Managing Interunit Transfer Pricing and Additional Costs

This chapter provides overviews of interunit transfers and the types of interunit transfers, lists a prerequisite, lists common elements, and discusses how to:

• Use transfer pricing definitions.

• Populate the Transfer Price table.

• Calculate default actual cost and current purchase cost.

• View transfer pricing data for an item.

• Review interunit accounting examples.

Understanding Interunit Transfers

A transfer of stock between two inventory business units is known as an interunit transfer. To create an interunit transfer:

1. Add a material stock request (MSR) with the request type of Interunit Transfer. The MSR includes a destination (receiving) inventory business unit.

2. Complete the demand fulfillment steps within the source (sending) Inventory business unit to ship the stock.

3. Run the Deplete On Hand Quantity (Depletion) process in the source unit. In addition to other functions, this process calculates the transfer price (transfer cost) of the stock and any additional transfer costs.

4. When the items are received in the destination business unit, run the Load Staged Items process (INPSSTGE).

5. Run the Cost Accounting Creation process page to create the accounting entries for the interunit transfer. These accounting entries record the changes to the inventory stock accounts, intransit accounts, and record any additional transfer expenses or gain/loss on transfers.

While using this chapter, please note the following points:

• The terms transfer price and transfer cost both refer to the same value.

• The setup of an interunit transfer can be divided into several parts. In this chapter, we discuss the transfer pricing and accounting entries related to a transfer. Before defining your transfer pricing structure, you must set up the overall interunit transfer structure. The PeopleSoft Enterprise Inventory PeopleBook provides detailed instructions for setting up the system for interunit transfers.

  See Transferring Stock Between Business Units.

• PeopleSoft Cost Management does not support interunit pricing for non-cost items.

• This chapter discusses transferring stock between two Inventory business units. For information about shipping stock to internal departments or on behalf of another GL unit, see the PeopleSoft Enterprise Cost Management PeopleBook, Setting Up the Accounting Rules Structure chapter. Read the sections "Designing Shipment On Behalf Of" and "Creating and Reversing Interunit Expensed Issues."

  See Designing Shipment On Behalf Of.

  See Creating and Reversing Interunit Expensed Issues.

Applying Transfer Prices to a Material Stock Request

The Deplete On Hand Qty (Depletion) process uses a default hierarchy to determine the transfer price for each line of a interunit material stock request. In the default hierarchy, the more specific information overrides the more general information. Transfer prices can be derived from:

1. Override values entered on the material stock request line. If you selected the Allow Price/Markup Overrides check box on the Setup Fulfillment page of the source business unit, then you can change the transfer price on the line.

2. The Transfer Pricing table. This table includes the material portion of the transfer price and the additional transfer costs. The Deplete On Hand Qty process looks for a transfer price specified for the item ID. This transfer price can be broken up into multiple cost elements. The setup and use of the Transfer Pricing table is optional.

3. The Transfer Pricing Definition component. If the Transfer Pricing table contains no entry for the specific item ID, then the Deplete On Hand Qty process calculates a transfer price using the data in the Transfer Pricing Definition component.

4. A value based on the cost of the item. If the transfer price cannot be derived from the transfer pricing definition, then the Deplete On Hand Qty process uses a value based on the item cost.

Details of the Transfer Price Default Hierarchy

The Deplete On Hand Qty process uses the following steps to determine the material transfer price and additional transfer costs included in an item's transfer price:

1. Use the override values (transfer price, markup percentage, or zero cost) entered on the MSR line using:

   • The Create/Update Stock Request component.

   • The Express Issue component.

   • The Maintain Stock Requests component.

   • The Inventory_Create_Stock_Request, Inventory_Front_End_Shipping, or Inventory_Shipping EIPs.

2. Find a transfer price for the specific item ID based on the source and destination business unit pair in the Transfer Price table. If no row contains this data, then:

3. Find a transfer price for the specific item ID in the Transfer Price table for which the source business unit is specified and the destination business unit is blank. If no row contains this data, then:

4. Use the Transfer Pricing Definition component to calculate the material portion of the transfer price using information defined for the specific source and destination unit pair.

   1. Search for item specific information at the detail level. If no item ID information is found, then:

   2. Search for item group information at the detail level. If no item group information is found and the Price Overrides Only check box has not been selected, then:

   3. Search for header level information (this step is skipped if the Price Overrides Only check box has been selected). If no Transfer Pricing Definition component is defined for the specific source and destination unit, then:

5. Use the Transfer Pricing Definition component to calculate the material portion of the transfer price using information defined for the specific source unit and a blank destination unit.

   1. Search for item specific information at the detail level. If no item ID information is found, then:

   2. Search for item group information at the detail level. If no item group information is found and the Price Overrides Only check box has not been selected, then:

   3. Search for header level information (this step is skipped if the Price Overrides Only check box has been selected). If no Transfer Pricing Definition component is defined for the specific source unit and a blank destination unit, then:

6. Use a value based on the item's cost as the transfer price. This value would record just a material portion of the transfer price with no additional transfer costs.

   • For standard cost items, the transfer price is the current frozen standard cost located in the CM_PRODCOST table.

   • For actual cost items, the transfer price is the value in the Default Actual Cost field (DFLT_ACTUAL_COST) in the Define Business Unit Item - General page.

   • For perpetual weighted average items, the transfer price is the current perpetual average cost located in the CM_PERPAVG_COST table. If there is no value in CM_PERPAVG_COST table, then the transfer price is taken from the AVERAGE_COST field in the BU_ITEMS_INV table.

