This chapter covers the following topics:
Consigned Inventory from Supplier is fully integrated with Oracle Cost Management. Oracle Cost Management is a full absorption, perpetual and periodic cost system that automatically costs and values all inventory, work in process, and purchasing transactions. It supports all perpetual costing methods including standard costing, average costing, fifo costing, and lifo costing. Accounting and costing occurs at the time of consumption.
At receipt:
Consigned goods are not accrued with financial implications. The owning organization is the supplier site.
The cost manager identifies material transactions for consigned stock, but does not cost these transactions.
At consumption:
Material is transferred from consigned stock to regular stock by transferring the ownership from supplier to the inventory organization.
When the goods are consumed, they are valued and accounted at the price that is in effect at consumption time. Sourcing rules determine the appropriate purchasing agreement.
Consumption transactions are grouped at the end of the billing cycle by running the concurrent process.
Related Topics
Overview of Standard Costing, Oracle Cost Management User's Guide
Overview of Average Costing, Oracle Cost Management User's Guide
Overview of FIFO/LIFO Costing, Oracle Cost Management User's Guide
Although, consigned inventory accounting prevents the use of expense items—the Inventory Asset Value is disabled—you can expense a consigned item into an expense inventory account.
The following table provides a summary of the accounting transactions for consigned inventory in a standard cost organization.
| Transaction | Regular Stock Accounts | Consigned Stock Accounts |
|---|---|---|
| PO Receipt | Debit: Receiving Inspection at PO price Credit: AP Accrual at PO price |
None |
| Delivery to Asset Subinventory | Debit: Inventory at standard cost Credit: Receiving Inspection at PO price Credit: PPV at variance |
None |
| Delivery to Expense Subinventory | Debit: Expense at PO Price Credit: Receiving Inspections at PO price |
None |
| Consumption in Asset Subinventory (Transfer to regular stock) | None | Debit: Inventory at standard cost Credit: AP Accrual at PO price Credit: PPV at variance |
| Consumption in Expense Subinventory | None | Debit: Expense at PO price Credit: AP Accrual at PO price |
| Generation of Consumption Advice | Not applicable | None |
| Generate invoice and match against consumption advice | Not applicable | Debit: AP Accrual at PO price Credit: Liability at invoice price Debit: Invoice Price Variance |
| Return to Vendor (RTV) | Debit: AP Accrual at PO price Credit: Inventory at standard cost Debit/Credit:PPV at variance |
None |
| Transfer to consigned in Asset Subinventory | -- | Debit: AP Accrual at PO price Credit: Inventory at standard cost Debit/Credit: PPV at cost variance |
| Transfer to consigned in Expense Subinventory | -- | Debit: AP Accrual at PO price Credit: Expense at PO Price |
| Miscellaneous receipt into regular stock | Debit: Inventory at standard cost Credit: Miscellaneous account at Standard cost |
Not applicable |
| Miscellaneous receipt into consigned stock | Not applicable | None |
| Miscellaneous issue from regular stock | Debit: Miscellaneous account at Standard cost Credit: Inventory at standard cost |
Not applicable |
| Miscellaneous issue from consigned stock (this triggers transfer to regular transaction and then miscellaneous issue from regular transaction). | Not applicable | Debit: Inventory at standard cost Credit: AP Accrual at PO price Debit/Credit: PPV at variance Credit: Inventory at standard cost Debit: Miscellaneous account at standard cost |
| Retroactive Price Update | Dr./Cr. Price Adjustment Cr./Dr. AP Accrual |
Dr./Cr. Price Adjustment Cr./Dr. AP Accrual |
Note: With Delivery into Expense subinventories, the expense account is debited at the PO Cost and no PO Variance is recorded.
The following table provides a summary of the accounting transactions for consigned inventory in an average cost organization.
| Transaction | Regular Stock Accounts | Consigned Stock Accounts |
|---|---|---|
| PO Receipt | Debit: Receiving Inspection at PO Cost Credit: Inv. A/P Accrual at PO Cost |
None |
| Delivery to Asset Subinventory | Debit: Inventory at PO cost Credit: Receiving Inspection at PO cost |
None |
| Delivery to Expense Subinventory | Debit: Expense at PO cost Credit: Receiving Inspections at PO cost |
None |
| Consumption in Asset Subinventory (Transfer to regular stock) | None | Debit: Inventory at PO cost Credit: AP Accrual at PO cost |
| Consumption in Expense Subinventory | None | Debit: Expense at PO cost Credit: Inventory AP Accrual at PO cost |
| Generation of Consumption Advice | Not applicable | None |
| Generate invoice and match against consumption advice | None | Debit: AP Accrual at PO cost Credit: Liability at invoice price Debit: Invoice Price at Variance |
| Return to Vendor (RTV) | Debit: AP Accrual at PO cost Credit: Inventory at PO cost |
None |
| Transfer to consigned in Asset Subinventory | -- | Debit: AP Accrual at PO cost Credit: Inventory at PO cost |
| Transfer to consigned in Expense Subinventory | -- | Debit: AP Accrual at PO cost Credit: Expense at PO cost |
| Miscellaneous receipt into regular stock | Debit: Inventory at miscellaneous cost Credit: Miscellaneous Receipt Account at miscellaneous cost |
Not applicable |
| Miscellaneous receipt into consigned stock | Not applicable | None |
| Miscellaneous issue from regular stock | Debit: Miscellaneous issue account at Miscellaneous cost Credit: Inventory at Miscellaneous cost |
Not applicable |
| Miscellaneous issue from consigned stock (Transfer from consigned to regular stock, the issue from regular stock) | Not applicable | Debit: Inventory at PO cost Credit: AP Accrual at PO cost Debit: Miscellaneous issue account at miscellaneous cost Credit: Inventory at miscellaneous cost |
| Retroactive Price Update | Dr./Cr. Price Adjustment Cr./Dr. AP Accrual |
Dr./Cr. Price Adjustment Cr./Dr. AP Accrual |
Accounting and invoicing transactions for RTVs differ depending on which material transactions have occurred. They can fall into one of several scenarios:
An RTV or adjustment prior to the consumption of material is performed in Oracle Purchasing. You first find the specific consigned shipment, and perform the adjustment. You must perform an adjustment because if the original receipt was flagged as consigned, then accounting or costing transactions were not created. Debit memos are not generated because invoicing transactions have not been performed.
