchases) and receipt accrual accounting.

Create and Update Cost Accounting Events

Use the process only for your periodic average cost books when the draft periodic average cost

accounting distributions are ready to be finalized for the period and posted through subledger

accounting into general ledger.

The periodic average costs can only be finalized at the end of a period. However, the solution is

designed to let you create, view, and report on draft periodic cost accounting distributions during a

period.

Create Cost Accounting Distributions

Costs and creates distributions for the transactions interfaced from other applications. The process to

create pairs of debit and credit accounting entries for inventory and manufacturing transactions.

Delete Standard Costs from Interface

Use the process to periodically delete temporary interface data that has been uploaded via the ADFdi

spreadsheet but set aside with error.

Export Standard Costs

Exports standard costs for a cost scenario in the XML format to the Cost Management directory on the

Oracle WebCenter Content server. The Cost Management WebCenter Content output directory is scm/

standardCost/export.

Import Revenue Lines

Transfers the final accounted revenue lines from Receivables to Cost Accounting. This synchronizes

posting of cost of goods sold with revenue posting to the General Ledger.

You must specify the business unit for which you want to import the information and select the

number of workers, the import as of date, and the start date. Revenue lines with accounting date

between the start date and the import as of date, including both dates, are transferred.

If you don't set the import as of date, it defaults to the system date. If you don't set the start date, then

the revenue lines with accounting date between the start of the previous or current open period and

the import as of date are transferred.

Purge Prior Cost Accounting Process

Errors

When you run the Create Cost Accounting Distributions process or the Validate and Update

Cost Accounting Periods process, the Purge Prior Cost Accounting Process Errors process runs

automatically after the respective process ends to clear cost processing errors and validation errors

from prior runs.

Roll up Costs

Calculates the costs of output items with active work definitions, based on the cost allocation defined

on the work definition operations.

Undo Cost Update

Use the process to revert the published standard costs that haven't been used to process any

transactions. When you publish standard costs to Cost Accounting, these new costs will automatically

be updated on the effective date of the cost scenario. Until this effective date, you can use this process

to undo the cost update. Also, you can undo the standard cost update only if it hasn't been used to

process any transactions.

Update Standard Costs

Use the process to update item and resource costs for cost accounting.

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Task Description

Validate and Update Cost Accounting

Periods

Use the process to perform period end validations and close periods for multiple cost organization and

cost book combinations simultaneously by using run controls.

For detailed information about each of these scheduled processes, see the Scheduled Processes for SCM guide.

Related Topics

•

Submit Scheduled Processes and Process Sets

•

View Status and Other Details for Scheduled Processes

Cost Accounting Process

Cost Accounting Process Flow

Oracle Cost Accounting creates distributions for transactions related to the physical movement of goods or services

through the supply chain and tracks the corresponding financial changes in ownership.

The transaction data for physical shipments is interfaced to Cost Accounting from Oracle Inventory Management, and

the trade events are interfaced from Oracle Supply Chain Financial Orchestration.

This figure illustrates the flow of transaction data through the cost processors.

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Create Cost Accounting Distributions

In the Cost Accounting work area, access the Create Cost Accounting Distributions page to process imported

transaction data. On this page define the run controls by specifying the cost organization books and cost processors

that you want to execute.

The processors that you can include in the run control are listed here:

• Preprocessor prepares all interfaced data for cost processing:

◦

Checks for invalid or missing data.

◦

Propagates the information to cost organization books and deriving their associated units of measure,

currencies, valuation units, and cost profiles. Note that the preprocessor runs for all cost books in the cost

organization.

◦

Maps incoming cost components to cost elements, based on user-defined mappings.

• Cost Processor processes:

◦

Physical inventory transactions

- Calculates costs for pre-processed transactions using the perpetual average cost method, actual

cost method, or standard cost method.

- Processes user-entered cost adjustments and applies overhead costs based on user-defined

overhead rules.

- Calculates the variance of standard costs from actual transaction costs.

- Calls the Acquisition Cost processor to calculate inventory valuation including the tax component

where applicable.

◦

Trade transactions

- Uses the Trade Accounting processor to process all in-transit transactions.

• COGS Recognition processor calculates the cost of goods sold and maintains consistency with the revenue

recognized in accounts receivable.

• Cost Distribution uses the Trade Accounting processor, Cost Processor, and COGS Recognition processor

results to create distributions for transaction costs. You can enable parallel processing in the Create Cost

Accounting Distributions process so that the eligible transactions are spread across multiple subprocesses to

achieve a much higher throughput during the distribution processing stage.

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• Cost Reports Processor: Generates inventory valuation, item cost, and gross margin data and is the source of

truth for reports generated by Oracle Fusion Transactional Business Intelligence and Oracle Analytics Publisher.

This process builds the data required to report inventory valuation at various levels:

◦

Valuation unit level

◦

Inventory control attribute levels (inventory organization, subinventory, locator, project, task, and country

of origin)

◦

Receipt layer level

The enhanced cost reports processor performs an incremental data update instead of a full data refresh. This

ensures that you can view prior period data even when the current period data if being processed.

You must run the cost reports processor regularly to ensure that the latest cost accounting information is

reflecting in UI and the reports. You can create a separate run control for the cost reports processor and

schedule it to run on a periodic basis. If the runtime for the cost reports processor isn't too long you can also

include it with the Create Cost Accounting Distributions process to reflect real-time data in the reports.

After the Create Cost Accounting Distribution process is run, the cost processer clears the cost processing errors from

prior runs. Only the errors for the most recent run of the Create Cost Accounting Distributions process are retained.

Run Control

To run the Create Cost Accounting Distributions process, you must create a run control. A run control is a container to

perform centralized cost processing across multiple cost organizations and cost book. When you define a run control,

you specify the processors that run as part of the run control, the commit limit, the cost organization and cost book

combinations that must be processed, and the cutoff dates.

When defining a run control, you can also define the Maximum Number of Workers, which is greater than 1, indicating

the maximum number of subprocesses that you would like to be used by the process for parallel processing. The

parallel processing allows for dividing the load irrespective of the cost organization structure or variations in data

volume in the cost organization or set of cost organizations during the distribution processing stage of the process.

Depending on the number and complexity of the transactions to be processed and the commit limit defined in the

run control, the Cost Processor will process the transactions in batches. When the commit limit is reached, the records

processed in the batch are committed to the database and the processor will start another iteration of transaction

processing. The Cost Processor will perform multiple iterations to process all the transactions. Each such iteration is

known as the commit limit loop.

Within a commit limit loop, the Cost Processor performs various steps. The processor might have to perform multiple

iteration of these steps for a commit limit loop. This iteration of steps is known as the inner loop.

To create a run control, perform these steps:

1. In the Cost Accounting work area, select Create Cost Accounting Distributions from the Tasks menu.

2. Click Add Row.

3. Enter a name for the run control and select the processors that must run as part of the run control.

Enter a number greater than 1 in for Maximum Number of Workers to indicate you want to use parallel

processing. The number indicates the maximum number of subprocess that would be used by the Create Cost

Accounting Distributions process during the distribution processing stage.

You can optionally set the Commit Limit and Collect Statistics parameters.

4. In the Details sections, click Add Row.

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5. Select the cost organization and cost book for which the process must run.

You can also set the cutoff date.

For a periodic average cost enabled cost book, you must select the Period for which you want to run the

process. The cutoff date is automatically set. You can also specify whether to update the period on the run

control automatically. If you enable this, when the current period is closed, the period for this run control is

automatically updated to the next open period.

You can add multiple rows to include different cost organization and cost book combinations, including periodic

average cost enabled cost books, as part of the run control.

6. Click Save.

Note: You can create cost accounting distributions only if the Cost Accounting period is in the Open status and

the corresponding period in the General Ledger is in the Open or Future Enterable status. However, here are a few

recommended best practices:

• Keep only one Cost Accounting period open at a time. Don't have multiple costing periods open at the same

time.

• Close the Cost Accounting period before closing the corresponding General Ledger period.

• Run the Create Accounting process for the Cost Accounting subledger only after the corresponding General

Ledger period is set to the Open status.

You can run the process for this run control by clicking Schedule Process. You can run the process on demand or you

can schedule it to run periodically. You can also run and schedule the process for this run control from the Scheduled

Processes work area.

When the process is running, you can view the status of the process on the Scheduled Processes page. When you select

the process, the details section provides a completion text that lets you know which processor is running, the commit

limit loop count, inner loop count (applicable only for the Cost Processor), the step and the corresponding start time.

On the Create Cost Accounting Distributions page, select the run control and click View Status to track the progress of

the process and obtain detailed timing information.

Parallel Processing

Parallel processing in the Create Cost Accounting Distributions process ensures that eligible transactions are spread

across multiple subprocesses to achieve a higher throughput during the quantity preprocessing and distribution

processing stages. If your organization has a high to very-high volume of cost processing, then the throughput

improvements will be significant in such scenarios. For low to medium volume cost processing, there will be

improvements in throughput, but it might not be noticeably higher as the current processing times will usually be

optimal to begin with.

The parallel processing allows for dividing the load irrespective of the cost organization structure or variations in

data volume in the cost organization or set of cost organizations. The parallel processing also makes better use of the

available hardware. The reduced processing time helps speed up period close processing.

When enabled, during the quantity preprocessing and distribution processing stages of the process, multiple

subprocesses are automatically spawned to process the transactions in parallel. The main process groups the cost

layers such that each of the subprocess can independently process those layers to generate distributions without any

contention with the other subprocesses that may be running in parallel.

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When defining a run control for Create Cost Accounting Distributions process, you can define the Maximum Number of

Workers, which is greater than 1, indicating the maximum number of subprocesses that you would like to be used by the

process for parallel processing.

To ensure that the Create Cost Accounting Distributions process doesn't consume a lot of resources that will otherwise

be required for other processing elsewhere in the system, some restrictions are placed on the number of workers that

will be launched. Regardless of the value for maximum workers set in the run control, during runtime, the system

dynamically reduces the number of concurrent workers that are run based on the data volume being processed to

ensure that the processing times are optimized. Currently, the threshold is set to 100,000 distribution lines and a

maximum of 20 workers.

The table shows how the system decides on the number of workers dynamically during processing.

Cost Layers Maximum Number of Workers Actual Number of Subprocesses Launched

(including the parent process)

1000 10 1

100,000 10 1

400,000 10 4*

1,000,000 10 10*

2,000,000 10 10*

In the above table, rows marked with * indicate that the actual subprocesses may vary slightly from the number

mentioned based on the actual volume and mix of transactions processed.

Related Topics

•

Cost Cutoff Dates

•

Cost Adjustments and Cost Distributions

•

Receipt Accounting Tasks and Accounting Events

•

Create Cost Accounting Distributions

•

Manage Cost Accounting Profile Options

Track Processing Progress and Review Results

After you run the Create Cost Accounting Distributions process, you can view the status of the process. On the Create

Costs Accounting Distributions page, search for the run control and click View Status.

The status for a run control provides the overall status of the Create Cost Accounting Distributions process, the process

start time, the process end time if the process has completed, and the process duration.

The status page includes this information for each of the processors:

• The current status of the processor. The applicable values are Not started, Processing, Completed, and Not

scheduled. If a processor isn't selected for the run control, then the corresponding status will be Not scheduled.

• The commit limit loop count. This is applicable only for the Cost Processor, COGS Recognition, and Cost

Distribution processors.

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• If the processor is running, the start date and time in your preferred time zone.

• If the processor has completed, the end date and time in your preferred time zone.

• The duration for which the processor ran.

• The inner loop count. This is applicable only for the Cost Processor.

• The current step, total steps, and the duration for which the current step has been running.

When the process is running, the status page also displays a ticker that lets you know when the last SQL commit was

completed and for how long the current SQL has been running.

The amount of time the process takes to complete depends on the number and complexity of transactions to be

processed. If you run the process infrequently and have a large number of transactions, the process would require more

time to complete than if you run the process often or have less transactions to process.

Also, the commit limit and the number of transactions to be processed by the run control determine the number of

commit limit loops required to complete the process. If you're processing a large number of transactions, multiple

commit limit loops may be required. In the case of processing transactions that include transfer orders or work orders,

the Cost Processor may have multiple inner loops within a commit loop before moving to the next processor. Also, the

processors that run as part of the Create Cost Accounting Distributions process contain multiple steps.

By frequently reviewing the detailed status of each process run, you can get a better understanding of the number of

commit limit loops required to complete the process and the overall time required to complete the process.