   • For items using Periodic Weighted Average or Retroactive Weighted Average, the transfer price is the value in the Average Purchase Price field (AVERAGE_COST) in the Define Business Unit Item - General page.

Note. Rounding differences could create a small gain or loss when using the current perpetual average cost (located in the CM_PERPAVG_COST table) as the transfer price.

See Also

Depleting Inventory Balances

Using Transfer Pricing Definitions

Populating the Transfer Price Table

Determining the Calculation Method for Transfer Prices

The following costs can be included in an interunit transfer price:

• Material transfer prices

• Landed costs

• Additional transfer costs

Determining the Material Transfer Price

The transfer price includes the material cost of the transferred item determined by the transfer price default hierarchy. Create a cost element with the cost category of Material to be used for the transfer price. The item's default material cost element is stored in the Default Cost Element field in the Define Business Unit Item - General page. Additional material cost elements can be established on the transfer pricing definition or in your PeopleSoft Manufacturing setup.

There are four different methods to value the material portion of an transfer price:

• At a Transfer Price.

  The system transfers the item using a fixed transfer price.

• At a Percent Markup of Cost or Transfer Price.

  The system creates the new transfer price by increasing the cost or transfer price of the inventory stock by a percentage markup.

• At Zero Price.

  The system values the intransit stock at zero. The zero cost method records the entire cost of the stock in the source business unit's interunit transfer gain or loss account. You can use this method for the shipment of promotional or sample items. You can change the default value for the zero price option on the material stock request line using the Material Stock Request - Accounting/Interunit Detail page or the Express Issue - Detail Override/Exceptions page. You can also change the zero price option on the Par Location Definition - Line Details page for issues to the par location.

• At a value based on the item's cost.

  The system transfers the item using a value based on the item's cost in the source inventory business unit.

Note. PeopleSoft Cost Management does not support interunit pricing for non-cost items.

Recording Landed Costs

The cost of obtaining inventory stock includes more than just the material costs of the items. Landed costs include some of the charges that are associated with getting items into a warehouse and available for use or sale. In the destination business unit, landed costs are absorbed into the material cost of the item for actual and weighted average items. For standard items, a variance is recorded. For information on setting up landed costs, see the "Structuring Landed Costs" chapter in this PeopleBook.

See Structuring Landed Costs.

Creating Additional Transfer Costs

In addition to the item's material cost and landed costs, you can also record additional transfer fees for an interunit transfer. To define additional transfer costs:

• Establish a cost element for additional transfer by using the cost category of Addl Trans.

• Define a fixed cost or percentage markup to calculate the additional transfer cost using the Transfer Pricing Definition component. Additional transfer costs can be defined at the header level or detail level (item ID or item group).

• Determine if your additional transfer costs should be added to the cost of the item in the destination business unit or written off in an expense account. Select the Expense Transfer Fees check box on the Inventory Definition - Business Unit Definition page to write off the additional transfer costs.

• Populate the Transfer Price table (CM_TRAN_PRICE) with the transfer prices (material and additional transfer costs) by running the Calculate Transfer Price (CM_TRANS_PRC) process. Additional transfer costs can only be used from the Transfer Price table. The Deplete On Hand Qty (Depletion) process does not calculate additional transfer costs directly from the Transfer Pricing Definition component.

See Applying Transfer Prices to a Material Stock Request.

Recording the Accounting Entries for Transfer Prices

During demand fulfillment, the MSR is located in the IN_DEMAND table. Once the transfer price has been calculated by the Deplete On Hand Qty process, the transfer price is located in a child table, IN_DEMAND_TPRC, where it is broken out into several parts by cost elements. Cost elements can be created for material costs, landed costs, and additional transfer costs. Estimated transfer price details can be viewed using the Transfer Price Inquiry component. While the stock is in the intransit account, the material, landed, and additional transfer costs are all included in the total transfer price. The transfer price details are retained when the stock is received by the destination business unit. During putaway, the additional transfer costs can be included in the material cost of the stock or the additional transfer costs can be expensed.

The following transaction groups can be used for an interunit transfer:

• 022 IBU Transfer Receipts

• 025 InterCompany Receipts

• 031 InterBU Transfer Shipments

• 035 InterCompany Transfers

• 042 IBU Transfer Adjustments

• 300 Gain/Loss on Transfer Price

• 301 InterCompany Cost of Goods

Transfer prices and additional transfer costs can also be used for Shipment On Behalf Of transactions using the following transaction groups:

• 034 Shipments on Behalf of Other BU

• 302 ShipOnBehalf Gain/Loss

See Designing Shipment On Behalf Of.

Transfer prices only can be used with interunit expense issues using the following transaction groups:

• 036 InterUnit Expensed Issue

• 026 Expensed Issue Return

Example of the Transfer Pricing Table

Once the Deplete On Hand Qty process calculates the transfer price for a standard, actual, or average cost item, the total transfer price is stored in the TRANSFER_COST field of the IN_DEMAND table; the transfer price details, broken out by cost element, are stored in the IN_DEMAND_TRPC table. To record the material cost of the transferred items, the system used the cost element in the Default Cost Element field in the Define Business Unit Item - General: Common page. The following diagram illustrates a simplified example of a material stock request with an interunit transfer price (transfer cost):

Example of a material stock request a with transfer price

Note. The terms transfer price and transfer cost both refer to the same value.

The above example displays an item with more than one material cost element, a landed cost element, and two additional transfer cost elements. Your purchased items may only have one material cost element, however, your make (manufactured) items may have multiple material cost elements. The setup for landed cost is located in the "Structuring Landed Costs" chapter of this PeopleBook.

