This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into.

This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision.

Intercompany Accounting and Transfer Pricing in Oracle EBS 11i.10

Rixin ZhuManager, Cost Management Systems

Oracle USA, Inc.

March, 2006

1-2This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision.

Agenda

• Overview• Supported Flows and Features• Logical Transactions• Parent Transactions• Accounting• Setups• Material Transactions and Distributions Forms


Overview

• Support of Internal Order Transfer Available in 11i.9– Transfer Pricing + Intercompany Invoicing

• Enhanced Drop Shipment and Shared Procurement Available in 11i.10 – Internal Drop Shipment to Customer– Shared Procurement– External Drop Shipment

• Cross-Product Effort:– Inventory– Purchasing (Receiving)– Order Management– Cost Management– AR/AP


White Papers

• Transfer Price Accounting in Oracle SCM, Feb 2006 (Metalink Note: 360106.1)

• Overview of Intercompany Invoicing, July 2005 (Metalink Note: 336129.1)

• Intercompany Invoicing and Advance Pricing Integration, May 2002 (Metalink URL: https://metalink.oracle.com/cgi-bin/cr/getfile.cgi?p_attid=72450.1:284025)


Internal Order Transfer

Features

• Account for the shipment as an (external) Sales Order and account for the receipt as a Purchase Order.

• Deriving the Cost of Goods Sold Account for the shipping organization as per the standard Oracle functionality.

• Customers can choose whether to use the Transfer Price as the incoming cost to the receiving organization.

• Internal profit margin is supported in Margin Analysis Report.

Sending OrganizationInventory Cost: $102

Receiving OrganizationInventory Cost: $108

Transfer Price: $120

Limitations

• No support of return and correction.

• Only support transfers across operating units.

• Only in-transit transfers are supported.


Enhanced Drop Shipment and Shared Procurement

• Separate financial transaction flows from physical flows

• Support infinite number of intermediate operating units

• Allow intermediate operating units to record COGS and Revenue on the logical internal sale of goods

• Support documents for the transaction flow (intercompany invoices)

• Support forward as well as return flows

• Costing features– Perform all of the Inventory accounting distributions for a

transaction flow in a single commit cycle, and display them together on the form

– Costs and Quantities in intermediate organizations are not impacted


Transaction FlowsShared Procurement

Shared Procurement

• Purchase order is created in operating unit P and received in a warehouse in operating unit T, with one or more intermediate operating units

• Execution of the receipt (into RI) in warehouse T kicks off the creation of receiving accounting events and logical inventory transactions in I and P.

• Accounting takes place in all operating units to record the obligations and intercompany COGS / revenue.

• Item costs and quantities in the procuring and intermediate operating units are not impacted

Procuring OU

SP

Ship To OU

T I


Transaction FlowsInternal Drop Shipment to Customer

Internal Drop Shipment to Customer

• Order is booked in operating unit O and shipped from a warehouse in operating unit F, with one or more intermediate operating units (source type: internal)

• Execution of the ship confirm from warehouse F kicks off the creation of logical inventory transactions in I and O

• Accounting takes place in all operating units to record the revenue and COGS for the transaction

Ship From OU

C I

Order-Booking OU

FO

Limitation

• Internal drop shipment to internal organization is not supported. For example, if C is an internal organization and it is an internal sales order.


Transaction FlowsExternal Drop Shipment

External Drop Shipment

• Order is booked in operating unit O and specifies a ship-from warehouse in operating unit F/T, with one or more intermediate operating units (source type: external).

• Run requisition import in F/T to create a requisition for the item.

• Run Autocreate process in F/T to create a purchase order. Be sure to specify operating unit P as the procuring OU, specify the supplier S, and the warehouse in F/T as the ship-to location for the PO. Approve the PO in operating unit P.

• Execute the direct delivery receipt in warehouse F/T to kick off the creation of RCV accounting events and INV logical transactions.

Ship From/To OU

C I

Order-Booking OU

F/TO

Procuring OU

SPI


Procuring OU

SP

Ship To OU

T I

Logical TransactionsProcurement Flow

Functional Event: Perform Receive (into RI) in warehouse T

The following logical transactions are created in INV as a result

• P logical PO receipt

logical intercompany sales issue

• I logical intercompany procurement receipt


• T <none>

RECEIVE LOGICAL RECEIVE LOGICAL RECEIVE


Logical TransactionsShipment Flow

Functional Event: Perform Ship Confirm out of warehouse F

The following transactions are created in INV as a result

• F [physical] sales order issue


• I logical intercompany shipment receipt


• O logical intercompany shipment receipt

logical sales order issue

Ship From OU

C I

Order-Booking OU

FO


Ship From/To OU

C I

Order-Booking OU

F/TO

Procuring OU

SPI

Logical TransactionsExternal Drop Shipment

Procurement + Shipment flow

Functional Event: Perform DIRECT DELIVERY receipt of item into warehouse F/T

The following logical (no physical) transactions are created in INV as a result• P logical PO receipt