View Detailed Timings

When the processor runs for multiple commit limit loops, the View Status shows the information for the current commit

limit loop. You can download the data for the prior commit limit loops in a spreadsheet format by clicking View Detailed

Timings. The spreadsheet provides detailed step timings.

The spreadsheet contains the date and time when the report was generated, the run control name, process ID, commit

limit, number of commit limit loops, process start and end time, process status, and process duration.

It also includes this summarized information for each processor:

• Commit limit loop count, except for Preprocessor

• Current step / Total steps

• Start Time of the processor

• End time of the processor

• Duration

• Inner loop count for Cost Processor

The Details part of the timing spreadsheet, provides this information:

• The start time, end time, and duration of each step in the processor, for all the processors selected as part of

the run control.

• For the Cost Processor, COGS Recognition, and Cost Distribution processors, this detailed step-level timing

information is provided for each commit loop.

• For the Cost Processor this detailed step-level timing information is also provided for each inner loop within a

commit loop.

You can also view the status and get the detailed timings spreadsheet for completed run controls.

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Review Process Results

After running the cost processors, check processing results in the Cost Accounting work area:

• View warning and error messages on the Review Cost Accounting Processes page.

• See additional warning and error messages specific to each transaction on the Transaction Errors tab of the

Review Cost Accounting Distributions page.

Purge Prior Cost Accounting Process Errors

If a run control not in use for 60 or more days, the Purge Prior Cost Accounting Process Errors automatically deletes the

corresponding cost processing error summary and details, resulting in improved page and process performance.

Review Cost Accounting Distributions

A single inventory transaction can generate multiple cost transactions, for which Cost Accounting creates accounting

data.

In the Cost Accounting work area use the Review Cost Accounting Distributions page to see cost information and

distributions related to each transaction, as well as receipt layers for receipt transactions, and depletion layers for issue

transactions.

On the Review Cost Accounting Distributions page, you can search for transactions by entering your search criteria. The

search parameters available differ based on the Search By option. The search by options available to define your search

criteria are listed here:

• Classic Search: This is the default search by option and allows you to search for all transactions.

• Reference Number: Search for transactions based on a reference number such as purchase order, transfer

order, sales order, work order, and transaction reference.

• Item Number: Search for transactions in a period for a particular item.

• Costing Status: Search for transactions based on their status. This search by option is particularly useful to

identify transactions that haven’t been costed or are in the error status.

• Transaction Type: Search for transactions within a specified date range and further filter them by transaction

type.

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• Accounting Status: Search for transactions that aren't accounted or are in error status and resolve any

reconciliation issues due to unaccounted transactions. All the accounting statuses are supported.

◦

Error: Search for all transactions that are in error in a period.

◦

Not Accounted: Search for all transactions that aren't accounted in a period.

◦

Draft Accounted: Search for all draft accounted transactions in a period. For better performance, always

restrict the transaction date range to a shorter duration.

◦

Final Accounted: Search for all final accounted transactions in a period. For better performance, always

restrict the transaction date range to a shorter duration.

◦

Multiple: Search for transactions where distributions for all cost transaction layers are in different

accounting statuses like error, final accounted, and so on.

◦

Not Applicable: Search for transactions that aren't applicable for accounting. Examples include

distribution amounts less than the minimum accountable unit (MAU) for the currency

◦

Excluded from Accounting: Search for transactions that are excluded from accounting based on the cost

profile setup. Examples include scrap transaction being included into inventory for a work order.

Note: When searching for transactions based on the costing status, using the fully costed status could result in

almost all transactions for the specified period and duration and unlikely to be helpful.

When you perform a classic search, all the relevant transactions are listed in a table on the page. For each transaction all

the relevant transaction details and costing details are listed. For more information about a transaction, you can select

the transaction and click View Details. On the Details pop-up window, you can see the receipt layers or the issue layers

depending on the transaction type. Also, all the cost information, cost distributions, transaction errors, and journal

entries are listed on the respective tabs in the window.

For all other search by options, the search results are segregated across different tabs on the page.

• Cost Transactions: View inventory and inter-company physical and logical transactions.

• Cost Adjustments: View manual or automatic cost adjustments to receipt costs and inventory value.

• COGS Transactions: View COGS recognition transactions.

• Work Order Transactions: View resource, operation scrap, and work in process job close transactions.

A color-filled circle next to the tab name is shown indicating that the tab contains search results. Similar to the classic

search, for each transaction all the relevant transaction details and costing details are listed. Also, for more information

about a transaction, you can select the transaction and click View Details.

Run Cost Distribution Details Report

From the Review Cost Accounting Distributions page, you can run the Cost Distribution Details Report. This report can

be generated for all the search by options, except classic search.

For the search criteria that you enter, the report provides a list of cost distributions and accounting information such

as accounting line type, account, and accounted amount along with basic transaction information in a spreadsheet-

friendly format.

You can also run this report from the Scheduled Processes work area.

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Cost Accounting Periods

Cost accounting periods enable you to monitor the timing of transaction processing, and to perform validations in

preparation for period close.

Cost periods are associated with combinations of cost organizations and cost books. When you associate a cost

organization with a cost book, you also define the cost accounting period calendar and other attributes.

Cost Period Calendar and Attributes

The cost period calendar is based on the ledger that's attached to the cost organization and cost book combination. For

cost books that don't have an associated ledger, you can set the calendar and cost periods manually on the Manage

Cost Organization Relationships page, Cost Books tab. On this page, you also define these cost period attributes:

• First opened period. Establishes the period when transaction accounting begins. Any transactions that precede

the first opened period, are accounted in the first opened period.

• Maximum open periods. Specifies the maximum number of concurrent periods that can be open. If the number

of periods is maximized, then no additional period can be opened until one of the open periods changes to

Closed, Permanently Closed, or Pending Close status.

Prevent General Ledger Period Close if Cost Accounting Subledger Period is Open

You can set up General Ledger to prevent closing general ledger periods if the corresponding subledger periods in Cost

Management are open. A warning message is displayed when you try to open a costing period that isn't open or is

closed and the corresponding general ledger period is closed. You can efficiently sequence your period end close so that

the Cost Management subledger journal entries are transferred to General Ledger before the general ledger period can

be closed.

Related Topics

•

Cost Accounting Period Statuses and Transaction Accounting

•

Cost Cutoff Dates

•

Cost Accounting Period Validations

•

How Cost Organizations, Inventory Organizations, and Cost Books Fit Together

•

How to Prevent a General Ledger Period from Closing When Open Subledger Periods Exist

Cost Cutoff Dates

The run control parameters you define for the cost processors include the cost cutoff date and the cutoff date for

the cost organization books being processed. The cost cutoff date sets the last transaction date processed for an

accounting period.

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This enables you to continue normal business operations with no interruptions from one period to the next, using the

cost cutoff date to define accounting period boundaries for these transactions.

The following discusses the cost cutoff date option, backdated transactions, and the costing date of transactions.

Cost Cutoff Date Option

In the Cost Accounting work area, access the Create Cost Accounting Distributions page to set the cutoff date option to

User-Defined or Auto. The User-Defined option requires you to specify the cutoff date, while the Auto option saves you

the effort of redefining the cutoff date which is automatically moved forward by the cost processor.

When you select the Auto option, the cost processor moves the cutoff date forward to the last date of the earliest open

cost period and then it stops, until the costing period is closed. After the period is closed, the cost processor advances

the cutoff date into the next open period, and so on. However, for a transaction, if preprocess is successful after the

cutoff date, then the cutoff date for that cost organization book moves forward to the date of the last transaction for

which the preprocess was successful. This could happen, for example, if you originally set the cutoff date option to

User-Defined and subsequently changed it to Auto.

Backdated Transactions

One of the purposes of the cost cutoff date is to allow backdating of transactions in an orderly fashion. For example,

if you set the cost cutoff date to October 31, you can still process October transactions that were entered in November

but meant for the period ending October 31 by backdating them to October 31 or earlier. However, when the cost cutoff

date advances forward to a date past October 31 and other transactions are processed beyond October 31, then the

backdated transactions can no longer be processed as October transactions.

If you set a cost cutoff date at October 31, the cost processor will queue up but not process any transactions with a date

after October 31. If you subsequently need to backdate transactions to a date before October 31, you can still process

those backdated transactions as long as you don't process any transactions beyond October 31. You can also backdate

transactions to any date after October 31, with the assurance that these transactions will be processed in the correct

order when the cost cutoff date moves forward.

Note: If you've opted-in for the Use Enhanced Period Inventory Valuation and Gross Margin Reporting feature, then

a transaction can be backdated only to period with open or pending close status. If the transaction is backdated to a

date that falls in a period which is in closed or final close status, then the the cost date of the transaction is set to the

1st day of the next open period. If no open period is available, then the transaction processing fails with an error.

Costing Date of Transactions

The costing date of transactions is normally the same as the transaction date, or the cost adjustment date, except for

backdated transactions.

Note: If you've opted-in for the Use Enhanced Period Inventory Valuation and Gross Margin Reporting feature, then:

• Cost date for a transaction is only derived when a cost is available to successfully cost the transaction.

• Cost date for a transaction is always derived in a period that's in the open or pending close status. If the

period is closed, the cost date for the transaction is moved to the next open period.

The cost date for backdated transactions inherits the greater of the backdated transaction date and the date of the last

processed transaction.

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Note: The cost cutoff date affects the costed date of the transaction and the inventory value that's reported as of a

given accounting date. It doesn't affect the inventory transaction date.

Related Topics

•

Examples of Backdating of Transactions

•

Cost Accounting Process Flow

Cost Accounting Period Validations

You can use the Manage Cost Accounting Periods task in the Cost Accounting work area to perform validations to

ensure that all transactions are complete and accounted for on an ongoing basis and before closing the accounting

period.

You can execute the validations one at a time, or all at once. Correct any resulting transaction errors, and rerun

validations as needed.

Validations

Perform cost accounting validations for periods that are in status Open, Pending Closed, or Closed. The validations

check for the following:

• Completed work orders not closed

• Pending revenue recognition events import

• Pending Interface

• Pending cost processing

• Pending preprocessing

• Pending preprocessing for manufacturing transactions

• Pending create accounting in final mode

• Pending accounting event creation

• Pending accounting overhead rates absorption

• Pending resource rates and standard costs absorption

• Pending preprocessing of trade events

• Pending processing of trade events

• Pending DCOGS transactions

Note: Not all period validations are applicable for all the period statuses.

Purge Prior Validation Errors

The Purge Prior Cost Accounting Process Errors process automatically deletes the validation errors for prior runs of

the Validate and Update Cost Accounting Periods and the Create Cost Accounting Distributions processes, resulting

in improved page and process performance. The exception details for period end validations are retained only for the

most recent run and are subsequently deleted when you close the period. Summary counts against each validation type

are available for each period.

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Related Topics

•

Cost Accounting Periods

•

Cost Accounting Period Statuses and Transaction Accounting

•

Cost Cutoff Dates

Cost Accounting Period Statuses and Transaction Accounting

Cost period statuses enable you to manage the timing for processing and accounting of transactions.

The following describes rules that apply under each cost period status, and how transactions are slotted into cost

accounting periods.

Cost Accounting Period Statuses

The cost period statuses are listed here:

• Never Opened: Default status for new periods assigned to a cost organization and cost book. This status does

not allow creation of distributions for transactions. You can change the status to Open, but you cannot change

it to Closed, or Permanently Closed.

• Open: A period status can be changed to Open only if the corresponding general ledger accounting period is

open. You can open several periods at a time, so long as they are contiguous. However, for a periodic average

cost enabled cost book, you have only one Open period. You cannot change the current period to Open if the

prior period status is Never Opened. When a period status is Open, inventory transactions can be accounted

in that period; when the period is not open, inventory transactions cannot be accounted in that period, but

they will be accounted in the next open period. Both costing and general ledger periods must be open for a

transaction to be accounted; if the costing period is open but the corresponding general ledger period is closed,

the transaction cannot be accounted and is held pending further user action. You can change an Open period

status to Closed or Pending Close.

• Pending Close: The Pending Close status works same as the Open status and doesn’t include any additional

validations or restrictions for transaction processing. However, if you set the Transaction Date Validation

Enabled (INV_TRANSACTION_DATE) profile option to Yes in Inventory Management, then new inventory

transactions aren't created for periodic average cost enabled cost books when the period is in the Pending

Close, Closed, or Permanently Closed status. Also, if this profile option is enabled, then no new transactions are

created for all cost books when the period is in the Closed or Permanently Closed status.