See Structuring Landed Costs.

Example of an InterBU Transfer Shipment (Transaction Group 031)

The following diagram illustrates a simplified example of the accounting entries generated in the source business unit after the Deplete On Hand Qty process and the Cost Accounting Creation process are complete. For the transaction group 031 (InterBU Transfer Shipments), the Cost Accounting Creation process determines any difference between the item's cost and the transfer price by comparing cost element to cost element. The typical shipping accounting entry debits the intransit inventory account at the item's transfer price and credits the inventory account at the item's cost. Any difference between the transfer price and cost creates an additional entry associated with the transaction group 300 (gain or loss on transfer price). The following diagram illustrates a gain on transfer price for the source business unit:

Gain or loss on an interunit transfer in the shipping (source) inventory business unit.

In the above example, note that the cost element detail is included in the accounting entry. The Cost Accounting Creation process uses the IN_DEMAND_TRPC table when creating accounting entries for interunit transactions.

Note. The above example does not address an intercompany transfer or an interunit transfer using interunit receivable and payable accounts. More detailed examples are given later in this chapter.

Examples of Inventory Business Unit Transfer Receipts (Transaction Group 022)

The following diagram illustrates a simplified example of the accounting entries generated in the destination business unit after the Load Staged Items process (INPSSTGE) and the Cost Accounting Creation process are complete. The Cost Accounting Creation process uses the transaction groups 022 (IBU Transfer Receipts) and 300 (gain or loss on transfer price).

Gain or loss on an interunit transfer in the receiving (destination) inventory business unit.

In both of these examples:

• The source business unit owns the stock while it is in the intransit account.

• The destination business unit has elected to write-off the additional transfer costs rather than include them in the inventory stock's cost.

For items using one of the weighted average costing methods, the material and landed cost portions of the transfer price are weighted into the new average cost for the item in the destination business unit. For items using the actual cost method, the material and landed cost portions of the transfer price becomes the actual cost for the receipts at the destination business unit. Note that for both the actual and average cost methods, you can choose to include the additional transfer costs in the cost of the item rather than write off these amounts.

For standard cost items, a gain or loss is calculated for the difference between the transfer price (material and landed cost portions only) and the item's standard cost maintained in the destination business unit. This difference is recorded in a gain/loss on transfer price account. The interunit stock is recorded into the inventory account at the standard cost, and the additional transfer costs are written off to a gain and loss on transfer price account.

Note. The previous example does not address an intercompany transfer or an interunit transfer using interunit receivable and payable accounts. More detailed examples are given later in this chapter.

Understanding the Types of Interunit Transfers

When you maintain warehouses and plants all over the world, you must be able to transfer goods among these locations and account for transfer prices, costs, currency changes, taxes, and invoicing for business units involved in the transfer. In PeopleSoft Inventory, a transfer of stock between two inventory business units is known as an interunit transfer. There are three approaches to interunit transfers:

This diagram illustrates the flow of an interunit transfer using only an intransit account:

Interunit transfers using only an intransit account

If the inventory business units transferring stock are linked to the same GL business unit, the system does not generate any affiliate interunit transactions. The intransit account must be defined as belonging to the source or destination business unit.

This diagram illustrates the flow of an interunit transfer with interunit receivables and interunit payables accounts when the source unit owns the intransit stock:

Interunit transfers with interunit receivables and interunit payables accounts when the source unit owns the intransit stock

In a transfer for which the inventory business units are linked to two GL business units that may be part of the same legal entity, entries are recorded in the interunit receivables and payables accounts. Affiliate accounting is used, and the interunit receivables affiliate and interunit payables affiliate entries should equal each other.

This diagram illustrates the cost flow of an intercompany sales transaction:

Intercompany sales approach

In an intercompany transfer, the inventory business units transferring stock want to transfer inventory in an "arm's length" manner. In this case, an intercompany sale is recorded. The destination inventory business unit must be defined as a customer and the source GL business unit must be defined as a vendor. The billing business unit linked to the source inventory business unit performs the additional tasks of calculating value-added taxes (VAT), invoice generation, legal shipping documentation, accounting line creation, and voucher initiation. The AP voucher is recorded in the interface tables of the destination payables business unit, where it can be processed and paid.

See Also

Transferring Stock Between Business Units

Defining Default Storage Location Structures and Attributes

Establishing InterUnit and IntraUnit Billing

Defining Additional Common Information

Understanding PeopleSoft Enterprise ChartFields

Prerequisite

Before defining your transfer pricing structure, you must setup the overall interunit transfer structure. The PeopleSoft Enterprise Inventory PeopleBook provides detailed instructions for setting up the system for interunit transfers.

See Transferring Stock Between Business Units.

Common Elements Used in This Chapter

Using Transfer Pricing Definitions

This section provides an overview of transfer pricing definitions and discusses how to:

• Use the Transfer Pricing Definition page.

• Copy transfer pricing defaults between business units.

• Use the Additional Transfer Price page at the header level.

• Use the Additional Transfer Price page at the detail level.

• Review examples of transfer pricing.

Understanding Transfer Pricing Definitions

To define transfer prices, use the Transfer Pricing Definition component (CM_TRAN_PRICE_DEFN). Use the Transfer Pricing Definition component interface (CM_TRAN_PRICE_CI) to load data into the tables for this component.

The key to establishing your transfer price is the Transfer Pricing Definition component, where you can establish transfer prices by:

• Inventory Business Unit Pairs: A combination of the source business unit, destination business unit, and pricing effective date.

