Acquisition Cost Adjustment

Oracle Cost Accounting provides an ability to value your inventory at the true acquisition costs. During receipt into inventory, inventory is valued at either purchase order price, including tax and any landed cost charges, or standard.

Any differences between the standard cost and the purchase order price are expensed as a purchase price variance.

Subsequently, any additional costs that are imported from Payables, such as invoice price variance, exchange rate variance and tax rate variance, are used to true up the inventory cost by applying them as acquisition cost adjustments. The true up of inventory cost is carried out based on the cost method.

• Actual cost (FIFO): acquisition cost adjustments apply to on-hand inventory as well as any consumption transactions such as sales order issues, work order issues, and transfers.

• Average cost: acquisition cost adjustments apply only to the extent of on-hand inventory and any adjustments pertaining to inventory that's consumed are expensed out into cost variance.

• Standard Cost: acquisition cost adjustments are always expensed out as a purchase price variance up to the extent of quantity delivered.