You can set the Pending Close status back to Open status and then process the transactions, so that those

which fall into the period will be staged for accounting in that period. Alternately, you can set the status of the

period to Permanently Close and set the next period to Open, in which case the transactions will be accounted

in the next open period.

• Closed: You can change this status to Permanently Closed or you can revert it to Open. When you set a period

status to Closed, you have the option of configuring the processor to allow closing even if all validations do

not pass; this enables you to decide when discrepancies are not material enough to delay period close. You

can also configure the processor to prevent closing a period until all selected validations pass. You set your

preferences for period close validations when you associate cost books with cost organizations, on the Manage

Cost Organization Relationships page, Cost Books tab.

• Permanently Closed: Closes the period for all types of transactions irreversibly. You cannot change the period

status to Permanently Closed without first changing the prior period status to Closed.

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Transaction Accounting Dates

The costing application is designed to set the proper accounting date for inventory transactions, even when they are

not entered into the application promptly or in the correct order. It does this by enabling backdating of transactions that

are entered on a date later than the physical transaction date. For example, suppose the physical transaction date is

November 30, and the transaction is entered into the costing application on December 2. In this case, you can backdate

the transaction and, under certain conditions, the application will post that transaction into the prior period.

The application orders your transactions by setting the cost date. To preserve the integrity of previous calculations

and to ensure that inventory balances tie with general ledger balances, the cost date cannot be set to a date prior to

transactions that are already processed. The cost processor parameters that you define include a cost cutoff date, which

lets you control the transactions that you want to process, including backdated transactions. In this example, as long

as you have not processed any transactions after November 30, the processor will set the cost date to November 30 for

transactions entered after November 30 with a backdated transaction date that is in November.

Once the cost date is established, the processor performs cost accounting calculations for the transaction, creates

accounting distributions, and sets the accounting date based on the following logic:

• If the cost date falls in a Never Opened period, the accounting date becomes the same as the cost date when

that period status is Open. In the rare case where the transaction date is in a period that precedes the first

period used in the application, the accounting date is set to a date in the first subsequent period that is Open.

• If the cost date falls in a Pending Close or Closed period, you are alerted by an error message. You can reopen

the period and the processor will attempt to set the accounting date to a date in that period; or you can

permanently close the period to let the transaction accounting date move into the next Open period.

• If the cost date falls in a period that is Permanently Closed and the next period is not Open, an error message

warns you that the transaction will remain unaccounted until a subsequent period is opened. Once the

subsequent period is Open, the accounting date of the transaction will move into that Open period.

When accounting distributions are staged within the costing subledger, the accounting distribution accounting date in

the costing subledger becomes the proposed accounting date for posting into the general ledger through the subledger.

If the general ledger application accepts the proposed accounting date, the transaction is posted with that date. If the

proposed accounting date is not accepted (for example if the general ledger period has already closed), then the general

ledger application returns an error and the cost processor sets the proposed accounting date to a date in the next open

general ledger period.

Related Topics

•

Examples of Backdating of Transactions

•

Cost Accounting Period Validations

•

Cost Cutoff Dates

•

Cost Accounting Periods

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Cost Processing

Actual Cost Method

The actual cost method tracks the cost of each receipt into inventory. When depleting inventory, the processor logically

identifies the receipts that are consumed to satisfy the depletion, and assigns the associated receipt costs to the

depletion.

The actual cost method uses receipt layers for transaction costing and inventory depletion.

Receipt Layers

A receipt layer is created for each put away or delivery of an item into a cost organization. The item is assigned a cost

profile that specifies the valuation structure of the item, and the valuation structure, in turn, specifies the valuation unit

of the item. The receipt layer falls within the valuation unit. Under the actual cost method, the cost processor identifies

the receipt that is used to satisfy the depletion, and applies the quantity depletion method that is defined in the cost

profile. The accounting application currently uses the first in, first out (FIFO) depletion method.

The FIFO accounting method assumes that the goods received first are consumed first. This logic does not require that

the inventory be physically moved in FIFO order. In reality, the inventory may be moving out in an unknown or random

fashion, especially when the goods are fungible.

Inventory controls the physical flow of inventory, and the actual cost method can be configured to conform to the level

of physical tracking maintained for inventory. For example, if the inventory is tracking at the lot level, the costs can also

be tracked at that level. If there is more than one receipt for a given lot, the FIFO accounting method assumes that the

receipts in the lot are consumed in FIFO order.

Receipt layers can be identified by combinations of any of the following: cost organization, inventory organization,

subinventory, locator, lot, serial and grade.

The following table illustrates the process of creating receipt layers for an item within a valuation unit.

Transaction Date Transaction Type Quantity Unit Cost Receipt Layer Created

01-Jan-2011

PO Receipt

100

120 USD

Receipt #1

02-Jan-2011

PO Receipt

100 USD

Receipt #2

03-Jan-2011

Miscellaneous Receipt

105 USD

Receipt #3

Inventory Depletion

This table illustrates the process of depleting the item inventory based on the created receipt layers using FIFO logic:

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Transaction Date Transaction Type Quantity Unit Cost Receipt Layer

Created

Receipt Layer Used

for Depletion

01-Jan-2011

PO Receipt

100

120 USD

Receipt #1

Not applicable

02-Jan-2011

PO Receipt

100 USD

Receipt #2

Not applicable

03-Jan-2011

Miscellaneous Receipt

105 USD

Receipt #3

Not applicable

04-Jan-2011

Miscellaneous Issue

-40

120 USD

Not applicable

Receipt #1

05-Jan-2011

Miscellaneous Issue

-60

120 USD

Not applicable

Receipt #1

06-Jan-2011

Miscellaneous Issue

-15

100 USD

Not applicable

Receipt #2

Related Topics

•

Example of Using the Actual Cost Method

•

Purchase Order Return and Sales Return Flows

Standard Cost Method

Use standard costs for inventory valuation to simplify your transaction accounting. For items that use other cost

methods for transaction accounting (such as the perpetual average cost method), you can still use standard costs for

simulation and planning purposes.

Configuring Item Attributes to Enable Costing

The following Costing prerequisite settings should be configured on the Manage Items page of the Product Information

Management work area:

• Costing Enabled. Set this attribute to Yes to report, value, and account for item costs.

• Include in Rollup. Set this attribute to Yes to include an item in the cost rollup.

For more information on configuring Product Information Management settings for Cost Planning, see the guide Using

Product Master Data Management.

Setting Up and Updating Standard Costs

Define the standard cost for a new item based on purchase information such as quotes from vendors, purchase

contracts, or bill of material. Periodically review the variance between actual transaction costs and the standard cost of

an item, and update the standard cost to ensure that it is close to actual costs.

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Inventory Value Adjustments Based on Standard Cost

When you implement a new standard cost for an item, the standard cost processor automatically creates accounting

adjustments to update inventory value. The adjustment is based on the revaluation of on-hand inventory as of the

effective start date for the current standard cost. The adjustment amount is calculated as follows:

Cost Adjustment = (New Standard Cost minus Current Standard Cost) multiplied by Quantity on Hand

Related Topics

•

How do I view the cost adjustments resulting from a standard cost update?

Standard Cost Definition Process

You can create standard costs by:

• Importing them from external sources and legacy applications

• Defining them manually in the costing application

Importing Standard Costs

To import standard cost data from external sources, you must load it into the Standard Cost Interface Table using the

application interface or spreadsheet. Once loaded, view the data in the Cost Accounting work area, on the Manage

Standard Cost Import Exceptions page, and validate the data by running the Import Standard Costs process. On this

page you can also view any errors resulting from the validation process, fix the errors, and rerun the Import Standard

Costs process. After validation is complete, the data are loaded into the Standard Costs Interface Table.

Defining Standard Costs

In the Cost Accounting work area, use the Manage Standard Cost Definitions page to view imported standard costs

that have been validated, and standard costs that are published from standard cost planning, and also to create new

standard costs..

Related Topics

•

Cost Planning Process

•

Can I update, deactivate, or delete a standard cost?

Periodic Average Cost Method

The periodic average cost method values inventory by including all the period expenses, invoices, and other

adjustments that are known only at the end of the period. It helps you to value the inventory on a periodic basis.

The principal objectives of the periodic average cost method are:

• Capture actual acquisition costs based on supplier invoiced amounts plus other direct procurement charges

required by national legislation or company policy.

• Capture actual transaction costs using fully absorbed resource and overhead rates.

• Average the inventory costs over a prescribed period, rather than on a transactional basis.

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Some of the key benefits of using the periodic average cost method include:

• Address regulatory and organization requirements to support full absorption costing.

• Helps to smooth the impact of significant price changes within a period, due to currency or other external

factors.

Unlike the other cost methods, a cost book must be enabled for periodic average cost for the cost processor to calculate

and use the periodic average cost for all the items associated with the cost book.

The periodic average cost of an item is the average cost for the item in a given period for a cost organization, cost book,

and valuation unit combination. This is the formula to calculate the periodic average cost:

Periodic Average Cost = [(prior period average cost * prior period ending balance) + SUM (transaction cost *

transaction quantity) + overheads + adjustments] / (prior period ending balance + transaction quantity for this

period)

Let’s take a simple example to understand this cost calculation. The inventory at the end of March for the item AS1000

is listed in this table. Here, cost is the calculated periodic average cost of AS1000 for the month of March.

Item Quantity Cost Value

AS1000 50 $10.00 $500.00

For the month of April, the receipt transactions for this item are listed in this table.

Transaction Quantity Cost Value

T1 50 $10.00 $500.00

T5 100 $9.95 $995.00

T9 50 $10.10 $505.00

Also, for the month of April, you had an adjustment of $25.00 and no overheads. Based on this, let’s calculate the

periodic average cost for the month of April.

Prior period average cost = $10.00

Prior period ending balance = 50

Adjustment = $25.00

Total receipt quantity for April = 200

Periodic Average Cost = {(10*50) + [(10*50) + (9.95*100) + (10.10*50)] + 25}/(50+200)

Periodic Average Cost = {(500) + [(500) + (995) + (505)] + 25}/250

Periodic Average Cost = {2525}/250 = 10.10

So, the periodic average cost for AS1000 for the month of April in $10.10. After this cost is calculated, the same would be

used to cost all the cost derived transactions for that period.

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When using the periodic average cost method, for a cost organization and cost book combination, all receipts are

processed at the actual receipt costs. However, the issues are costed with a single cost that is the periodic average cost,

which is calculated as a single composite cost of all the cost owned transactions.

Here are a few terms that you must understand before you start using the periodic average cost method:

• Cost owned transactions: Transactions where the costs are defined. The transaction cost for such transactions

are included when calculating the periodic average cost. Cost owned transactions include:

◦

Purchase order receipts

◦

All kinds of adjustments

◦

WIP completion / returns transactions

◦

Resource or overhead transactions

◦

Reversal of resource charges

◦

RMA referenced to original sales order

◦

Return to vendor

◦

Miscellaneous receipt and issue transactions with a cost

◦

Inter-organization transfers that cross valuation unit

◦

Intransit transfers (within and across valuation units)

Note: For inter-organization transfers that cross valuation unit and intransit transfers the prior period

average cost is used.

• Cost derived transactions: Transactions that are costed using the calculated periodic average cost. Cost derived

transactions include:

◦

Miscellaneous transactions without cost

◦

Negative material issue

◦

Component issues to WIP

◦

Component returns from WIP

◦

All direct transfers within the same valuation unit

◦

RMA not referenced to the original sales order, or RMA within the same period

• Prior period average cost: This is the final periodic average cost calculated for the prior period, when that period

was closed. The prior period average cost can also be an adjustment that you enter to override an existing cost.

There are scenarios where a prior period cost might not be available:

◦

The first opened period for a cost book.

◦

A new item is transacted and there aren’t any transactions for this item in the prior periods.

You need to create an opening balance in these scenarios, else the prior period cost is set to 0. You can enter a

prior period cost by creating an opening cost override.

• Prior period ending balance: The inventory balance at the end of the prior period, if available. This can also be

considered as the opening balance at the start of a new period. If an item is being transacted for the first time,

then the prior period ending balance will be 0.

To ensure that items have a cost at most times, the periodic average cost for an item is carried forward from one period

to next period even if the on-hand quantity in those periods is 0.

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For example, the item AS2000 was received in January and completely depleted in February. The periodic average cost

for this item is carried forward to March. This ensures that the item has a cost when transacted in a future period.