• Source Business Unit Only: A combination of the source business unit and pricing effective date. By leaving the destination business unit blank, you can create transfer prices for all items in the source unit that transfer to any destination business unit that is not already defined in a business unit pair.

The Transfer Pricing Definition component defines the transfer prices for all items within a source business unit or an inventory business unit pair. When a transfer pricing definition has not been setup for certain business units, the system transfers the items at the cost in the source inventory business unit. When a transfer pricing definition is created, setting all transfer prices at the business unit level (header level) may be too broad; therefore, the Transfer Pricing Definition component allow you to override the header level settings with transfer prices specific to the item group or item ID itself. The specific information is used instead of the more general information.

Once you define your transfer pricing definitions, you can:

• Populate the Transfer Pricing table with your transfer prices and additional transfer costs by running the Calculate Transfer Price process. The Deplete On Hand Qty process looks to this table first to find a match and to retrieve transfer data.

• Leave the Transfer Pricing table blank for some or all items. If the Deplete On Hand Qty process cannot find a match in the Transfer Pricing table, then it looks to the setup in the Transfer Pricing Definition components. The detail level overrides are used instead of the header level information. Header level information is used when no detail level overrides exist and the Price Overrides Only check box is not selected.

The Transfer Pricing Definition component can be used by both:

• The Calculate Transfer Price process to populate the Transfer Price table.

• The Deplete On Hand Qty process to calculate a transfer price for an MSR line directly using the data in the Transfer Pricing Definition component. Use this option if the Transfer Price table does not contain a transfer price for the MSR line.

Not all options on the Transfer Pricing Definition component are available when the Deplete On Hand Qty process is calculating a transfer price directly from the component. Look carefully at the field definitions for information about the Calculate Transfer Price process and the Deplete On Hand Qty process.

Note. PeopleSoft Cost Management does not support interunit pricing for non-cost items.

For additional details about applying transfer prices to an MSR, see the Understanding Interunit Transfers topic of this chapter.

See Also

Applying Transfer Prices to a Material Stock Request

Defining Basic Fulfillment Defaults

Pages Used to Define Transfer Prices

Using the Transfer Pricing Definition Page

Access the Transfer Pricing Definition page (Cost Accounting, Item Costs, Define Rates and Costs, Transfer Pricing Definition).

New Transfer Pricing Definitions

In add mode, you enter the source inventory business unit in the Business Unit field and the destination inventory business units in the Destination Unit field. The Pricing Effective Date field defaults to today's date if there is no entry. The Destination Unit field is not required. If you leave the Destination Unit field blank, then the parameters set up on this component apply to the source business unit, regardless of the inventory business unit receiving the stock. The transfer pricing definition with the source business unit and no destination unit is used as the default for all business unit pairs that are not defined. The source business unit must be valid and an open inventory unit.

Header Levels and Detail Levels

On the Transfer Pricing Definition page, overrides and default values can be entered at both the header level or the detail level.

Overrides and default values defined at the header level apply to the entire transfer pricing definition. The header level includes the Default Overrides group box and the BU Level Defaults group box. These values are used with transfers from this source inventory business unit (or source unit and destination unit combination) and for this price effective date. Information added at the header level is used to determine the transfer price for all items that are not overridden at the detail level as long as the Price Overrides Only check box has not been selected.

Overrides and default values defined at the detail level apply to an item group or item ID within the transfer pricing definition. The detail level includes the Item / Item Group Definitions group box. These values can be added to override the values defined at the header level.

Default Overrides Group Box

The values defined in this group box apply to the header level of this transfer pricing definition. The following zero check boxes prevent the system from performing a particular calculation. These check boxes are not mutually exclusive with their associated value. For example, both a Zero Markup Percent can be entered and the Zero Markup Percent flag checked, though once the Transfer at Zero Price field is selected, selecting the Zero Markup Percent has no additional effect. These check boxes control what is done for any items not overridden at the detail level. Keep in mind that these check boxes are never used for items defined in the detail level of this component. In addition, if the Price Overrides Only check box is selected, then this group box is not used.

The check boxes in this group box are used by both:

• The Calculate Transfer Price process to populate the Transfer Price table (CM_TRAN_PRICE).

• The Deplete On Hand Qty process to calculate a transfer price for an MSR line using the data in the Transfer Pricing Definition component. This option is used if the Transfer Price table does not contain a transfer price for the MSR line.

BU Level Defaults Group Box

The default values defined in this group box apply to the entire transfer pricing definition (that is, the header level). These default values are used with transfers from this source inventory business unit (or source unit and destination unit combination) and for this price effective date. When setting up a Transfer Pricing Definition component, keep in mind that your entry in the Price Overrides Only check box changes the use of this group box.

Select Lines Group Box

Use the Select Lines group box to enter search criteria for displaying existing items and item group definition in the Item / Item Group Definitions group box.

Item / Item Group Definitions Group Box

The detail level overrides and default values defined in this group box apply to the specific item ID or item group in the row. The values entered here override the same values entered at the header level. To create a new row to override header level attributes for a specific item ID or item group, add a new row to the grid.

Copying Transfer Pricing Defaults Between Business Units

Access the Copy Pricing Definition page (click the Copy Pricing Definition link on the Transfer Pricing Definition page).

When setting up the transfer pricing definitions for each of your source unit, destination unit, and price effective date combinations, you can reduce data entry time by using the copy feature on the Copy Pricing Definition page. Enter a source inventory business unit and a destination business unit (optional) Use this page to copy an existing transfer pricing definition to your new combination of source business unit, destination unit, and price effective date. This page is only available if you are adding a new transfer pricing definitions.

