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Intercompany Accounting and Transfer Pricing in Oracle EBS 11i.10 Rixin Zhu Manager, Cost Management Systems Oracle USA,

Intercompany Accounting and Transfer Pricing in Oracle EBS 11i.10 Rixin Zhu Manager, Cost Management Systems Oracle USA, Inc. March, 2006. Agenda. Overview Supported Flows and Features Logical Transactions Parent Transactions Accounting Setups Material Transactions and Distributions Forms.

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Intercompany Accounting and Transfer Pricing in Oracle EBS 11i.10 Rixin Zhu Manager, Cost Management Systems Oracle USA,

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  1. Intercompany Accounting and Transfer Pricing in Oracle EBS 11i.10Rixin ZhuManager, Cost Management SystemsOracle USA, Inc.March, 2006

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

  3. 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

  4. 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)

  5. Internal Order Transfer Transfer Price: $120 Receiving Organization Inventory Cost: $108 Sending Organization Inventory Cost: $102 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. Limitations • No support of return and correction. • Only support transfers across operating units. • Only in-transit transfers are supported.

  6. 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

  7. Transaction FlowsShared Procurement T I P S 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 Ship To OU Procuring OU

  8. Transaction FlowsInternal Drop Shipment to Customer C O I F 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 Order-Booking OU Ship From OU 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.

  9. Transaction FlowsExternal Drop Shipment C O I F/T I P S Order-Booking OU Ship From/To OU Procuring OU 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.

  10. Logical TransactionsProcurement Flow RECEIVE LOGICAL RECEIVE LOGICAL RECEIVE T I P S Ship To OU Procuring OU 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 logical intercompany sales issue • T <none>

  11. Logical TransactionsShipment Flow C O I F Order-Booking OU Ship From OU Functional Event: Perform Ship Confirm out of warehouse F The following transactions are created in INV as a result • F [physical] sales order issue logical intercompany sales issue • I logical intercompany shipment receipt logical intercompany sales issue • O logical intercompany shipment receipt logical sales order issue

  12. Logical TransactionsExternal Drop ShipmentProcurement + Shipment flow RECEIVE LOGICAL RECEIVE LOGICAL RECEIVE C O I F/T I P S DELIVER Order-Booking OU Ship From/To OU Procuring OU 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

  13. 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)

  14. Parent Transactions Forward Return S S P P Procurement Flows Logical RTV Logical PO receipt C C P P Shipment Flows [physical] RMA receipt [physical] Sales Order Issue Shipment Flow – External Drop Ship C P … Logical PO Receipt (created during direct deliver)

  15. 1. Shipment 102 102 108 120 12 108 108 2. Receipt 3. I/C AR 120 120 4. I/C AP 120 120 Accounting – Internal OrderOption 1: Price As Incoming Cost Transfer Price: $120 Receiving Organization O2 Standard Cost: $108 Sending Organization O1 Inventory Cost: $102 FOB Shipment INV Valuation (O1) COGS (O1) In-transit (O2) INV Valuation (O2) Accrual (O2) PPV (O2) Event I/C Receivable (O1) I/C Revenue (O1) Accrual (O2) I/C Payable (O2)

  16. 1. Shipment 102 102 108 6 120 18 108 108 2. Receipt 3. I/C AR 120 120 4. I/C AP 120 120 Accounting – Internal Order Option 2: Price Not As Incoming Cost Transfer Price: $120 Receiving Organization O2 Standard Cost: $108 Sending Organization O1 Inventory Cost: $102 FOB Shipment Profit In Inventory (O2) INV Valuation (O1) COGS (O1) In-transit (O2) INV Valuation (O2) PPV (O2) Accrual (O2) Event I/C Receivable (O1) I/C Revenue (O1) Accrual (O2) I/C Payable (O2)

  17. AccountingProcurement Flow – P 60 50 40 30 20 10 C O I2 F/T I P S Order-Booking OU Ship From/To OU Procuring OU Inv Valuation Event Accrual Clearing I/C COGS 1. RCV Receive 10 10 2. INV Log PO Rcpt 10 10 3. INV Log I/C Ship 10 10

  18. AccountingProcurement Flow – I 60 50 40 30 20 10 C O I2 F/T I P S Order-Booking OU Ship From/To OU Procuring OU Inv Valuation Event I/C Accrual Clearing I/C COGS 1. RCV Receive 20 20 2. INV Log I/C Proc Rcpt 20 20 3. INV Log I/C Ship 20 20

  19. AccountingShipment Flow – F/T 60 50 40 30 20 10 C O I2 F/T I P S Order-Booking OU Ship From/To OU Procuring OU Inv Valuation Event I/C Accrual Clearing I/C COGS 1. RCV Receive 30 30 2. INV Log PO Rcpt 30 30 3. INV Log I/C Ship 30 30

  20. AccountingShipment Flow – I2 60 50 40 30 20 10 C O I2 F/T I P S Order-Booking OU Ship From/To OU Procuring OU Inv Valuation Event I/C Accrual I/C COGS 1. INV Log I/C Ship Rcpt 40 40 2. INV Log I/C Ship 40 40

  21. AccountingShipment Flow – O 60 50 40 30 20 10 C O I F/T I P S Order-Booking OU Ship From/To OU Procuring OU Inv Valuation Event I/C Accrual I/C COGS 1. INV Log I/C Ship Rcpt 50 50 2. INV Log SO Issue 50 50

  22. SetupsTransaction Flow

  23. SetupsIntercompany Relations

  24. SetupsTransfer Price

  25. FormsMaterial Transactions Form

  26. FormsMaterial Distributions Form

  27. FormsMaterial Distributions Form (2)

  28. Thank You.

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