Period Period End Quantity Periodic Average Cost

January 100 $10.00

February 0 $10.00

March 0 $10.00

Let's look at how this periodic average cost would be used in a future period.

If there is only one receipt (R1) for AS2000 in April for 10 units without any cost specified and there aren’t any other cost

owned transactions for this item, then the receipt will be costed at $10.

If there is another receipt which is cost owned (R2) for 10 units at $15 in April, then receipt R1 will be costed at $15.

Periodic Average Costing Process

When using a periodic average cost enabled cost book, as a cost accountant you need to know the tasks you can

perform during the period and the tasks you must perform at period end, for costing and accounting the transactions.

The image here illustrates the periodic average costing process for a period. Its shows the tasks and the sequence in

which you can perform them during a period before you set the period status to Pending Close.

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In an open period, you can run the various processes to transfer transactions from upstream application to costing.

After the transactions are transferred to costing, you run the Create Cost Accounting Distribution process. Unlike other

cost methods, when you run this process for a periodic average cost enabled cost book, the distributions created aren’t

final. You can run the create cost accounting distributions process multiple times in an open or pending close period.

Only after the period is closed, the accounting distributions are frozen.

You can schedule this process to run on a periodic basis and review the distributions created on the Review Cost

Accounting Distributions page. If you need to correct the distributions, you can create adjustments by using the

Manage Periodic Average Cost Adjustments task in the Cost Accounting work area. You can also revise the resource

rates, create and modify overhead rules, and then run the Create Cost Accounting Distribution process again.

As a best practice, you must run the period validations regularly from the Manage Cost Accounting Periods page. You

need to review and check for unprocessed transactions, adjustments, under or over absorption on expense pools,

processing errors, and so on. Resolving errors and issues, if any, would reduce surprises during period end and make

the period end processes smoother.

The image illustrates the tasks specifically to be performed at period end to cost and account the transactions for the

period.

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At the end of the period, you first set the period status to Pending Close. This ensures that no new transactions are

transferred in to costing and a final periodic average cost can be calculated. The period validations for the Pending

Close status are automatically run. You must review the exceptions and take necessary corrective measures. You can

also review the costing reports for the periodic average cost, inventory value, gross margins, overhead absorption, and

resource rate absorption.

Although you can’t transfer new transactions in to costing after you set the period status to Pending Close, you can

adjust the costs and process the transactions that are already in costing. You can check the overhead absorption and

modify the overhead accounting rules.

You then run the Create Cost Accounting Distributions process. After the distributions are created, you can review the

various costing reports like Inventory Valuation and COGS & Gross Margin.

You can now close the period. When you close the period, the period end validations for the Close status are

automatically run. Also, the Create Cost Accounting Events process is automatically initiated. Review the validation

exceptions and take corrective measure, where necessary.

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Run the Create Accounting process in the Final mode to account the transactions and publish them to General Ledger.

Set the period status to Permanently Closed. This will automatically run the corresponding period validations. You need

to manually open the next period.

Review Item Costs

On the Review Item Costs page view the perpetual average cost, actual cost, or standard cost details of items, chart cost

trends, and compare cost records.

The options available for analyzing item costs are:

• Cost details

• Transaction costs

• Cost comparisons

Cost Details

View the perpetual average cost, actual cost, or standard cost of an item for combinations of a cost organization, cost

book, and valuation unit. View these costs for a current date or any date in the past.

The Cost Details page displays additional information on:

• Cost breakdown: the item cost details for a receipt record. The breakdown is available by cost element, cost

element type, and analysis group.

• Cost history: the cost trend of an item over a period of time.

• Depletions: the layer consumption for issues out of a receipt record.

• Cost information: the cost details from the source transaction for a receipt record.

Transaction Costs

Select a time frame to view the perpetual average cost, actual cost, or standard cost history of an item, or specify the

number of days for the moving average cost calculation.

For each transaction contributing to the item cost history, you can view the cost elements, transaction source,

document number, quantity on hand prior to the transaction, transaction date, and transaction quantity.

Cost Comparisons

Compare the cost details for up to six records of:

• Several items

• One item across several cost organizations or cost books

• One item over a period of time

Related Topics

•

Cost Adjustments and Cost Distributions

•

Manage Cost Elements and Analysis Groups

•

How Cost Components, Cost Elements, and Cost Component Groups Work Together

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Cost Adjustments and Cost Distributions

You can adjust the cost of items to manage obsolescence, or to mark down inventory to address "lower of cost or

market requirements", price changes, and variances.

You can make adjustments to the perpetual average cost of items, purchase order and miscellaneous receipt costs, and

layer inventory cost.

This figure illustrates the process for making cost adjustments, processing them, and viewing results.

The costing application enables you to adjust costs, process them, and create the corresponding cost accounting

distributions.

Entering Cost Adjustments

Adjust the cost of items on the Create Cost Adjustments page. You can make three kinds of adjustments for

combinations of a cost organization, cost book, valuation unit, and cost element.

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If you want to track the adjustment through the supply chain, use a cost element of type Adjustment:

• Perpetual average item cost. Enter the new average unit cost. The processor will automatically adjust the overall

average cost for the quantity on hand.

• Receipt cost. The receipt cost is adjusted by an update from purchasing or accounts payable, or you can

manually enter new receipt costs, PO receipts, interorganization receipts, miscellaneous receipts, or RMA

receipts. The processor will automatically adjust the cost of the remaining receipt quantity.

• Layer inventory cost. You can adjust the unit cost of items that use the actual cost method. The processor will

automatically adjust the value of the on-hand receipt layer quantity.

You can bundle multiple records, such as multiple receipts or valuation units, into a single adjustment transaction, and

when submitted, they are assigned an adjustment number. Optionally, you can also specify a reason code.

Save the adjustment and review the impact to inventory valuations based on the quantity on hand at the time of

adjustment. Do this prior to final submission for cost processing, so that you can revise as necessary. After final review

and submission, you can still void the adjustment, provided it is not yet processed by the cost processor. However, the

adjustment cannot be reversed once processed. Accordingly, the adjustment status code is automatically set to: S for

submitted, C for voided, or P for pending processing.

Processing Adjustments

When you review and submit a cost adjustment, the cost processor creates a new adjustment transaction:

• For a perpetual average item cost adjustment, the processor updates the perpetual average cost of the item

in that combination of cost organization, cost book, item, and valuation unit. The processor then applies the

perpetual average item cost adjustment against inventory valuation at the rate of quantity on hand times the

change in cost.

If you create multiple perpetual average cost adjustments with the same cost organization, cost book, item,

valuation unit, and adjustment date combination, then the cost processor will only process the adjustment with

the maximum adjustment number. The cost processor will ignore the remaining adjustments and mark them as

excluded.

• For a receipt cost adjustment, the processor updates the receipt cost for the portion of the receipt that is part

of the current on-hand balance. The portion of the adjustment attributable to what is no longer part of the on-

hand balance will be accounted for with a write off distribution. However, if the cost profile of the item has cost

propagation enabled, the processor revalues the issue transactions that were consumed out of the receipt.

• For a layer inventory cost adjustment, the processor updates the unit cost of the item in that combination of

cost organization, cost book and valuation unit. The processor then updates inventory valuation at the rate of

quantity on hand times the change in cost.

Example 1: Assume a receipt of 8 units, all of which are currently on hand. The valuation unit has a total of 10 units on

hand. You adjust the cost of the receipt from $10 to $11 per unit. The processor adjusts the average cost by $0.80 (that is,

8/ (Division symbol) 10 * (Multiplication symbol) $1).

Example 2: Assume a receipt of 8 units, of which 6 units are currently on hand, and 2 units have been depleted. The

valuation unit has a total of 10 units on hand. You manually adjust the cost of the receipt from $10 to $11 per unit.

The processor adjusts the receipt cost by $6 (that is, 6 *(Multiplication symbol) $1), and creates a write off accounting

distribution of $2 (that is, 2 * (Multiplication symbol) $1).

Example 3: Assume a valuation unit has a total of 7 units on hand, valued at $10 per unit. You manually adjust the unit

cost to $12 per unit. The processor adjusts inventory value by $14 (that is, 7 * (Multiplication symbol) $2).

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Reviewing Cost Adjustment Results

After running the cost processors, check processing results, including warning and error messages, on the Review Cost

Accounting Processes page.

Review the accounting entries resulting from the cost adjustments on the Review Cost Distributions page.

Review the updated perpetual average cost or actual cost of items on the Review Item Costs page.

Related Topics

•

Review Item Costs

•

Examples of Making Cost Adjustments

•

What happens if an item in a cost organization book has both a perpetual average item cost adjustment and a

receipt cost adjustment pending?

•

Receipt Cost Adjustment and Propagation

•

Example of Receipt Cost Adjustment

Receipt Cost Adjustment and Propagation

You might adjust cost of a processed receipt for reasons such as invoice price variances, retroactive purchase order

price changes, or prior adjustments. If you're using the actual cost method, you can propagate such adjustments to

downstream inventory consumption transactions.

In the case of an interorganization transfer, you can propagate the receipt cost adjustment to the destination inventory

organization.

Receipt Cost Adjustments

Enter receipt cost adjustments on the Create Cost Adjustments page. Because these adjustments could distort the view

of costs and margins downstream in the supply chain, you have the option of tracking them separately by using cost

elements of type Adjustment.

If you're not tracking cost adjustments separately, you can use cost elements of type Material, Overhead, or Profit in

Inventory.

Propagation of Receipt Cost Adjustments

You can propagate cost adjustments through the supply chain only if you're using the actual cost method for

transaction costing. To do this you must enable propagation in the cost profile setup on the Create Cost Profile page.

When propagation is enabled, the cost processor:

• Propagates receipt cost adjustments to downstream transactions by revaluing the transactions to the extent of

quantity consumed.

• Revalues any remaining inventory.

The cost processor adjusts receipt costs for interorganization transfers by recording the propagated cost as profit in

inventory in the destination organization and all organizations in between, only if propagation is enabled in all of them

and the profit in inventory tracking is enabled on the transfer agreement. However, if the profit in inventory tracking

is disabled on the transfer agreement or if the transfers are cost-based transfers, the difference is booked as inter

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organization gain or loss in the shipping node. On the other hand, propagation stops if an inventory organization is

associated with a cost profile that doesn't use the actual cost method or doesn't have propagation enabled.

The processor always propagates cost adjustments through logical inventory organization nodes in the flow, regardless

of propagation enablement.

If propagation isn't enabled, then the receipt cost adjustment is written off as an expense for all inventory that's

consumed.

Related Topics

•

Cost Adjustments and Cost Distributions

•

Example of Receipt Cost Adjustment

•

Cost Profiles, Default Cost Profiles, and Item Cost Profiles

Cost Accounting for Purchase Orders

Purchase Order Receipts

All purchase order receipt transactions are processed, costed, and accounted at their latest true acquisition costs.

When the invoice isn't available, the latest acquisition costs are the purchase order price and estimated landed cost

charges. However, when invoice is available, the latest acquisition costs are the invoice price and actual landed cost

charges.

The inventory is valued based on the cost method of the item:

• Actual Cost and Perpetual Average Cost: Items are costed at the latest acquisition cost for the receipt.

• Standard Cost: Any difference between the acquisition cost and the standard cost is booked as purchase price

variance.

• Periodic Average Cost: Acquisition cost is considered as value adjustment and added to the inventory value for

the period.

Acquisition cost adjustments are propagated to issue transactions if the cost method is actual cost and propagation is

enabled on the cost profile.

Acquisition Cost for Procure to Pay Cycle Events

Cost Accounting creates a separate set of transactions and distributions for each applicable event in the procure to pay

cycle.

The table here lists the source documents for various events in the procure to pay cycle and the corresponding cost

components and acquisition cost logic.