The copy action immediately saves the new data and overrides any existing information that you may have entered on the new transfer pricing definition.

Using the Additional Transfer Price Page at the Header Level

Access the Additional Transfer Price (Header Level) page (on the Transfer Pricing Definition page, click the Additional Costs link in the BU Level Defaults group box).

This page displays the cost element detail for the header level of the transfer pricing definition and allows you to enter additional transfer costs using cost elements with a cost category of Addl Trans. This page can only be used by the Calculate Transfer Price process to populate the Transfer Price table.

Using the Additional Transfer Price Page at the Detail Level

Access the Additional Transfer Price (Detail Level) page (on the Transfer Pricing Definition page, click the Addl Costs icon within the Item / Item Group Definitions group box).

This page displays the cost element detail for the detail level of the transfer pricing definition and allows you to enter additional transfer costs using cost elements with a cost category of Addl Trans. The top section of this page displays the item ID or item group for these additional prices. The field definitions are the same as the Additional Transfer Price (Header Level) page defined above. This page can only be used by the Calculate Transfer Price process to populate the Transfer Price table.

See Also

Using the Additional Transfer Price Page at the Header Level

Reviewing Examples of Transfer Pricing

The following examples show how the transfer price default hierarchy uses the Transfer Pricing Definition component. In the examples below, the fields used on the Transfer Pricing Definition component can be used by the Calculate Transfer Price process to build the Transfer Pricing table and by the Deplete On Hand Qty process to directly calculate the MSR line transfer price.

Transfer Pricing Definition 1: Source business unit: US001, Destination business unit: (blank), and Price Effective Date: 10/15/2009

• Header Level:

  Price Overrides Only check box	Price Markup %	Cost Element Option	Markup Cost Element
  Not selected	20%	Add'l Cost	751

• Detail Level:

  Item ID	Transfer Price	Price Markup %	Cost Element
  80200	Specify: 4.00	Specify: 4%	Specify: 750

Transfer Pricing Definition 2: Source business unit: US001, Destination business unit: US014, and Price Effective Date: 10/15/2009

• Header Level:

  Price Overrides Only check box	Price Markup %	Cost Element Option	Markup Cost Element
  Not selected	15%	Add'l Cost	750

• Detail Level:

  Item ID	Transfer Price	Price Markup %	Cost Element
  80400	Specify: 18.18	Specify: 10%	Default
  80500	Specify: 7.00	Specify: 5%	Specify: 751

The following item and cost information are used in these examples:

Example 1

In this example, the following results will occur (for the US001/US014 combination only) when the Calculate Transfer Price process populates the Transfer Pricing table or when the Deplete On Hand Qty process calculates the transfer prices directly for MSR lines. In both cases, to populate transfer prices and cost elements for the source business unit US001 and the destination business unit US014, the processes (using the transfer price default hierarchy) look first to the transfer pricing definition 2; if data cannot be found then the processes look to the transfer pricing definition 1.

Example 2

In this example, all information is the same as example 1 except the Price Overrides Only check box is selected on the transfer pricing definition 2. The following results will occur (for the US001/US014 combination only) when the Calculate Transfer Price process populates the Transfer Pricing table or when the Deplete On Hand Qty process calculates the transfer prices directly for MSR lines. Since the transfer pricing definition 2 is more specific, the processes (using the transfer price default hierarchy) look first to it. If data cannot be found then the processes look to the transfer pricing definition 1.

Populating the Transfer Price Table

This section provides an overview of the transfer price feature and discusses how to populate the Transfer Price table.

Understanding the Transfer Price Feature

The transfer price feature enables you to populate the Transfer Price table (CM_TRAN_PRICE) with the transfer prices (material and additional transfer costs) that are used by the system when an MSR transfers stock. The Calculate Transfer Price process (CM_TRANS_PRC) populates this table based on your setup in the Transfer Pricing Definition component. Populating the Transfer Price table is optional, you can choose to have the system create the transfer price based on the currently available data and setup rather than using the values in this table.

Note. The performance of the Deplete On Hand Qty process can be affected if the Transfer Price table contains a large number of rows. Consider the size of the table when you design your transfer price method.

See Applying Transfer Prices to a Material Stock Request.

Page Used to Populate the Transfer Price Table

Running the Calculate Transfer Price Process

Access the Calculate Transfer Price page (Cost Accounting, Item Costs, Update Costs, Calculate Transfer Price).

As of Date	Determines the set of parameters to use when calculating the transfer price. This date controls the effective date used to retrieve rows defined on the Transfer Pricing Definition component and to retrieve actual cost rows for pricing calculations. In addition this date is the new Price Effective Date set in the Transfer Price record.
Create Errors for No Receipts	Select this check box to have the process log error messages when the calculation method is Last Price Paid, First Price Paid, or Average N, and there are no receipts for a source business unit and item ID . Use caution when selecting this check box as the number of log messages could potentially be quite high.

Source Business Unit Group Box

This process can only select source PeopleSoft Inventory business units that:

• Are valid for the user running this process.

• Have an open status on the Inventory Definition - Business Unit Definition page.

• Have the Generate InterUnit Prices check box selected on the Inventory Definition - Business Unit Definition page.

• Have an existing transfer pricing definition record with a status of Active.

Destination Business Unit Group Box

The Destination Business Unit group box enables you to select destination business unit that are paired with the source unit on a transfer pricing definition. You can select combinations with a blank destination, a specific destination unit, or all valid combinations. This process can only select destination PeopleSoft Inventory business units that have, in combination with the source unit, an existing transfer pricing definition record with an active status.