logical intercompany sales issue• I logical intercompany PROCUREMENT receipt

logical intercompany sales issue• F/T logical PO receipt – replaces delivery to inventory

logical intercompany sales issue• I logical intercompany SHIPMENT receipt

logical intercompany sales issue• O logical intercompany SHIPMENT receipt

logical sales order issue

DELIVER

RECEIVE LOGICAL RECEIVE LOGICAL RECEIVE


Parent Transactions

• Accounting for all related logical events created at once

• Grouping is achieved by linking all logical events together via the parent transaction ID – new column in mtl_material_transactions

• Parent transaction is always in the FROM operating unit of the flow– Physical transaction if one exists (shipment flows): sales order issue and

RMA receipt– Logical transaction otherwise: Logical PO receipt and Logical RTV in

procurement flows. Logical PO receipt during deliver in shipment flows of external drop shipments

• All accounting for a single flow is displayed together on the Material Distributions form (grouped together by parent transaction ID)


Parent Transactions

Logical PO receipt

Procurement Flows

Forward

Logical RTV

Return

[physical] Sales Order Issue

Shipment Flows

[physical] RMA receipt

S S

C C

Shipment Flow –

External Drop Ship Logical PO Receipt (created during direct deliver)

C …

P P

P P

P


Accounting – Internal OrderOption 1: Price As Incoming Cost

Event

INV Valuation

(O1)

Sending Organization O1Inventory Cost: $102

Receiving Organization O2Standard Cost: $108


FOB Shipment

COGS

(O1)

1. Shipment 102 102

In-transit

(O2)

Accrual

(O2)

PPV

(O2)

108 120 12

INV Valuation

(O2)

2. Receipt 108 108

I/C Receivable

(O1)

I/C Revenue

(O1)

3. I/C AR 120 120

I/C Payable

(O2)

4. I/C AP 120 120

Accrual

(O2)


Accounting – Internal Order Option 2: Price Not As Incoming Cost

Event

INV Valuation

(O1)

Sending Organization O1Inventory Cost: $102

Receiving Organization O2Standard Cost: $108


FOB Shipment

COGS

(O1)

1. Shipment 102 102

In-transit

(O2)

Accrual

(O2)

PPV

(O2)

INV Valuation

(O2)

2. Receipt 108 108

I/C Receivable

(O1)

I/C Revenue

(O1)

3. I/C AR 120 120

I/C Payable

(O2)

4. I/C AP 120 120

Accrual

(O2)

Profit In Inventory

(O2)

108 1206 18


AccountingProcurement Flow – P

Ship From/To OU

C I2

Order-Booking OU

F/TO

Procuring OU

SPI

1020

Event

1. RCV Receive

2. INV Log PO Rcpt

3. INV Log I/C Ship

Accrual ClearingInv

Valuation I/C COGS

10 10

10 10

10 10

30405060


Ship From/To OU

C I2

Order-Booking OU

F/TO

Procuring OU

SPI

AccountingProcurement Flow – I

Event

1. RCV Receive

2. INV Log I/C Proc Rcpt

3. INV Log I/C Ship

I/C Accrual ClearingInv

Valuation I/C COGS

20 20

20 20

20 20

102030405060


Ship From/To OU

C I2

Order-Booking OU

F/TO

Procuring OU

SPI

AccountingShipment Flow – F/T

Event

1. RCV Receive

2. INV Log PO Rcpt

3. INV Log I/C Ship

ClearingInv

Valuation I/C COGS

30 30

30 30

30 30

102030405060

I/C Accrual


Ship From/To OU

C I2

Order-Booking OU

F/TO

Procuring OU

SPI

AccountingShipment Flow – I2

102030405060

Event

1. INV Log I/C Ship Rcpt

2. INV Log I/C Ship

Inv Valuation I/C COGS

40 40

40 40

I/C Accrual


Ship From/To OU

C I

Order-Booking OU

F/TO

Procuring OU

SPI

AccountingShipment Flow – O

102030405060

Event

1. INV Log I/C Ship Rcpt

2. INV Log SO Issue

Inv Valuation I/C COGS

50 50

50 50

I/C Accrual


SetupsTransaction Flow


SetupsIntercompany Relations


SetupsTransfer Price


FormsMaterial Transactions Form


FormsMaterial Distributions Form


FormsMaterial Distributions Form (2)

This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision.

Thank You.

This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into.

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