Source Document Cost Components Acquisition Cost Logic - Match to Purchase

Order/Receipt

Goods Purchase Order Receipt Line

Purchase order price, Nonrecoverable Tax

Purchase order receipt is valued at purchase

order price plus nonrecoverable tax

Trade Operation (estimated landed costs)

Landed cost charges

Separate acquisition cost adjustments created

for each landed cost charge

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Source Document Cost Components Acquisition Cost Logic - Match to Purchase

Order/Receipt

Change Order (retro price adjustment)

Purchase order price, Nonrecoverable Tax

Acquisition cost adjustment created for delta

retro price adjustment

Goods Invoice from Accounts Payable

IPV, TIPV, TPV, ERV

Separate acquisition cost adjustment created

for each invoice with variances

Trade Operation (actual landed costs from

Accounts Payable third-party invoice)

Landed cost charges

Acquisition cost adjustment created for any

delta between estimated and actual landed cost

charges with cost date always in open period

Canceled Invoice, Credit or Debit Memo

Purchase order price, IPV, TIPV, TPV, ERV

Acquisition cost adjustment created for each

canceled invoice, credit and debit memo, where

applicable

Accrual Clearing

Accrual line

Acquisition cost adjustment created by

prorating total invoice costs over delivered

quantity

Acquisition Cost Adjustment

Oracle Cost Accounting provides an ability to value your inventory at the true acquisition costs. During receipt into

inventory, inventory is valued at either purchase order price, including tax and any landed cost charges, or standard.

Any differences between the standard cost and the purchase order price are expensed as a purchase price variance.

Subsequently, any additional costs that are imported from Payables, such as invoice price variance, exchange rate

variance and tax rate variance, are used to true up the inventory cost by applying them as acquisition cost adjustments.

The true up of inventory cost is carried out based on the cost method.

• Actual cost (FIFO): acquisition cost adjustments apply to on-hand inventory as well as any consumption

transactions such as sales order issues, work order issues, and transfers.

• Average cost: acquisition cost adjustments apply only to the extent of on-hand inventory and any adjustments

pertaining to inventory that's consumed are expensed out into cost variance.

• Standard Cost: acquisition cost adjustments are always expensed out as a purchase price variance up to the

extent of quantity delivered.

Variance Absorption

The Match Option selected on the purchase order schedule is used to calculate the variances. If the option is set to

Order, the invoice is matched to the purchase order, and if set to Receipt, the invoice is matched to the receipt.

Difference between the invoice and the purchase order or receipt amounts is the invoice price variance. If the invoice

is in a currency different from the ledger currency, the exchange rate fluctuations can cause a change in the Payables

liability in the ledger currency. This variance is known as the exchange rate variance (ERV).

Depending on the match option, the exchange rate variance is calculated as:

• If the option is set to Order, the currency conversion rate on the purchase order is used to calculate the

exchange rate differences.

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• If the option is set to Receipt, the currency conversion rate on the receipt is used to calculate the exchange rate

differences.

The variance is recorded in the accounted currency (ledger currency). The currency amount entered remains the same if

the vendor sends the invoice for the same amount.

If the match option is set to Order, then all the invoices apply to all the receipts for a corresponding purchase order

and the variances are fully absorbed. If the match option is set to Receipt, the invoice applies to specific receipt for a

corresponding purchase order.

You can also exclude the ERV recorded on payables invoices in Receipt Accounting and Cost Accounting transactions.

This prevents the impact of ERV on inventory valuation when receiving purchase orders with inventory, expense, and

work order destinations. For all cost methods, you can exclude ERV for item costs and inventory valuation. Some of the

benefits of excluding ERV are:

• Adhere to regulatory requirements for inventory valuation by classifying ERV as a period expense that's

recorded in the period it's incurred.

• Ensure accurate unit item costs and inventory valuation.

You must enable the profile option Ignore Invoice Exchange Rate Variances for Inventory, Expense, and Work Order

Destination Purchases (ORA_CMR_IGNORE_AP_ERV_TERV) to exclude ERV.

If enabled, any exchange rate variance distributions lines will be ignored from receipt and cost processing and where

applicable, such lines won't be interfaced to Projects.

Note: Consigned purchase orders aren't impacted by this profile option.

If you want to ignore all invoice variances from impacting acquisition costs of an item, you can use the profile option

Ignore Invoice Variances for Inventory Destination Purchase Orders (ORA_CMR_IGNORE_AP_INV_VAR_ALL)

Related Topics

•

Manage Receipt Accounting Profile Options

Acquisition Cost with Enhanced Cost Processing

After you opt in to the Calculate Acquisition Cost for Purchase Order Transactions with Enhanced Cost Processing

feature, the acquisition costs for purchase order transactions are calculated using the new processing logic.

With the new processing logic:

• Acquisition cost is computed every time a new document information is available.

• If the match option is set to Order, invoice variance amount is considered for the entire purchase order quantity

and prorated to the delivered quantity.

• If the match option is set to Receipt, invoice for each receipt can be determined and the invoice variance

amount is applied to the receipt quantity for receipt matched with the invoice.

• New acquisition cost is compared with the old acquisition cost to generate delta acquisition cost adjustments.

• Accrual clearing triggers an acquisition cost adjustment and the invoice amount is considered as the final

amount for prorating to delivered quantity.

The benefits of using this new processing logic include:

• Reconcile the Receiving Inspection account across Cost Accounting and Receipt Accounting with the enhanced

logic.

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• For the purchase order related transactions, the processor uses transaction dates instead of the cost

accounting process date for more accurate currency translation calculations.

• Invoice price variance adjustment events in Cost Accounting are posted to the General Ledger period that is

same as the period used by Accounts Payable.

• Absorb the entire invoice amount over the net delivered quantity rather than the ordered quantity on the

purchase order.

• Granular tracking, easier reconciliation and processing of each purchase order price events, and eliminate

commingling of events.

Note: The Calculate Acquisition Cost for Purchase Order Transactions with Enhanced Cost Processing feature isn't

applicable for global procurement purchase orders.

Let’s look at an example of transactions and the corresponding accounting dates for the Jan-23 period which is in the

Open status.

Transaction Date Costed Date Event Quantity Unit Price Total Amount Accounted Date

1/17/2023 1/17/2023 Purchase Order 2000 900 1,800,000.00

1/18/2023 1/18/2023 Receipt 1500 900 1,350,000.00 1/18/2023

1/18/2023 1/18/2023 Deliver 1500 900 1,350,000.00 1/18/2023

1/31/2023 2/01/2023 Invoice 1500 1000 1,500,000.00 2/01/2023

The transactions and the corresponding distributions are accounted as per the accounted date in the table. The invoice

is accounted on 2/01/2023 in General Ledger. This date is used as the accounted date in Receipt Accounting and Cost

Accounting.

Let's say the invoice is accounted on 1/31/2023 in General Ledger but the Jan-23 period is closed in Cost Accounting,

then the accounted date in Receipt Accounting will be 1/31/2023 and the costed date and accounted date in Cost

Accounting will be 2/01/2023, if the Feb-23 period is open.

Example of Acquisition Cost Adjustment With Match Option Set to Order

This example illustrates the accounting entries for an acquisition cost adjustment when the match option is set to Order

in the purchase order schedule.

Let's consider a purchase order with partial receipt and a corresponding invoice with price variance. The table here lists

the transactions.

Transaction Date Document Quantity Unit Price Total Amount

1/17/2023 PO 01 2000 900 1,800,000.00

1/18/2023 RC 01 1500 900 1,350,000.00

1/18/2023 Deliver - RC 01 1500 900 1,350,000.00

1/31/2023 INV 01 1500 1000 1,500,000.00

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Also, you've opted in to the Calculate Acquisition Cost for Purchase Order Transactions with Enhanced Cost Processing

feature.

After you run the cost processor, these entries are created in Receipt Accounting.

Transaction Type Accounting Line Type Document Dr. Cr.

Receipt Receiving Inspection RC 01 1,350,000.00

Receipt Accrual RC 01 1,350,000.00

Invoice Price Adjustment Receiving Inspection INV 01 150,000.00

Invoice Price Adjustment Invoice Price Adjustment IINV 01 150,000.00

These entries are created in Cost Accounting.

Transaction Type Accounting Line Type Document Dr. Cr.

Delivery Inventory Valuation RC 01 1,350,000.00

Delivery Receiving Inspection RC 01 1,350,000.00

Delivery Inventory Valuation INV 01 150,000.00

Delivery Receiving Inspection INV 01 150,000.00

As you can see, the entire invoice amount is absorbed over the net delivered quantity rather than the ordered quantity

on the purchase order.

Let's consider few more transactions to fully receive the remaining purchase order quantity. This time the invoice

doesn't include any price variance.

Transaction Date Document Quantity Unit Price Total Amount

2/05/2023 RC 02 500 900 450,000.00

2/05/2023 Deliver - RC 02 500 900 450,000.00

2/07/2023 INV 02 500 900 450,000.00

After you run the cost processor, these entries are created in Receipt Accounting.

Transaction Type Accounting Line Type Document Dr. Cr.

Receipt Receiving Inspection RC 02 450,000.00

Receipt Accrual RC 02 450,000.00

These entries are created in Cost Accounting.

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Transaction Type Accounting Line Type Document Dr. Cr.

Acquisition Cost

Adjustment

Receiving Inspection INV 01 37,500.00

Acquisition Cost

Adjustment

Inventory Valuation INV 01 37,500.00

Delivery Inventory Valuation RC 02 450,000.00

Delivery Receiving Inspection RC 02 450,000.00

Delivery Inventory Valuation INV 02 37,500.00

Delivery Receiving Inspection INV 02 37,500.00

As you can see, the following has happened:

• The receipt quantity and invoice quantity remains same so we see no change in the acquisition cost as we have

already booked inventory for both the receipts.

• The difference in invoice price variance is moved out of inventory in relation to the first receipt.

• Inventory value is updated based on the receipt quantity at purchase order price and the invoice price variance.

On the Review Transaction Costs page, you can track each purchase order price events.

Example of Acquisition Cost Adjustment With Match Option Set to Receipt

This example illustrates the accounting entries for an acquisition cost adjustment when the match option is set to

Receipt in the purchase order schedule.

Let's consider a purchase order with partial receipt and a corresponding invoice. The table here lists the transactions.

Transaction Date Document Quantity Unit Price Total Amount

1/17/2023 PO 01 2000 1000 2,000,000.00

1/18/2023 RC 01 1000 1000 1,000,000.00

1/18/2023 Deliver - RC 01 1000 1000 1,000,000.00

1/31/2023 INV 01 800 1200 960,000.00

Also, you've opted in to the Calculate Acquisition Cost for Purchase Order Transactions with Enhanced Cost Processing

feature.

After you run the cost processor, these entries are created in Receipt Accounting.

Transaction Type Accounting Line Type Document Dr. Cr.

Receipt Receiving Inspection RC 01 1,000,000.00

Receipt Accrual RC 01 1,000,000.00

Invoice Price Adjustment Receiving Inspection INV 01 160,000.00

Invoice Price Adjustment Invoice Price Adjustment INV 01 160,000.00

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These entries are created in Cost Accounting.

Transaction Type Accounting Line Type Document Dr. Cr.

Delivery Inventory Valuation RC 01 1,000,000.00

Delivery Receiving Inspection RC 01 1,000,000.00

Delivery Inventory Valuation INV 01 160,000.00

Delivery Receiving Inspection INV 01 160,000.00

As you can see, the entire invoice amount is absorbed over the net delivered quantity rather than the ordered quantity

on the purchase order.

Let's consider few more transactions to fully receive the remaining purchase order quantity.

Transaction Date Document Quantity Unit Price Total Amount

2/05/2023 RC 02 1000 1000 1,000,000.00

2/05/2023 Deliver - RC 02 1000 1000 1,000,000.00

2/07/2023 INV 02 1200 1200 1,440,000.00

After you run the cost processor, these entries are created in Receipt Accounting.

Transaction Type Accounting Line Type Document Dr. Cr.

Receipt Receiving Inspection RC 02 1,000,000.00

Receipt Accrual RC 02 1,000,000.00

Invoice Price Adjustment Receiving Inspection INV 02 240,000.00

Invoice Price Adjustment Invoice Price Adjustment INV 02 240,000.00

These entries are created in Cost Accounting.

Transaction Type Accounting Line Type Document Dr. Cr.

Delivery Inventory Valuation RC 02 1,000,000.00

Delivery Receiving Inspection RC 02 1,000,000.00

Delivery Inventory Valuation INV 02 240,000.00

Delivery Receiving Inspection INV 02 240,000.00

On the Review Transaction Costs page, you can track each purchase order price events.

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Ignore Invoice Variances for Inventory Destination Purchase Orders

You can exclude payables invoice cost variances from inventory valuation for inventory and work order destination

purchase orders. Use this if you don't want to apply invoice cost variances as acquisition cost adjustments to item cost

and inventory value.

Enable the exclude invoice cost variances feature by using the costing profile options. The profile option code for this

feature is ORA_CMR_IGNORE_AP_INV_VAR_ALL. The corresponding profile name is 'Ignore Invoice Variances for Inventory

Destination Purchase Orders'. This profile option must be set at the Site level.

