Transfer Price Schedules

Transfer price schedules contain the rules to determine the transfer price amount for transactions charged from a provider organization to a receiver organization. You create different transfer price schedules to use for various combinations of legal entities, business units, and organizations.

You can create different schedules to use different rules for various projects and tasks between the same pairs of provider and receiver organizations. For example, you can define one schedule that contains the rules for capital projects and another for contract projects.

Before you set up transfer price schedules, you must set up organizations and transfer price rules.

Transfer Price Schedule Lines

Transfer price schedule lines contain details about the provider and receiver organization, labor transfer price rule and markup or discount percentage, nonlabor transfer price rule and markup or discount percentage, and amount type.

A transfer price schedule can contain provider and receiver organizations from any organization classification that's relevant to projects. The available organization classifications are determined at implementation when setting up organization hierarchies and classifications. If you don't select a receiver organization, the transfer price schedule applies to any receiver organization that receives transactions from the specified provider organization.

A labor rule is valid transfer price rule with a type of labor. A nonlabor rule is a valid transfer price rule with a type of nonlabor. A transfer price schedule must contain either a labor or nonlabor rule, or both. You can assign a markup or discount percentage to each transfer price rule to apply to the transfer price amount that the rule calculates.

You assign cost transfer or revenue transfer as the amount type for the transfer price calculation.

Transfer Price Schedule Hierarchy

A transfer price schedule should be determined based on whether the cross-charge transaction is processed using the borrowed and lent processing method or the intercompany billing method. If you use the borrowed and lent processing method, you should assign a transfer price schedule to the receiver task or the project. If you use the intercompany billing method, the bill and the revenue plan can have a transfer price schedule.

Note: The interproject billing method doesn't use transfer price calculation logic. Only the billing methods based on the bill rate schedule or burden rate schedule are allowed for interproject billing.

You can define a transfer price schedule at any organization level and legal entity level. Project Financial Management applications use the following logic to identify the appropriate schedule line:

1. If a transfer price schedule line exists for the provider organization (the project expenditure organization) and the receiver organization (the project and task owning organization), then the application uses the corresponding rule to calculate the transfer price.

   Note: You define the project expenditure organization hierarchy in the implementation options for the provider business unit. You define the project and task owning organization hierarchy in the implementation options for the receiver business unit.

2. If it doesn't find a schedule line in the previous step and an organization hierarchy is used, the application checks for a line with the provider organization and a receiver parent organization.

   If the receiver organization has multiple intermediate parents and you defined schedule lines for more than one of the parents, the schedule line defined for the lowest level parent takes precedence over schedule lines defined for parents higher in the organization hierarchy.

3. If it doesn't find a schedule line in the previous step and an organization hierarchy is used, the application checks for a line with the provider parent organization and receiver parent organization.

   If the provider organization has multiple intermediate parents and you defined schedule lines for more than one of the parents, the schedule line defined for the lowest level parent takes precedence over schedule lines defined for parents higher in the organization hierarchy.

   Note: If there is a schedule line with only a provider organization, and another schedule line with both provider and receiver organizations, the application gives precedence to the schedule line with both provider and receiver organizations.

4. If it doesn't find a schedule line in the previous step, the application checks for the default line for the transfer price schedule.

5. If it doesn't find a schedule line in the previous step, the process results in an error.