Intercompany Accounting and Transfer Pricing in Oracle EBS 11i.

10

Rixin Zhu Manager, Cost Management Systems Oracle USA, Inc. March, 2006

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.

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

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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.

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

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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.

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/cgibin/cr/getfile.cgi?p_attid=72450.1:284025)

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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.

Internal Order Transfer

Sending Organization Inventory Cost: $102 Transfer Price: $120 Receiving Organization Inventory Cost: $108

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.
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.

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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

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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.

Transaction Flows
Shared Procurement
T I P S

Ship To OU

Procuring OU

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
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.

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Transaction Flows
Internal Drop Shipment to Customer
C O I F

Order-Booking OU

Ship From OU

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 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.
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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.

Transaction Flows
External 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.
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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.

Logical Transactions
Procurement Flow
RECEIVE T LOGICAL RECEIVE I LOGICAL RECEIVE 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>

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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.

Logical Transactions
Shipment 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

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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.

Logical Transactions
External Drop Shipment Procurement + Shipment flow
RECEIVE C O I F/T DELIVER LOGICAL RECEIVE I LOGICAL RECEIVE P S

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
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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.

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)

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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.

Parent Transactions
Forward Procurement Flows
P S

Return
P S

Logical PO receipt

Logical RTV

Shipment Flows

[physical] Sales Order Issue

[physical] RMA receipt

Shipment Flow External Drop Ship

Logical PO Receipt (created during direct deliver)

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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.

Accounting Internal Order

Option 1: Price As Incoming Cost
Sending Organization O1 Inventory Cost: $102
Transfer Price: $120 FOB Shipment
In-transit (O2) 108 108 108 INV Valuation (O2) Accrual (O2) 120 PPV (O2) 12

Receiving Organization O2 Standard Cost: $108

Event 1. Shipment 2. Receipt

INV Valuation (O1) 102

COGS (O1) 102

I/C Receivable (O1) 3. I/C AR 4. I/C AP 120

I/C Revenue (O1) 120

Accrual (O2)

I/C Payable (O2)

120

120

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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.

Accounting Internal Order

Option 2: Price Not As Incoming Cost
Sending Organization O1 Inventory Cost: $102
Transfer Price: $120 FOB Shipment
INV Valuation (O2) PPV (O2) 6 108 108 Accrual (O2) 120 Profit In Inventory (O2) 18

Receiving Organization O2 Standard Cost: $108

Event 1. Shipment 2. Receipt

INV Valuation (O1) 102

COGS (O1) 102

In-transit (O2) 108

I/C I/C Revenue Receivable (O1) (O1) 3. I/C AR 4. I/C AP 120 120

Accrual (O2)

I/C Payable (O2)

120

120

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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.

Accounting
Procurement Flow P
60 50 40 30 20 10

I2

F/T

Order-Booking OU

Ship From/To OU

Procuring OU

Event 1. RCV Receive 2. INV Log PO Rcpt 3. INV Log I/C Ship

Accrual 10

Clearing 10 10

Inv Valuation

I/C COGS

10 10 10

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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.

Accounting
Procurement Flow I
60 50 40 30 20 10

I2

F/T

Order-Booking OU

Ship From/To OU

Procuring OU

Event 1. RCV Receive 2. INV Log I/C Proc Rcpt 3. INV Log I/C Ship

I/C Accrual 20

Clearing 20 20

Inv Valuation

I/C COGS

20 20 20

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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.

Accounting
Shipment Flow F/T
60 50 40 30 20 10

I2

F/T

Order-Booking OU

Ship From/To OU

Procuring OU

Event 1. RCV Receive 2. INV Log PO Rcpt 3. INV Log I/C Ship

I/C Accrual 30

Clearing 30 30

Inv Valuation

I/C COGS

30 30 30

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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.

Accounting
Shipment Flow I2
60 50 40 30 20 10

I2

F/T

Order-Booking OU

Ship From/To OU

Procuring OU

Event 1. INV Log I/C Ship Rcpt 2. INV Log I/C Ship

I/C Accrual 40

Inv Valuation 40 40

I/C COGS

40

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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.

Accounting
Shipment Flow O
60 50 40 30 20 10

F/T

Order-Booking OU

Ship From/To OU

Procuring OU

Event 1. INV Log I/C Ship Rcpt 2. INV Log SO Issue

I/C Accrual 50

Inv Valuation 50 50

I/C COGS

50

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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.

Setups
Transaction Flow

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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.

Setups
Intercompany Relations

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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.

Setups
Transfer Price

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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.

Forms
Material Transactions Form

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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.

Forms
Material Distributions Form

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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.

Forms
Material Distributions Form (2)

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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 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.