When you set the profile value to Yes, unprocessed invoices in costing for both uninvoiced and partially invoiced PO

distributions aren't used for creating additional receipt accounting distributions. The invoice variance amounts, if any,

aren't considered for true up of inventory valuation or Purchase price variance. When the profile option is enabled the

variances aren't accounted in Receipt Accounting and Cost Accounting.

When you change the profile value to No, unprocessed invoices in costing for both uninvoiced and partially invoiced PO

distributions are used for creating additional receipt and cost accounting distributions for acquisition cost adjustment

based on existing logic.

Related Topics

•

Manage Receipt Accounting Profile Options

Periodic Average Cost Adjustments

Value adjustment and opening cost override are the periodic average cost adjustments that you can create using the

Manage Periodic Average Cost Adjustments task.

The periodic average cost can be adjusted by user created adjustments or automatically based on business events, such

as invoice price changes. You can create the periodic average cost adjustments listed here:

• Value Adjustment: You can adjust the inventory value by specifying an amount as the adjustment. This

adjustment value is then used to calculate the periodic average cost. An example of value adjustment could be

a rebate that you received and need to be apply on all the inventory quantities.

• Opening Cost Override: You can define a new cost for the opening balance of the period. If you don’t want to

use the prior period cost, you define an opening cost override that the cost processor must use to calculate the

periodic average cost for the period. This is also useful when you want to define a cost for a newly transacted

item. When defining the opening cost override, you can select the cost elements that you would like to change

and specify the new cost for each cost element. A use case where you would want to define an opening cost

override is that the prior period cost was defaulted to 0 due to negative inventory. You aren’t comfortable using

0 as the prior period cost and want to use a new cost.

If you have defined an opening cost override and value adjustments for a cost organization, cost book, item, valuation

unit, and period combination, then the formula to calculate the periodic average cost for the item will be:

Periodic Average Cost = [(opening cost override * prior period ending balance) + SUM (transaction cost *

transaction quantity) + overheads + value adjustments] / (prior period ending balance + transaction quantity for

this period)

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You can create, update, and delete adjustments only if the corresponding period is in the Open or Pending close status.

Also, you can’t update or delete an opening cost override after it has been processed, even if the corresponding period

is in the Open or Pending close status.

After you create and process the adjustments by running the Create Cost Accounting Distributions process, you can

check the processing results, including any warning or error messages, on the Review Cost Accounting Process page.

You can view the corresponding accounting entries on the Review Cost Distributions page. Also, you can check the

updated periodic average cost of the item on the Review Item Costs page.

The automatic adjustments include:

• Acquisition cost adjustments due to invoice price variance, landed costs, purchase order price changes, and so

on.

• Variance adjustments are created when either the inventory value is negative or the total quantity is less than or

equal to 0.

Total Quantity Total Inventory Value Variance Calculation Periodic Average Cost

> 0 > 0 No variance > 0

< 0 < 0 No variance > 0

> 0 < 0 Variance gain to bring inventory

value to 0

= 0

< 0 > 0 Variance loss to bring inventory

value to 0

= 0

= 0 > 0 Variance loss to bring inventory

value to 0

= 0

= 0 < 0 Variance gain to bring inventory

value to 0

= 0

In the table, based on the period average cost calculation formula,

Total Quantity = (prior period ending balance + transaction quantity for this period)

Total Inventory Value = [(prior period average cost * prior period ending balance) + SUM (transaction cost * transaction

quantity) + overheads + adjustments]

Periodic Average Cost Adjustment Status

The status of the periodic average cost adjustment specifies what actions you can perform on the adjustment.

The table summarizes the various status that a periodic average cost adjustment can be in.

Status Description

Submitted When you create or edit an adjustment, it’s in the Submitted status. Only adjustments that are in

this status will be processed by the cost processor. You can edit or delete adjustments that are in this

status.

Processed When you run the Create Cost Accounting Distribution process, the adjustments in the Submitted

status are processed and corresponding distributions are created. These adjustments are then set to

the Processed status.

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Status Description

You can edit a value adjustment that’s in the Processed status if the corresponding period is not closed.

The edited adjustment is then reset to the Submitted status.

Discrepancy If a processed adjustment is edited and the corresponding period is closed without reprocessing the

adjustment, then the adjustment status is set to Discrepancy. You can’t edit such an adjustment.

Obsolete If an adjustment isn’t processed during the period and was in the Submitted status when the

corresponding period was closed, then the adjustment status is set to Obsolete. You can’t edit such an

adjustment.

Failed When you create an adjustment without the cost details through REST API, the adjustment won’t

be processed successfully and the status is set to Failed. You must add the cost details for such an

adjustment from the UI. The cost details can be added only if the period is in the Open or Pending

close status.

Create a Value Adjustment

When you want to modify the inventory value for a period, you would create a value adjustment. For example, you

received a rebate and want to apply it on the inventory.

1. In the Cost Accounting work area, click Manage Periodic Average Cost Adjustment on the tasks menu.

2. On the Periodic Average Cost Adjustments page, click Create Value Adjustment.

3. Select the cost organization, cost book, item, and valuation unit.

4. Select the period.

You can define an adjustment only for the current open period of the cost book.

5. Select a reason code.

6. You can optionally associate an adjustment account, if the cost book is a primary cost book.

7. Click Add to include cost details for the adjustment.

8. Select the cost element and enter the adjustment value.

Repeat step 7 and 8 for each cost element that you want to add to the adjustment.

9. Click Submit.

After you create a value adjustment, you can update it only if the corresponding period is in the Open or Pending close

status. You can update the reason code and account. You can modify the value for the cost elements, add new cost

elements, and delete existing cost elements.

Create an Opening Cost Override

You can define a new cost for the opening inventory balance for a period by creating an opening cost override. For

example, the prior period cost was defaulted to 0 due to negative inventory and you don’t want to use this cost.

You can define only one opening cost override for a cost organization, cost book, item, valuation unit, and period

combination.

1. In the Cost Accounting work area, click Manage Periodic Average Cost Adjustment on the tasks menu.

2. On the Periodic Average Cost Adjustments page, click Create Opening Cost Override.

3. Select the cost organization, cost book, item, and valuation unit.

4. Select the period.

You can define an adjustment only for the current open period of the cost book.

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5. Select a reason code.

6. You can optionally associate an adjustment account, if the cost book is a primary cost book.

7. Click Add to include cost details for the adjustment.

8. Select the cost element and enter the adjustment value.

Repeat step 7 and 8 for each cost element that you want to add to the adjustment.

9. Click Submit.

After you create an opening cost override, you can update it only if the corresponding period is in the Open or Pending

close status and the adjustment isn’t processed by the cost processor. You can update the reason code and account. You

can modify the new unit cost for the cost elements, add new cost elements, and delete existing cost elements.

Costing Subinventory Material Staged for Production

Costing can account material movement from warehouse or a common stock subinventory to a shop floor supply

subinventory for work orders that are scheduled for production in the near future.

This supply subinventory is commonly marked as not available-to-promise to prevent the production material from

being used for other purposes, while enabling cost accountants to report on the value of the material that's staged for

production but not yet issued to work orders.

Prerequisites

The following tasks must be completed in order to enable the costing of subinventory material staged for production:

• Enable the following Subledger Accounting Journal Entry Rule Set: Work in Process Pick

• Run the following process: Transfer Transactions from Inventory to Costing

Accounting Distributions

The following accounting distributions are created on the Review Cost Accounting Distributions page for the

subinventory material issue:

Accounting Line Type Transaction Type

Offset

Debit

Inventory Valuation

Credit

The following accounting distributions are created on the Review Cost Accounting Distributions page for the receipt:

Accounting Line Type Transaction Type

Inventory Valuation

Debit

Offset

Credit

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Cost Accounting for Outside Processing

Oracle Cost Accounting provides costing and accounting features for manufacturing outside processing, where one or

more work order operations are outsourced to a supplier who provides specialized manufacturing services.

Costing of Outside Processing Work Orders

An outside processing work order is costed and processed as follows.

• The outside processing service is modeled as an Item in cost planning, and is attached to a supplier operation.

• You can define a standard cost and overheads for the outside processing item.

• The outside processing item cost is included in the finished product's rolled up cost.

Transaction Processing for Outside Processing

Cost Accounting supports the Purchase Order Receipt 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.

Accounting Distributions Created for Outside Processing

You can review the distributions created for outside processing in the Cost Accounting work area on the Review Cost

Accounting Distributions page. Cost Accounting creates the following distributions for the delivery of the outside

processing service item to Manufacturing.

Accounting Line Type Transaction Type

Work In Process Valuation

Debit

Receiving Inspection

Credit

Related Topics

•

How Outside Processing Costs are Planned, Accounted, and Reviewed

•

How Items Are Set Up for Outside Processing

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Cost Accounting for Manual Procurement of Items for Work Orders

Oracle Cost Accounting provides costing and accounting features for items that are directly procured from a work order

and are received against that work order and operation.

Costing of Manual Procurement of Items for Work Orders

Cost Accounting supports the Direct Delivery to Work Order transaction type for the costing of items delivered to

Manufacturing.

The transaction processing depends on the cost method:

• Actual or Average cost method - The purchase price multiplied by the number of items received is added to the

work in process valuation. This is also applicable for description-based and amount-based items.

• 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.

Accounting Distributions for Manual Procurement of Items for Work Orders

You can review the distributions created for the Direct Delivery to Work Order transactions in the Cost Accounting work

area on the Review Cost Accounting Distributions page.

This table lists the accounting distributions for manufacturing work orders.

Accounting Line Type Transaction Type

Work In Process Valuation

Debit

Receiving Inspection

Credit

This table lists the accounting distributions for maintenance work orders.

Accounting Line Type Transaction Type

Expense

Debit

Receiving Inspection

Credit

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Cost Accounting for Rework and Transformation Work Orders

Oracle Cost Accounting provides costing and accounting functionality for the following manufacturing work order

types:

• Rework Work Orders. A work order of type Rework is created for finished products with defects that need to be

repaired and reworked. For example, a product may need to have a defective component removed and replaced

with a new component.

• Transform Work Orders. A work order of type Transform is created when you want to refurbish a product and

transform it into a different product, for example, by upgrading one of the product components.

Transactions Types for Rework and Transform Work Orders

The following transaction types have been added for rework and transform work orders:

• Material Negative Issue. If the quantity is negative and the transaction type is Issue, then a Material Negative

Issue transaction is used.

• Material Negative Return. If the quantity is negative and the transaction type is Return, then a Material Negative

Return transaction is used.

Related Topics

•

Review Work Order Costs

•

Overview of Work Orders

Cost Accounting for Manufacturing Work Orders

Oracle Cost Accounting provides costing and accounting functionality for these manufacturing work order types:

• Process and discrete manufacturing work orders

• Standard and non-standard work orders

• Orderless manufacturing

After a work order is released in manufacturing execution, it can be interfaced to cost accounting. These transactions

reported for the work orders get interfaced to costing and are processed by costing:

• Component issues and returns

• Resource charging and reversals

• Product completions and returns

• Scrap transactions

• Work order close

• Work in Process Cost Adjustments

Component Issues and Returns

The component transactions are costed based on the cost method of the component.

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Cost Method Component Cost

Standard Cost

Uses current standard cost of the component.

Perpetual Average

Uses current perpetual average cost of the component.

Actual Cost

Uses the cost of the specific layer from which the component was issued by the cost processor.

Resource Charging and Reversals

Resource transactions are costed based on the resource cost set up in Manage Resource Costs and published to cost

accounting. For all cost methods, you need to define the resource rates in a cost scenario. You need to first create a cost

scenario for your cost organization and cost book combination. You then define the resource rates in the cost scenario

and publish the cost scenario so that the resource rates are used for accounting.

Product Completions and Returns

All product completions are costed with an estimated cost as provisional completions and their actual cost is calculated

when the work order is closed. The estimated cost used for the product completion is based on the cost method and the

corresponding provisional completions option set in the item cost profile of the product.

Cost Method Provisional Completions Options

Standard Cost

Value at standard cost

Perpetual Average

• Value at last actual cost

• Value at perpetual average cost

• Value at standard cost

• Value at work order close

• Value using accumulated work in process balances

Actual Cost

• Value at last actual cost

• Value at standard cost

• Value at work order close

• Value using accumulated work in process balances

Note:

• Even if you're using the Actual Cost or Perpetual Average cost method, you can create a standard cost for any

item.

