Oracle® Process Manufacturing

Enhancements to Invoices Support in Actual Cost

Release 12

Part No. E05665- 01

August 2007

This chapter includes the following topics:

• Changes to the Event Fiscal Policy window

• Changes to the Actual Cost Process

• Inclusion of additional Invoice Types

Summary

Prior to the enhancement, the Actual Cost Process inaccurately considered partial and out-of-period

invoices. By setting the profile option GMF: Exclude Invoices that have no Receipts, it was possible to

ignore out of period invoices. However, price differences between the PO price and invoice price were not

included in cost calculations. In addition, invoices that came in for a partial quantity of a receipt were

considered for the entire receipt quantity. Moreover, additional types of invoices such as credit or debit

memos and mixed invoices were never considered for cost calculations. These inconsistencies resulted in

reconciliation issues.

Following are the changes introduced in the Oracle Process Manufacturing Cost Management application to

correct these issues:

• Modiﬁed the Actual Cost process to consider out of period, partial and credit or debit memo and

mixed invoices. The Actual Cost Process was modiﬁed to use the Invoice Price Variance (IPV)

amount to adjust the cost for price changes in out of period invoices.

• Added the proﬁle option GMF: Invoice Variance Transfer Method to Inventory In Actual

Costing to use either the entire IPV, or a portion of it based on the beginning balance to adjust

cost.

• Obsoleted the profile option GMF: Exclude Invoices that have no Receipts.

• Modiﬁed the Create Accounting process to book the invoice variance that is transferred to

inventory for all invoices that are either in or out of period.

• Added a new journal entry, Invoice Price Adjustment (IPA), to post the adjustment to inventory

from the transfer of IPV to inventory.

Changes to the Event Fiscal Policy

The OPM Accounting Pre-Processor uses the setting in the Event Fiscal Policy window for the Purchasing

Source to use the Item Cost, PO Price, or Invoice Price to book the INV account for receipts.

The following changes are made to proﬁle options as part of this enhancement:

• A new proﬁle option GMF: Invoice Variance Transfer Method to Inventory in Actual Costing is

added.

• GMF: Exclude Invoices which have no Receipts proﬁle is made obsolete.

The proﬁle option GMF: Invoice Variance Transfer Method to Inventory in Actual Costing is applicable

only for Actual Costing. The proﬁle has the following values:

• Apply whole IPV (Invoice Price Variance) and ERV (Exchange Rate Variance) to Inventory

(default)

• Apply IPV (Invoice Price Variance) and ERV (Exchange Rate Variance) based on Opening

Balance

This proﬁle option is effective only if the cost type is Period Moving Average Calculation or PMAC (only

in case of PMAC we have a period opening balance). For other cost types the actual cost process behaves

as if the proﬁle is set to the default value.

• When you select Transfer entire IPV to Inventory, all invoices, credit memos, and price

corrections that are applicable for the current period are used to adjust the PMAC cost of the

item.

• When you select Prorate IPV based on Opening Balance, the entire IPV of In period standard

invoices, credit or debit memos, and mixed invoices is used in cost calculation:

• For out of period standard invoices, the IPV is used in cost calculation based on the period

opening balance. The IPV is prorated based on the invoice quantity and the opening balance.

For example, if the beginning balance is 30 units and the invoice is for 60 units, then only

half of the IPV is distributed to the PMAC cost of the item.

o Out of period credit/debit memos are not used in the PMAC cost of the item.

o Out of period price correction is not used in the PMAC cost of the item.

Mixed Invoices with positive quantities are treated as standard invoices. Mixed Invoices with negative

quantity are treated as credit memos.

Note: The following proﬁle value combinations may not work correctly:

GMF: Include Receipt in Actual Cost = No

GMF: Include Invoices in Actual Cost = Yes

This combination would result in inventory and subledger value reconciliation issues. We recommend that

you do not use this proﬁle value combination.

Changes to the Actual Cost Process

The Actual Cost Process is modified to do the following:

Including Out of Period Invoices in Actual Costing

Out of period invoices that are now included in Actual Cost calculations. Based on the new proﬁle, entire or

part of out of period IPV is used in cost calculations. The Actual Cost process creates data for all the

processed invoices that are used by the OPM Accounting Pre-processor and Create Accounting process for

creating journal entries.

Including Additional Invoices (Credit and Debit Memos, Mixed and Price Correction

type of invoices) in Actual Costing

Previously, the Actual Cost process ignored additional invoices. This resulted in incorrect costs of items

and inventory reconciliation issues.

The Actual Cost process is modiﬁed to do the following:

Actual cost process considers all the In period additional invoices for cost calculation. Out of period

additional invoices are considered based on the proﬁle value you set (refer to the "Changes to Proﬁle

Options" topic).