Selected Business Units Group Box

This group box displays the results of the search initiated by the Show Results button on this page. Clicking this button displays the valid source unit, destination unit, and price effective date combinations that can be processed based on your parameters. In order for a combination to be selected, the following rules apply:

• The source and destination unit combinations must have a transfer pricing definition with a price effective date matching the As of Date field on this page.

• The transfer pricing definition must have a status of Active.

• The business units must:

  • Have the Generate InterUnit Prices check box selected on the Inventory Definition - Business Unit Definition page.

  • Be valid for the user running this process.

  • Have an open status on the Inventory Definition - Business Unit Definition page.

Item Options Group Box

Use the Item Options group box to calculate transfer prices based on item ID or item group.

Note. When you save this run control, the system performs a check of existing transfer prices in the Transfer Pricing table. Based on your parameters, if this process run could overwrite existing transfer prices, then a warning message will appear.

Calculating Default Actual Cost and Current Purchase Cost

This section provides an overview of costs and discusses how to use the Update Default Actual Cost process.

Understanding Costs

The values in the Default Actual Cost field and the Current Purchase Cost field are used by both processes and reports when a item value is needed. These fields are located on the Define Business Unit Item - General: Common page. The value in these fields can be manually updated or you can use the Update Default Actual Cost (CM_BUCST_UPD) process to automatically update these field.

Understanding Default Actual Cost and Current Purchase Cost

The Default Actual Cost field is used as the actual or average cost if the item does not yet have an actual cost generated from the receipt and putaway processes. This value is stored in the DFLT_ACTUAL_COST field of the BU_ITEMS_INV record. The Default Actual Cost is used in these processes and reports:

• The Deplete On Hand Quantity process (IN_FUL_DPL). This field value is used to determine the transfer cost of an interunit transfer when the Transfer Pricing Definition component uses the default actual cost option.

• The Reconciliation Report (INS5050) and the Stock Quantity Update process (INPOPOST) for a inventory stock count (physical count or cycle count). This field value is used to record a positive inventory adjustment when a receipt cost is not found.

• The Adjustments page (ADJUSTMENT2_INV). The field value is used if the item requires a positive inventory adjustment prior to an actual cost being generated from receipt of the item.

• The Cost Rollup process in PeopleSoft Manufacturing uses this field value as a preliminary cost if a receipt cost is not found.

• The Interunit and RMA Receiving component uses the value in the Default Actual Cost field to cost the receipt of items using actual cost.

• The Utilization Type Calculation Summary report (INS5100)

• The Slow Moving Inventory report (INS5200) uses this field value if a receipt cost is not found.

The Current Purchase Cost field is used in PeopleSoft Manufacturing. This value is stored in the CURRENT_COST field of the BU_ITEMS_INV record. The Cost Rollup process in PeopleSoft Manufacturing uses this field value as an optional source to calculate the value of a standard-cost item. The Current Purchase Cost field is used to determine the material cost of purchased items and the lower-level material cost of a manufactured item when the cost type that you are rolling uses current costs.

Understanding the Update Default Actual Cost Process

The Update Default Actual Cost (CM_BUCST_UPD) process is a PeopleSoft Application Engine program that can update the Default Actual Cost field and the Current Purchase Cost field for all the items regardless of the item's cost profile. Before running this process, be sure to run the Cost Accounting Creation process to update the PeopleSoft Cost Management tables for any new receipts, cost adjustments, PeopleSoft Payable cost adjustments, or PeopleSoft Manufacturing finalized cost adjustment transactions. Based on your search criteria, the process:

• Includes all the zero cost receipts, as they are originally part of average cost calculation during putaway.

• Excludes cancelled receipts.

• For consigned inventory items, includes all receipts irrespective of the consumption for consigned inventory items.

• Rolls up all the cost elements into one default actual cost for each item, receiver ID, receiver line, distribution line before calculating the new cost.

• Excludes manufacturing transactions with a cost source of 8 (Preliminary Production Cost).

Note. After the Update Default Actual Cost process is completed, you can query the PS_CM_ACT_COST_TMP and PS_CM_AVG_RCST_TMP tables to see what receipts were used during the cost calculation. These tables are cleared during the next run.

Page Used to Calculate Default Actual Cost and Current Purchase Cost

Using the Update Default Actual Cost Process

Access the Update Default Actual Cost page (Cost Accounting, Item Costs, Update Costs, Update Default Actual Cost).

Use the Update Default Actual Cost process to update the cost fields Default Actual Cost (DFLT_ACTUAL_COST) and Current Purchasing Cost (CURRENT_COST) in the Define Business Unit Item - General: Common page (BU_ITEMS_INV).

Viewing Transfer Pricing Data for an Item

This section discusses how to use the transfer price inquiry, which is an online inquiry page that enables you to view the transfer pricing setup for an item.

Pages Used to View Transfer Pricing Data for an Item

Using the Transfer Price Inquiry

Access the Transfer Price Inquiry page (Cost Accounting, Item Costs, Review Costs, Transfer Price Inquiry).

The Transfer Price Inquiry page displays the transfer pricing details for the combination of a specific item ID, source business unit, destination unit, and price effective date.

Transfer Pricing Definition Group Box

This group box displays the values from the Transfer Pricing Definition component that apply to this item ID based on source unit, destination unit, and price effective date. The data displays any override values entered at the item ID or item group level as well as any additional cost data from the Additional Transfer Price page.

Transfer Prices Group Box

This group box displays values from the Transfer Pricing table. This table is optional and is populated by the Calculate Transfer Price process.