• If you set value at work order close, product completions are costed with the actual cost incurred for the work

order when the work order close is processed. The product completion transactions won't be processed until

work order is closed and will remain uncosted.

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Scrap Transactions

The cost of scrap reported against a work order is calculated based on the actual cost incurred till the operation where

the scrap has been reported. The scrap accounting is based on these parameters that are setup in the item cost profile.

• The operation scrap valuation option is used to decide when the scrap transactions are processed.

◦

Value at work order close: Bunches all the scrap transactions together and processes them at work order

close.

◦

Value immediately and at work order close: The scrap transaction is processed as soon as the cost

processor encounters it and then corrects the value at work order close, if necessary. This option leads to

more transactions than the previous option.

◦

Value at cost cutoff date and at work order close: This option is used for long running batches. The scrap

transaction is processed on the cost cutoff date, which is usually the month end, and is corrected at work

order close, if necessary.

• The operation scrap accounting option indicates how to account for the scrap transactions.

◦

Include in inventory: The cost of the scrap is included in the inventory value. In essence, the cost of the

scrap is spread over the good products produced in the work order. The scrap transaction is ignored by

the cost processor and the distribution processor and is marked accordingly.

◦

Expense: The cost of the scrap is expensed out from the work order.

• The Estimated Scrap transaction absorbs the costs due to the additional material used at each operation. An

Estimated Scrap transaction is recorded for each completion of an operation that has operation yield associated

with it. This is supported for all cost methods.

Estimated Scrap Quantity = Operation Completion Quantity * (1 - Operation Yield)/Operation Yield

Accounting entries for Estimated Scrap are listed here.

Accounting Line Type Debit Credit

Work in Process X

Estimated Scrap Absorption X

If an operation completion transaction is reversed, the estimated scrap gets reversed through an Estimated

Scrap Return transaction.

Accounting Line Type Debit Credit

Estimated Scrap Absorption X

Work in Process X

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Work Order Close

When the work order is closed, costing ensures that all the transactions reported for the work order are successfully

costed. After successfully processing all transactions, these events are created in costing.

• If the product is costed using actual cost or perpetual average, product cost adjustment transactions are

created. After the work order is closed, cost processor calculates the actual cost for the product based on all the

material and resource transactions reported for the work order. If there is a difference between this actual cost

and the estimated cost used for the provisional completions, product cost adjustments are created.

• The scrap costs are recalculated and necessary adjustments are created if the costs are different from the ones

that were considered earlier. The actual scrap transaction reported in work orders that have operation yield

associated with it are processed with the Operation Scrap Accounting option of Expense, irrespective of the

value set up in the cost profile.

• If the product is costed using standard cost, then the cost processor compares the components and resources

used for the work order with the work definition used to roll up the product and creates these variances.

Variance Description

Material Rate Variance

The difference in cost when the rate used for the component during cost rollup is different from

the rate used while costing the component issue transaction.

Material Substitution Variance

The difference in cost when an item in the work definition isn't used in the work order or when

an item that isn't in the work definition is used in the work order.

Material Usage Variance

The difference in cost when the quantity used in the work order is different from the quantity

specified in the work definition.

Resource Rate Variance

The difference in cost when the rate used for the resource during cost rollup is different from

the rate used while costing the resource charging transaction.

Resource Substitution Variance

The difference in cost when a resource specified in the work definition isn't used in the work

order or when a resource that isn't in the work definition is used in the work order.

Resource Efficiency Variance

The difference in cost when the actual usage of resource is different from the one that's

specified in the work definition.

Batch Size Variance

The difference in cost for items and resources that have a usage basis of 'fixed' and the quantity

used in the work order.

Job Close Variance

This is used to accommodate any variances that the cost processor can't identify as one of

those defined earlier. Also, if the standard cost of the product is manually setup and not

through the cost rollup process, then the entire cost of components and resources is marked as

job close variance.

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Variance Description

Yield Variance

The difference between the planned output (from the work definition) and the actual output.

Note: If a closed work order is reopened and closed again in manufacturing execution, these transactions will be

recreated to identify if any new resource or material transaction is reported since the last time the work order was

reopened.

Work in Process Cost Adjustments

These are the work order cost adjustments.

• Work in Process Material Standard Cost Adjustment - Captures the change in the standard cost of components

for work orders that are in the Released and Completed status.

• Work in Process Resource Cost Adjustment - Captures the change in cost of resources for work orders that are

in the Released and Completed status.

• Work in Process Product Cost Adjustment - The cost of product completions is estimated based on the

provisional completions options set in the cost profile. After the work order is closed, the cost of the work order

is recalculated and compared against the earlier estimated cost. The difference, if any, is accounted as cost

adjustment. This cost adjustment is applicable only if the products are costed using the Actual or Perpetual

Average cost methods.

• Work in Process Scrap Cost Adjustment - Scrap can be accounted each time it's reported or at the end of

the work order based on the scrap valuation option set in the cost profile. If scrap is accounted as soon as

it's reported, then the actual cost accumulated in the operation till that point of time is considered. Scrap is

recalculated at the work order close and if the value is different, then this cost adjustment is created.

Note: The Review Cost Accounting Distributions page doesn't lists the scrap cost adjustment transaction as a

separate transaction, instead it's logged as a layer against the original scrap transaction.

Related Topics

•

Create a Cost Scenario for Regular Items

•

Operation Yield for Estimating Losses during Work Order Execution

•

Co-Products and By-Products in Discrete Manufacturing

•

Publish Costs

•

Include Supplier Supplied Items in Work Order Costs

Review Work Order Costs

You can review work order costs for process manufacturing and discrete manufacturing on the Review Work Order

Costs page. The accounting transactions for work in process balances are displayed, including costs of inputs, outputs,

scrap, and standard cost variances.

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To review work order costs, perform the following steps.

1. From the Navigator menu, select Cost Accounting.

2. From the Tasks panel, select Review Work Order Costs.

3. Search for the work order records by Cost Organization. You can also filter by Cost Book, Plant, Output Item,

Work Order Number, and Work Order Status. The fields are described in the following table.

Field Description

WIP Balance

The work in process balance is equal to the sum of input and resource costs, minus completions and

scrap costs.

Variance Percentage

The difference between actual and standard cost as a percentage of output cost.

Scrap Percentage

The scrap cost as a percentage of total work order cost. The processing of scrap valuation and scrap

accounting is determined by the Cost Profile settings for your organization. For more information, see

the guide Implementing Manufacturing and Supply Chain Materials Management.

The scrap costs are calculated using the following formula:

Scrap costs = (The total costs accumulated through this operation) multiplied by the (Scrap Quantity

divided by the Batch Quantity)

Amount in Cost Book Currency

The value of input and resources at operation and cost element levels.

Operation Completion Quantity

The total quantity of completions and returns.

Cost Allocation Factor

The product costs for process manufacturing and discrete manufacturing transactions are calculated

based on the cost allocation factor defined in the work definition for the primary product, co-products,

and by-products. All product completions processed before a work order is closed use an estimated

cost based on the Provisional Completion setting defined for the item's Cost Profile. Once a work order

is closed, the cost allocation factor is used to calculate the actual product costs. The cost allocation

factor settings are as follows:

• Fixed. The standard cost of the item is used to cost the provisional completions. You must create

a standard cost for the output item when you set the cost allocation factor to Fixed.

• Percentage. The following formula is used for products that have the cost allocation factor set to

Percentage:

Percentage = (The total costs accumulated through this operation minus Scrap Reported in this

operation) multiplied by the Cost Allocation Factor), divided by the Quantity Produced.

You can view the variance details on the Variance Amounts tab. Information is displayed for the following variance

types:

• Material rate variance

• Yield variance

• Job close variance

• Batch size variance

• Usage variance

• Efficiency variance

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The formula for calculating the yield variance is as follows:

Yield Variance = (The actual reported quantity minus the planned scaled quantity) multiplied by the standard cost of the

product

When there's operation yield, the Estimated Scrap Costs tab on the Review Work Order Costs - View Detailed Balances

page shows the estimated scrap that has been absorbed into work in process. If there's no operation yield, this tab is

called Scrap Absorbed into Inventory. The actual scrap transaction reported in work orders with operation yield are

processed with the Operation Scrap Accounting option of Expense, irrespective of the value set up in the cost profile.

The timing of the scrap processing transaction depends on the Operation Scrap Valuation option chosen in the cost

profile.

The Actual Scrap Costs tab in the Review Work Order Costs - View Detailed Balances shows the actual scrap reported for

the work order.

Related Topics

•

Overview of Work Orders

•

How Cost Organizations, Inventory Organizations, and Cost Books Fit Together

Review Maintenance Work Order Costs

Reviewing maintenance work orders help you track costs incurred for the materials and resources used for maintenance

activities. These activities include preventive maintenance, break down maintenance, and so on, which can be

performed in-house or outside as outsourced jobs.

Prerequisites

The two prerequisites are:

1. Run the processes listed in the table in the same sequence. These can be either scheduled or run on demand.

Process Run By Navigation

Transfer Transactions from Maintenance to

Costing

Manufacturing Supervisor

Tasks panel of Maintenance Management >

Transfer Transactions from Maintenance to

Costing.

Transfer Transactions from Inventory to

Costing

Cost Accountant

Scheduled Processes work area > Schedule

New Process > Transfer Transactions from

Inventory to Costing.

Create Cost Accounting Distributions

Cost Accountant

Cost Accounting Work area > Create Cost

Accounting Distributions.

Create Accounting to create Accounting in

SLA

Cost Accountant

Cost Accounting Work area > Create

Accounting.

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Process Run By Navigation

2. The maintenance work order is in any status other than the unreleased status. That is, the work order is in any

of the following statuses.

◦

Released

◦

On Hold

◦

Canceled

◦

Completed

◦

Closed

Viewing Costs of a Maintenance Work Order

You can review the material and resource costs incurred for a maintenance work order on the Maintenance Work Order

Costs page. You can review the cost details and their distributions, separately.

• Details: View the summary of cost details, that is, the total cost, material costs, and the resource costs.

You can further drill down and view detailed information about the material and resource costs incurred for

each operation and work center in that work order.

• Distributions: View the summary of costs distribution.

Distributions provide accounting information for all the transactions reported against the maintenance work

order that is being analyzed. The summary page shows the processing status of the transactions, that is, Not

Processed, Partially Costed, and so on.

To review maintenance work order costs, do the following:

1. In the Cost Accounting work area, select Review Maintenance Work Order Costs under Cost Processing from

the Tasks panel.

2. Search for the work order records using the search filers: Cost Organization, Cost Book, Plant, Output Item,

Work Order Number, and Work Order Status.

3. Select the required work order from the search results and click View Costs.

Note: You can also navigate to this page by clicking View Costs on the Edit Maintenance Work Orders page.

When you perform maintenance activities for multiple assets that belong to the same item in a single maintenance work

order, the assets that you link to the work order get interfaced to costing and the maintenance expenses are equally

apportioned to all the assets linked to the work order. This ability to group and track expenses incurred on multiple

assets in a single maintenance work order helps to improve the operational efficiencies.

The Multiple Assets column on the Maintenance Work Order Costs page indicates whether one or more assets are

linked to the order. The asset details are shown in the Asset Details section with the total costs incurred for the work

order apportioned across all the assets linked to the work order. Also, the Work Order Costs detail page shows the Asset

field set as Multiple if multiple assets are linked to the work order and you can identify the assets by clicking the link.

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You can track the work in process balances and complete assets to inventory for maintenance work orders with

Complete to Inventory enabled. Transactions such as WIP Material Issue and Resource Charges will debit the Work in

Process accounting line type instead of the Maintenance Expense.

The Completion to Inventory column on the Maintenance Work Order Costs page helps you to differentiate such work

orders. You can also assign multiple assets to such a work order and Multiple Assets is set to Yes for the work order.

Click View Costs to see the details of the Input Costs, Output Costs, and Variance Amounts.

• If you are using the Standard Cost method to cost the Asset Item, any difference between the Input Costs and

Output Costs will create a Rework Variance.

• If you are using Actual, Perpetual Average, or Periodic Average cost methods, the product completion cost will

be based on the total costs incurred for the work order.

Reviewing Distributions of a Maintenance Work Order

Review distributions for all transactions reported against a maintenance work order or for a specific transaction. The

transaction and costing details give you the accounting information of all the resources and materials used for each

item.