Actual Costing of Partial Invoices

Previously, if partial invoices existed, the Actual Cost process used only the partial invoice for costing and

ignored the receipt, whereas the Create Accounting process booked INV account for the entire receipt

quantity at the receipt or invoice price according to the event ﬁscal policy option. This resulted in

reconciliation issues.

The Actual Cost process is modiﬁed to address this scenario as follows:

The invoiced quantity of a receipt is valued at invoice price and the remaining uninvoiced quantity is

valued at purchase order price.

If the invoice is matched to a Purchase Order we use all the receipts of the Purchase order in the current

period to ﬁnd the invoiced and uninvoiced quantity.

The actual cost support of invoices ﬂowchart is as follows:

Actual Cost Transaction View

The Actual Cost Transaction View window now includes a new source, Invoice IPV Adjustments.

Changes to the OPM Accounting Pre-Processor

Previously, the OPM Accounting Pre-Processor and Create Accounting Process never created journal

entries for Invoice Price Variances created due to differences between PO Price and Invoice price. The

OPM Accounting Pre-Processor and Create Accounting process is now modiﬁed to post the invoice price

variance amount transferred to inventory. The invoice data is collected and stored by the OPM Accounting

Pre-Processor. Based on the proﬁle value chosen by the user, the Actual Cost process calculates and stores

the IPV amount that needs to be transferred to inventory and uses it in cost calculations. The Create

Accounting process uses the IPV value transferred to Inventory to create an Invoice Price Adjustment

journal entry.

New Journal Entries for Invoice Adjustment

A new journal entry, Invoice Price Adjustment (IPA), is created to support the creation of journal entries.

A new event type, Invoice Price Transfer to Inventory (IPVX), is added:

The following table provides the IPVX Invoice

Refer to the “Accounting Methods Builder Process” topic of the Oracle Subledger Accounting

Implementation Guide for detailed information on defining and setting up IPV journal line types.

IPV Journal Entry Detail:

Type Code Description

11070 IPVX IPV Transfer to

Inventory

Journal Line

Type

Description

Sign

Maintain

Quantity

INV

Inventory

DR/CR

Yes

IPA

Invoice Price

Adjustment

DR/CR

There are no changes to the subledger postings for receipts and returns.

If the Create Accounting process is run for actual costing, then these changes are applicable. It is not

applicable for standard costing.

Example

The following tables show the PMAC cost and subledger postings:

Prior Period: There is no opening balance and prior cost.

Transaction

Qty

Price

Receipt 1

100

PMAC 5 = (0 + 100 * 5)/(0 + 100) Period Ending Balance 100

Current Period

Quantity

Prior Cost

Opening Balance

100

Transaction

Quantity

Price

IPV

Invoice 1

100

5.5

Matched to Receipt 1

IPV = 100 x (5.5 -

5.0)

Receipt 2

100 6 N/A

Invoice 2

100

6.4

Matched to Receipt 2

IPV = 100 x (6.4 -

6.0)

Invoice 2B (Credit

Memo)

-10

6.4

-4

Matched to Invoice 2

Invoice 2X (Price

Correction)

-20

Matched to Invoice 2

Receipt #3

100 7 N/A

Invoice #3

7.25

Matched to Receipt 3

for Partial Quantity

IPV = 60 x (7.25 -7)

PMAC 6.27 = [(100 * 5.0) + 50 + (100 * 6.0) + 40 + (-4) + (-20) + (100 * 7.0) + 15] / [100 + 100 + 100]

Period Ending Balance 300

The PMAC cost is calculated as follows:

(Prior Period Balance * Prior Period Cost) + (Receipt Quantity * Receipt Price) + IPV for

Invoices

PMAC Cost = -----------------------------------------------------------------------------------------------------------

Prior Period Balance + Receipt Quantity

Note: The above equation for PMAC cost only shows receipts and invoices. If adjustments, burdens, and

allocations are used, then they are calculated as always.

Create Accounting Process creates the following Journal Entries for Prior Period

The proﬁle option GMF: Invoice Variance Transfer Method to Inventory in Actual Costing, is set to

Transfer entire IPV (Invoice Price Variance) to Inventory.

The subledger postings are as follows:

Transaction

Journal Entry

Debit

Credit

Receipt #2

INV

500

ISP

500

Create Accounting Process creates the following Journal Entries for Current Period

Transaction

Journal Entry

Debit

Credit

Adjustment for Invoice 1

INV

IPA

Receipt 2

INV

ISP

600

Adjustment for Invoice 2

INV

IPA

Adjustment for Invoice

INV

IPA

-4

Adjustment for Invoice

INV

IPA

-20

Receipt 3

INV

ISP

700

Adjustment for Invoice 3

INV

IPA

Inventory Account Balance at the end of current period = 1881

Sum of all INV amounts Inventory Value at end of current period = 1881

Quantity x Cost = 300 x 6.27.

Note: The inventory account balances with inventory value.