If the material has been consumed using the transfer to regular transaction in the Consigned Transactions window, and the consumption advice has not been created, the return requires an additional step—transferring the material back to consigned status prior to running the RTV transaction.
You can perform a transfer to consigned transaction to restore the material to consigned status. The reversal accounting entries are generated for the corrected quantity; consequently, no credit memos are needed because the consumption advice will reflect the net quantity.
Note: You can perform a transfer to consigned transaction if the consumption transaction has been generated implicitly or explicitly.
If the consumption advice has not been generated, and you cannot locate the original consumption transaction, first perform a Miscellaneous issue from regular stock. Next, create a Miscellaneous receipt into consigned stock. To perform an RTV transaction:
Create a miscellaneous issue out of the regular stock area, and a miscellaneous receipt into the consigned stock area.
Create a manual credit memo and match it to the appropriate consumption advice.
Note: Miscellaneous issue transactions are based on standard or current average cost information. A manual credit memo must be created, and manual adjustments to the Purchase Price Variance (PPV) account must be made.
There is a current limitation in consigned inventory that prevents the use of expense items (Inventory Asset Value turned off). Nevertheless, a consigned item can be delivered into an expense Inventory. If you receive into an expense Inventory, the expense account assigned to the Inventory is used instead of the material valuation account.
Subinventories containing consigned material must have the Quantity Tracked parameter enabled. This option allows the maintenance of on-hand quantities and is required in order to record consumptions properly.
Retroactive price changes updates AP Accrual, therefore there are substantial differences between regular materials and consigned materials.
For regular materials there are two steps, PO Receipt and Delivery to an Asset Subinventory. Retroactive price update adjusts PO receipts only. Therefore Retroactive Price Adjustment journals are created in the operating unit where PO receipt has occurred. Retroactive price adjustment journals are imported from PO to the GL.
Consumption of consigned material (a transfer to regular transaction) in an Asset Subinventory occurs in an inventory organization. When Retroactive price update is executed, a price update material transaction is created in an inventory organization and the distribution is created when the cost manager runs. Price adjustments journals for consigned materials need to be transferred from inventory to the GL.
If your accounting period is the same as Consignment Billing Cycle, you will need to bill against all consignment consumptions in the given period. The process is as follows:
Verify that all WIP material/resource transactions or INV material transactions have stopped for the period
Execute the WIP/Lot Move Transaction Manager, verify that it completes successfully.
Optionally run the Material Transaction Manager (depending on TP mode), verify that it completes successfully.
Run the Cost Manager, verify that it completes successfully.
Optionally run the INV Physical or INV Cycle Count, approve and post adjustments.
Run the Create Consumption Advice, verify that it completes successfully.
Run Retroactive Price Update.
Restart creating WIP material/resource transactions, and INV material transactions.
If you run Standard Cost Adjustment including consigned items:
Verify that all WIP material/resource transactions or INV material transactions have stopped for the period.
Run the WIP/Lot Move Transaction Manager, verify that it completes successfully.
Optionally run the Material Transaction Manager (depending on TP mode), verify that it completes successfully.
Run the Cost Manager, verify that it completes successfully.
Run Create Consumption Advice, verify that it completes successfully.
Run Retroactive Price Update.
Run Standard Cost Adjustment.
Restart creating WIP material/resource transactions, and INV material transactions.
In this case, consider a consignment consumption of item X, where purchase price = 10 USD, and unit cost = 10 USD
Dr. INV Material 1,000 USD (100EA @ 10 USD)
Cr. AP Accrual 1,000USD (100EA @ 10 USD)
If the price is retroactively changed from 10 USD to 15 USD; Adjusted amount = New Line Amount (100EA x 15USD) – Old Line Amount (100EA x 10USD)
Dr. Price Adjustment 500 USD
Cr. AP Accrual 500 USD
Unit cost is adjusted from 10 USD to 15 USD
Dr. INV Material 500 USD (100EA @ 5 USD)
Cr. Standard Cost Adjustment 500 USD (100EA @ 5 USD)
Price Adjustment account and Standard Cost Adjustment can be netted if an item’s
Purchase price and unit cost are the same
Price change and cost change are the same