To review distribution of maintenance work order costs, on the Maintenance Work Order Costs page:

1. Select the required work order.

2. Click Review Distributions.

Purchase Order Return and Sales Return Flows

The cost processor uses FIFO logic to cost purchase order (PO) returns. For sales returns that reference an RMA, the

cost processor uses the original sales order cost.

For sales returns that don't reference an RMA, it uses the Unreferenced RMA Receipt Cost option set in the cost profile

associated with the item cost profile.

Purchase Order Returns

For PO returns, the cost processor uses the FIFO receipt layer cost to deplete inventory, while it offsets receiving

inspection at the acquisition PO price. The difference between the PO price and the FIFO receipt layer cost is booked as

cost variance.

This table illustrates several receipts and issues of an item in an inventory organization, followed by a PO return for the

same item:

Reference Transaction Date Transaction Type Quantity Unit Cost Receipt Layer

Reference

Receipt #1

01-Jan-2011

PO Receipt

100

$120

Not applicable

Receipt #2

02-Jan-2011

PO Receipt

$100

Not applicable

Receipt #3 03-Jan-2011 Miscellaneous Receipt 20 $105 Not applicable

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Reference Transaction Date Transaction Type Quantity Unit Cost Receipt Layer

Reference

Issue #1

04-Jan-2011

Miscellaneous Issue

-40

$120

Receipt #1

Issue #2

05-Jan-2011

Miscellaneous Issue

-60

$120

Receipt #1

Issue #2

05-Jan-2011

Miscellaneous Issue

-15

$100

Receipt #2

Receipt #1

06-Jan-2011

PO Return

-10

$100

Receipt #2

The cost distribution processor creates the following accounting entries for the PO return:

• Dr Receiving Inspection $100*10 / Cr Inventory $100*10

• Dr Receiving Inspection $20*10 / Cr Cost Variance $20*10

Sales Returns

A sales return is costed using the Referenced RMA or Unreferenced RMA option defined in the cost profile associated

with the item cost profile.

Any sales return classified as unreferenced in Order Management is costed using the Unreferenced RMA Cost option set

in the cost profile. For sales returns classified as referenced in Order Management, they're costed as listed in this table.

Here, CO1 and CO2 are cost organizations, IO1 and IO2 are inventory organizations, and BU1 and BU2 are business units.

Sales Order Type Ship From Return To RMA Cost Option

Simple Sales Order

CO1 - IO1 - BU1

Referenced

Simple Sales Order

CO1 - IO1 - BU1

CO1 - IO2 - BU1

Referenced

Simple Sales Order

CO1 - IO1 - BU1

CO2 - IO2 - BU1

Unreferenced

Drop Ship

CO1 - IO1 - BU1

Referenced

Drop Ship

CO1 - IO1 - BU1

CO1 - IO2 - BU1

Referenced

Drop Ship

CO1 - IO1 - BU1

CO2 - IO2 - BU1

Unreferenced

Drop Ship

CO1 - IO1 - BU1

CO2 - IO2 - BU2

Unreferenced

Note: In the case of customer drop shipments, the ship from is where the logical shipment is processed.

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When you define the cost profile for an item, you can select these options for costing a sales return:

• Referenced RMA: Sales returns are costed using the original sales order issue cost.

• Un-referenced RMA: Sales returns are costed based on the value set for the Unreferenced RMA Receipt Cost

option set in the cost profile associated with the item cost profile.

◦

Existing Item Cost: The RMA receipt is costed using the existing item cost. In the case where a current

cost is unavailable, the item is costed with zero cost, if you've setup a default cost element.

◦

Price on RMA Order: The RMA receipt is costed using the price entered on the RMA order excluding taxes

and recurring charges.

Let's consider an example to understand how the sales returns are costed based on these settings. This table illustrates

several receipts and issues of an item in an inventory organization.

Reference Transaction

Date

Transaction

Type

Quantity Unit Cost Receipt Layer

Reference

Average Cost Standard Cost

Receipt #1

01-Jan-2011

PO Receipt

100

$120.00

Not applicable

$120.00

$110.00

Receipt #2

02-Jan-2011

PO Receipt

$100.00

Not applicable

$110.00

Issue #1

13-Jan-2011

Sales Order

Issue

-40

$120

Receipt #1

$110.00

Receipt #3

05-Feb-2011

Miscellaneous

Receipt

$140.00

Not applicable

$113.00

$115.00

Issue #2

15-Feb-2011

Sales Order

Issue

-60

$100.00

Receipt #2

$113.00

$115.00

Issue #3

05-Mar-2011

Sales Order

Issue

-15

$140

Receipt #3

$113.00

$120.00

A sales return for the item is initiated and the price on the RMA order is listed in this table.

Price Component Per Unit Amount

Basic onetime price

$90.00

Recurring charges

$15.00

Taxes

$5.00

Total

$110.00

Based on the settings, let's see how the item is costed on RMA order for different cost methods.

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Reference Transaction Date Transaction Type Quantity Unit Cost Actual

Costing

Unit Cost Average

Costing

Unit Cost

Standard Costing

Referenced RMA of

Issue#2

20-Feb-2011

RMA Receipt

$100.00

$113.00

$115.00

Unreferenced RMA

Cost: Price on RMA

Order

10-Mar-2011

RMA Receipt

$90.00

Unreferenced RMA

Cost: Existing Item

Cost

13-May-2011

RMA Receipt

$140.00

$113.00

$120.00

Note: When the Unreferenced RMA Cost option is set to Existing Item Cost, for the Actual cost method, the item

is costed based in the setting for the Receipt Without Cost option in the cost profile. In our example here, we have

considered that this option is set to last receipt layer.

Related Topics

•

Actual Cost Method

•

Set Up a Cost Profile

Cost Accounting for Drop Shipments

Global drop shipment is an order fulfillment strategy where the seller does not keep products in the inventory. The seller

relies on suppliers or contract manufacturers to build, store, and ship orders to the customers.

When a customer places an order for a drop shipped product, the seller issues a purchase order for the item. The seller

also provides instructions to the suppliers to ship directly to the customer.

The supply chain financial orchestration process routes the orchestration flow of drop shipments through one or more

business units within the corporation. These business units can belong to the same legal entity or may occur across

legal entities.

The financial flow starts when the supplier sends the advanced shipment notice, or when the supplier matches the

invoice with the purchase order for the drop shipment. The flow creates cost accounting distributions and intercompany

invoices for the ownership transfers that occur between parties, including supplier, one or more organizations, and the

customer. Oracle Supply Chain Financial Orchestration sends a request to the receiving system to create a drop ship

receipt on the supplier invoice that references the purchase order. Oracle Receiving creates a logical receipt, and then

notifies Oracle Order Management to start customer billing. This automation helps to reduce billing cycle time.

Cost Accounting Distributions for Drop Shipments

You can review the cost accounting distributions for drop shipments on the Review Cost Accounting Distributions page.

The following accounting line types are created for single busnisess unit drop shipment events.

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Event Transaction Subledger Accounting Line Dr/Cr

Invoice Validation

Supplier Invoice

Accounts Payable

Accrual

Debit

Invoice Validation

Supplier Invoice

Accounts Payable

Liability

Credit

Drop Ship Delivery

Putaway

Cost Accounting

Drop Ship Inventory

Debit

Drop Ship Delivery

Putaway

Cost Accounting

Receiving Inspection

Credit

Trade Sale Issue

Logical Sale Issue

Cost Accounting

Deferred Cost of Goods

Sold

Debit

Trade Sale Issue

Logical Sale Issue

Cost Accounting

Drop Ship Inventory

Credit

For the corresponding receipt accounting distribution, see Receipt Accounting for Drop Shipments.

Cost Accounting Distributions for Drop Shipment Invoice Cancellation or Correction

For customer drop ship with payables invoice as the ownership change event, sometimes you may need to cancel the

supplier invoice. For example, when an incorrect purchase order is matched to the invoice or when the supplier has sent

an incorrect invoice. When the invoice is cancelled, the Oracle Supply Chain Financial Orchestration sends trade sales

return as a reversal to the trade sale issue created on invoice matching.

Oracle Cost Management creates cost accounting distributions for receipt corrections and trade sales returns. This

reverses the accounting recorded on the invoice approval and ensuring that no balance is accumulated in the receiving

inspection account. The automatic reconciliation of the receiving inspection account avoids manual adjustments and

provides accurate accounting for the drop ship correction flow, when ownership change event is invoice.

You can review the cost accounting distributions for invoice cancellation or correction on the Review Cost Accounting

Distributions page. The following accounting line types are created:

Event Transaction Subledger Accounting Line Dr/Cr

Invoice Cancellation

Supplier Invoice

Accounts Payable

Liability

Debit

Invoice Cancellation

Supplier Invoice

Accounts Payable

Accrual

Credit

Drop Ship Receipt

Adjustment

Putaway Correction

Cost Accounting

Receiving Inspection

Debit

Drop Ship Receipt

Adjustment

Putaway Correction

Cost Accounting

Drop Ship Inventory

Credit

Trade Sale Return

Logical Sale Issue Reversal

Cost Accounting

Drop Ship Inventory

Debit

Trade Sale Return

Logical Sale Issue Reversal

Cost Accounting

Deferred Cost of Goods

Sold

Credit

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Event Transaction Subledger Accounting Line Dr/Cr

For the corresponding receipt accounting distribution, see Receipt Accounting for Drop Shipments.

Note:

• Drop ship correction events are processed for single BU customer drop ship flow.

• If AP invoice is cancelled avoid creation of AR invoice and cost of goods recognition (COGS) for the initial

events. The correction events on cancellation won't reverse the cost of goods till AR invoice revenue

recognition is reversed and order line is reopened. The balance in COGS account can be manually adjusted.

• Review the accounting setup for mapping sets and account rules for the Drop Ship Delivery Adjustment,

Trade Sales Return events to ensure it reverses the accounts booked on Drop Ship Delivery and Trade Sale

Issue.

Cost Management for Inclusive Taxes

To comply with country-specific regulatory requirements, you can capture item prices and all calculated exclusive

and inclusive taxes in your purchases, with receipt costs adjusted to account for amounts of inclusive taxes that were

incorporated in the item purchase price.

The amounts of inclusive taxes are booked to a tax liability or recovery account. Procurement flows for both delivery and

non-delivery inclusive taxes are supported, as follows.

• Tax Point Basis Set to Receipt. In the case of delivery based taxes, where the Tax Point Basis is set to Receipt,

the tax call is made during the receipt transaction, and inclusive taxes are calculated. Based on the recoverable

percentage defined, inclusive tax can have recoverable and nonrecoverable amounts. On the purchase order

line, the total amount calculation incorporates the receipt quantity. During invoicing, the receipt values are

copied to the invoice, therefore cost variance is not applicable.

• Tax Point Basis Set to Invoice. In the case of non-delivery based taxes, where the Tax Point Basis is set to

Invoice, recoverable and nonrecoverable inclusive taxes on the purchase order are copied during the receipt

transaction. Any difference between the amounts on the receipt and the invoice are considered as variances,

and are applied to the item cost.

Cost Management supports the following cost adjustments and accounting events for inclusive taxes:

Cost Adjustments and Accounting

Events

Description

Adjust Receipt and Inventory Cost for

Inclusive Taxes on Purchase Orders.

Segregate and account for recoverable and nonrecoverable inclusive tax. When the item price on a

purchase order line includes taxes, Receipt Accounting separates the item price into basic item price,

inclusive recoverable tax, and inclusive nonrecoverable tax. This lets you account for nonrecoverable

tax in the item cost when the price on the purchase order line contains inclusive tax.

Adjust Receipt and Inventory Cost for

Inclusive Taxes on Global Procurement

Purchase Orders.

Segregate and account for recoverable and nonrecoverable inclusive tax. When the item price on

a global procurement purchase order line includes taxes, Receipt Accounting separates the item

price into basic item price, inclusive recoverable tax, and inclusive nonrecoverable tax. Inclusive tax

adjustments are now performed on logical transactions in the supplier-facing inventory organization

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Cost Adjustments and Accounting

Events

Description

when you physically receive the items in an inventory organization that is associated with a different

business unit.

Adjust Receipt and Inventory Cost for

Inclusive Taxes on Consignment Purchase

Orders

Segregate and account for recoverable and nonrecoverable inclusive tax. When the item price on a

consignment purchase order line includes taxes, Receipt Accounting separates the item price into

basic item price, inclusive recoverable tax, and inclusive nonrecoverable tax. This lets you account

for nonrecoverable tax in the consigned item cost when the price on a purchase order line contains

inclusive tax.

Internal Material Transfers