Reviewing Interunit Accounting Examples

This section provides an overview of interunit accounting examples and reviews examples of:

• Transferring interunit stock using only an intransit account.

• Transferring interunit stock using interunit receivables and payables.

• Transferring interunit stock using the interunit sales approach (intercompany).

Understanding Interunit Accounting Examples

This table describes the accounting entries that you can create using the three different types of interunit stock transfers:

All of the examples use the following cost elements:

• 100 (Material- General)

• 601 (Landed- Duty)

• 751 (Addl Trans- Freight)

Determining the Inventory Account

For all the examples below, the location accounting feature determines how the system selects the ChartField combination used for the inventory stock account. The inventory account is debited for receipt of stock and credited for shipment of stock. The location accounting feature is turned on at the business unit level by selecting the Location Accounting Required check box on the Inventory Options page (Set Up Financials/Supply Chain, Business Unit Related, Inventory, Inventory Options).

• If the Location Accounting Required check box is not selected, the inventory account is derived from the Accounting Rules page (Account Distribution page) for the applicable transaction group.

• If the Location Accounting Required check box is selected, the inventory account is derived from the storage area from which the inventory is shipped.

Determining the Intransit Account

For all the examples below, the intransit inventory account defined using the inventory business unit combinations on the InterUnit Ownership page or from the intransit account defined in the centralized interunit and intraunit processor.

Transferring Interunit Stock Using Only an Intransit Account

This example illustrates a stock transfer from inventory business unit US012 to inventory business unit US013. Both of these business units post to the same general ledge (US003); in this case, US012 owns the intransit inventory until it is received at the requesting business unit. The item uses the actual-cost method. In this example, the item cost and the transfer price for the item differ.

Example 1

The following diagram illustrates the accounting entry for the shipping transaction in the source business unit US012 (transaction group 031- InterBU Transfer Shipments). The inventory account is credited at item cost for the material and landed costs. The intransit account contains the transfer price of material, landed cost, and additional transfer costs. The gain and loss on transfer price account contains the additional transfer cost plus any difference between the transfer price and the cost of the item.

Example of shipping interunit stock from a source business unit

The following diagram illustrates the accounting entry for the putaway transaction in the destination business unit US013 (transaction group 022 - IBU Transfer Receipts). The entire shipment arrives intact, and the intransit account is credited for the transfer price (material, landed, and additional transfer costs). Since the item uses the actual-cost method, the inventory account in US013 is debited for transfer price of the material and landed costs portions. Since the Expense Transfer Fees check box for US013 is selected on Inventory Definition - Business Unit Definition page, the additional transfer costs are written off to the gain and loss on transfer price account rather than added to the cost of the item.

Example of putting away interunit stock in the destination business unit

Transferring Interunit Stock Using Interunit Receivables and Payables

These examples illustrate stock transfers for inventory business units that post to different PeopleSoft General Ledgers.

Example 2.1

This example illustrates a stock transfer from inventory business unit US001 to inventory business unit US012. These inventory business units post to different general ledgers; inventory unit US001 reports to the GL unit US001 and inventory unit US012 reports to the GL unit US003. The source inventory business unit, US001, owns the intransit inventory until it is received. The item uses an actual or average-cost method. The units use the same currency. In this case there is a difference between the item cost and the transfer price for the item. During setup, the intercompany (interunit sales approach) method was not selected for these two units.

The following diagram illustrates the accounting entry for the shipping transaction in the source business unit US001 (transaction group 031 - InterBU Transfer Shipments). The inventory account is credited, at item cost, for the material and landed costs. The intransit account contains the transfer price of material, landed, and additional transfer costs. The gain and loss on transfer price account contains the additional transfer cost plus any difference between the transfer price and the cost of the item.

Example of shipping interunit stock from a source business unit

The following diagram illustrates the accounting entry for the putaway transaction in the destination business unit US012 (transaction group 022 - IBU Transfer Receipts). The entire shipment arrives intact and the intransit account is credited for the transfer price (material, landed, and additional transfer costs). The interunit receivable account in the source business unit and the interunit payables account in the destination business unit are posted with the transfer price (material, landed, and additional transfer costs). Since the item uses the actual or average-cost method, the inventory account in US012 is debited for the material and landed costs portions of the transfer price. Since the Expense Transfer Fees check box has been selected on Inventory Definition - Business Unit Definition page for US012, the additional transfer costs are written off to the gain and loss on transfer price account rather than added to the cost of the item.

Example of putting away interunit stock in the destination business unit when using interunit receivables and interunit payables accounts

Example 2.2

This example has the same conditions as Example 2.1 except that the intransit account is owned by the destination business unit (US012).

The following diagram illustrates the accounting entry for the shipping transaction in the source business unit US001 (transaction group 031 - InterBU Transfer Shipments). The interunit receivable and interunit payable transactions are recorded at shipment time because the intransit stock is owned by the destination business unit. The inventory account is credited, at item cost, for the material and landed costs. The intransit account contains the transfer price of material, landed, and additional transfer costs. The gain and loss on transfer price account contains the additional transfer cost plus any difference between the transfer price and the cost of the item.

Example of shipping interunit stock from the source business unit when the intransit stock belongs to the destination business unit

The following diagram illustrates the accounting entry for the putaway transaction in the destination business unit US012 (transaction group 022 - IBU Transfer Receipts):

Example of putting away interunit stock in the destination business unit when the intransit stock belongs to the destination business unit

Example 2.3

This example has the same conditions as Example 2.1 except that the quantity of the item shipped is different from the quantity of the item received.

