Example of Accounting of Acquisition Cost Adjustment for External Drop Shipments

Scenario

Supplier of Vision Operations drop ships the goods to the customer of Brazil Operations.

An intercompany transfer price is established between Vision Operations and Brazil Operations. Vision Operations, the supplier-facing organization, will make the settlement to the supplier.

Transactions from Oracle Supply Chain Financial Orchestration

Trade agreements are set up in Supply Chain Financial Orchestration, and the transactions flow into Receipt Accounting and Cost Accounting based on this setup:

Supplier of Vision Operations sends goods directly to the customer at the cost of USD 240 per unit.
Intercompany transfer price from Vision Operations to Brazil Operations is USD 360 per unit.
Order is for 2 units.
Profit tracking is set to Yes.
Intercompany Invoicing is set to Yes.
Vision Operations books a profit of USD 120 per unit (USD 360 transfer price - USD 240 PO price).
Later, the supplier sends an actual invoice for USD 400, resulting in an invoice price variance of USD 160 per unit. Because the transfer price is USD 360, the revised profit for Vision Operations is USD -40.

Accounting Entries

Accounting entries are created for the shipment of goods from the legal entity Vision Operations to the other legal entity Brazil Operations.

Accounting Entries for Vision Operations

The following table describes the accounting entries for the drop shipment flow for Vision Operations, the supplier-facing organization.

Subledger	Event Type	Accounting Line Type	Cost Element/Cost Source	Debit	Credit
Receipt Accounting	Receipt Into Receiving Inspection	Receiving Inspection	PO Price	480
Receipt Accounting	Receipt Into Receiving Inspection	Accrual	PO Price		480
Cost Accounting	Drop Ship Delivery	Drop Ship Inventory	Material	480
Cost Accounting	Drop Ship Delivery	Receiving Inspection	Material		480
Cost Accounting	Drop Ship Trade In-transit Issue	Intercompany COGS	Material	480
Cost Accounting	Drop Ship Trade In-transit Issue	Drop Ship Inventory	Material		480

The following table describes the accounting entries created because of acquisition cost adjustments resulting from price changes.

Subledger	Event Type	Accounting Line Type	Cost Element/Cost Source	Debit	Credit
Receipt Accounting	Invoice Price Adjustment	Receiving Inspection	Invoice Price Variance	320
Receipt Accounting	Invoice Price Adjustment	Invoice Price Adjustment	Invoice Price Variance		320
Cost Accounting	Drop Ship Delivery	Drop Ship Inventory	Material-IPV	320
Cost Accounting	Drop Ship Delivery	Receiving Inspection	Material-IPV		320
Cost Accounting	Drop Ship Trade In-transit Issue	Intercompany COGS	Material-IPV	320
Cost Accounting	Drop Ship Trade In-transit Issue	Drop Ship Inventory	Material-IPV		320

Accounting Entries for Brazil Operations

The following table describes the accounting entries for the drop shipment flow for Brazil Operations, the customer-facing organization:

Subledger	Event Type	Accounting Line Type	Cost Element/Cost Source	Debit	Credit
Receipt Accounting	Trade Receipt Accrual	Trade Clearing	Transfer Price	720
Receipt Accounting	Trade Receipt Accrual	Intercompany Accrual	Transfer Price		720
Cost Accounting	Trade In-transit Receipt	Trade Clearing	Material		480
Cost Accounting	Trade In-transit Receipt	Trade In-Transit Valuation	Material	480
Cost Accounting	Trade In-transit Receipt	Trade In-Transit Valuation	Profit in inventory - V1	240
Cost Accounting	Trade In-transit Receipt	Trade Clearing	Profit in inventory - V1		240
Cost Accounting	Trade Sales Issue	Deferred Cost of Goods Sold	Material	480
Cost Accounting	Trade Sales Issue	Trade In-Transit Valuation	Material		480
Cost Accounting	Trade Sales Issue	Deferred Cost of Goods Sold	Profit in inventory - V1	240
Cost Accounting	Trade Sales Issue	Trade In-Transit Valuation	Profit in inventory - V1		240

The following table describes the accounting entries resulting from acquisition cost adjustments, for Brazil Operations.

Subledger	Event Type	Accounting Line Type	Cost Element/Cost Source	Debit	Credit
Cost Accounting	Trade In-transit Receipt	Trade In-Transit Valuation	Material-IPV		320
Cost Accounting	Trade In-transit Receipt	Trade Clearing	Material-IPV	320
Cost Accounting	Trade In-transit Receipt	Trade In-Transit Valuation	Profit in inventory - V1	320
Cost Accounting	Trade In-transit Receipt	Trade Clearing	Profit in inventory - V1		320
Cost Accounting	Trade Sales Issue	Deferred Cost of Goods Sold	Material-IPV	320
Cost Accounting	Trade Sales Issue	Trade In-Transit Valuation	Material-IPV		320
Cost Accounting	Trade Sales Issue	Trade In-Transit Valuation	Profit in inventory - V1	320
Cost Accounting	Trade Sales Issue	Deferred Cost of Goods Sold	Profit in inventory - V1		320