The following diagram illustrates the accounting entry for the shipping transaction in the source business unit US001 (transaction group 031 - InterBU Transfer Shipments). The inventory account is credited, at item cost, for the material and landed costs. The intransit account contains the transfer price of material, landed, and additional transfer costs. The gain and loss on transfer price account contains the additional transfer cost plus any difference between the transfer price and the cost of the item.

Example of shipping interunit stock from a source business unit

During transit, half of the shipment was stolen. The source business unit (US001) shipped 10 units, but the destination business unit (US012) received only 5 units. Since the source business unit owned the intransit stock, it must absorb the loss for the stolen items.

Example of receiving interunit stock when shipping quantity is more than received quantity

Transferring Interunit Stock Using the Interunit Sales Approach (Intercompany)

These examples illustrate different types of accounting transactions that can be generated for intercompany transfers.

Example 3.1

This example illustrates an intercompany inventory transfer from business unit US002 to business unit US013. These business units all use the same base currency. These inventory business units post to different general ledgers; inventory unit US002 reports to the GL unit US001 and inventory unit US013 reports to the GL unit US003. The inventory unit US013 assumes ownership at the time of shipment. The item is standard costed for US013 and can be any cost type for US002. In this case, there are differences between the item cost in the source business unit, the item transfer price, and the item cost in the destination business unit. Here is what the setup looks like for this example:

This diagram illustrates the accounting entries in PeopleSoft Inventory and PeopleSoft Billing after shipment. These entries belong to the transaction group 301 (Intercompany Cost of Goods).

InterCompany transaction after shipment

The above accounts are derived from the following sources:

• Inventory account in source unit: If the location accounting check box is deselected in the source business unit, the inventory account is derived from the Accounting Rules page (Account Distribution page) for the Intercompany Cost of Goods transaction group (301). If the location accounting check box is selected, the inventory account is derived from the storage area from which the inventory is shipped.

• InterCompany Cost of Goods Sold (COGS) account: The COGS account is the source interunit account defined for the inventory business unit combination on the InterUnit Pair page or InterUnit Template page of the centralized interunit and intraunit processor.

• InterCompany Intransit account: The intercompany intransit account is defined on the Interunit Ownership page. This transaction belongs to the InterCompany Transfers transaction group (035).

• InterCompany Accrued Liability account: The intercompany accrued liability account, in the destination business unit, is the destination interunit account defined for the inventory business unit combination on the InterUnit Pair page or InterUnit Template page of the centralized interunit and intraunit processor. This transaction belongs to the Intercompany Transfers transaction group (035).

Note. The source inventory business unit doesn't use the gain or loss on transfer price transaction group (300); the margin between the cost of the inventory transferred and the transfer price is intrinsic in the difference between the intercompany sales and the intercompany cost of goods sold.

Here is what the accounting entries for PeopleSoft Inventory look like upon putaway in the destination business unit (US013). These entries belong to the transaction group 025 (InterCompany Receipts).

Putting away an intercompany receipt.

Here is what the accounting entry looks like for PeopleSoft Payables upon voucher processing:

Entries in PeopleSoft Payables

Here is what the accounting entry looks like for the open payable and receivable settlement:

Settlement transactions for an intercompany transfer

Example 3.2

This example has the same conditions as example 3.1 except the item ID uses the actual or average-cost method in the destination business unit.

This example differs from example 3.1 only in the accounting entries for PeopleSoft Inventory upon putaway. In this example, the item is an actual or average cost item for US013. Here is what the accounting entries look like in PeopleSoft Inventory upon putaway:

Putting away intercompany receipt at actual or average cost

Example 3.3

This example illustrates an intercompany inventory transfer from business unit US012 to business unit FRA02. These inventory business units post to different general ledgers; inventory unit US012 reports to the GL unit US003 and inventory unit FRA02 reports to the GL unit FRA01. In addition, these business units have different base currencies; USD and EUR. The inventory business unit FRA02 assumes ownership at the time of shipment. The item uses the standard-cost method for FRA02 and can be any cost method for US012. In this case, there are differences between the item cost in the source business unit, the item transfer price, and the item cost in the destination business unit.

Here is what the accounting entries look like in PeopleSoft Inventory upon shipment using the transaction group 301 (Intercompany Cost of Goods):

Intercompany shipment with exchange rate

The above accounts are derived from the same sources as in example 3.1; however, the amount recorded in the FRA02 business unit is in FRA02's base currency of EUR. The intransit amount is the transfer price (7.00 USD) multiplied by the exchange rate (1.05) resulting in 7.35 EUR.

Here is what the accounting entries look like for PeopleSoft Inventory unit FRA02 upon putaway using the transaction group 025 (InterCompany Receipts):

Intercompany putaway with exchange rate

Note. Entries are in FRA01 base currency of EUR.

Here is what the accounting entry looks like for PeopleSoft Payables upon voucher processing:

Voucher processing

Here is what the accounting entry looks like for open payable and receivable settlement:

Payables and Receivables Settlement

Example 3.4

This example has the same conditions as example 3.3 except the item ID uses the actual or average-cost method in the destination business unit (FRA02).

This example differs from example 3.3 only in the accounting entries for PeopleSoft Inventory upon putaway. In this example, the item is an actual or average cost item for FRA02. Here is what the accounting entries look like in PeopleSoft Inventory upon putaway:

Putaway of Intercompany receipt with actual or average cost item

Note. Transaction Group 042 (IBU Transfer Adjustments) works the same for intercompany receipts as it does for interunit receipts.

See Also

Transferring Stock Between Business Units

Establishing InterUnit and IntraUnit Billing