Generate Intercompany Invoices for Internal Sales Orders with Intermediate Nodes
The system now generates intercompany invoices for internal sales orders (ISOs) with intermediate nodes. This means that:
When an internal sales order involving physical movement of goods is placed between organizations in different operating units, financial transactions may flow across multiple internal operating units (nodes) within the larger corporate structure. Each intermediary node generates an invoice to the next organization in the chain, effectively requiring each transfer of ownership to be accounted for with separate intercompany invoices at the appropriate transfer price. In addition to the inventory accounting of the physical intercompany shipment and receipt transactions, the logical transactions representing the financial flow will also be appropriately accounted at the transfer price between the nodes. Return logistics between the operating units with intermediate nodes will be managed with reversal in inventory accounting and invoicing. Intercompany invoicing now supports intermediate nodes for both customer sales orders and internal sales orders.
Accounting for Intercompany Transfers with Intermediate Nodes:
When intermediate logical nodes are present, transfer pricing accounting works as follows:
- Accounting is always performed at the transfer price; the CST: Transfer Pricing Option profile is not considered.
- The transfer price used is always between each pair of neighboring nodes; the transfer price between the final physical organizations is irrelevant.
- If the FOB point is shipment, ownership transfers from the Shipping OU to the Receiving OU at shipment, and all logical transactions are generated at that time.
- If the FOB point is receipt, ownership transfers from the Shipping OU to the Receiving OU only upon receipt, and all logical transactions are generated with the receiving transaction.
Example:
Cost in shipping org in OU1: $10
Transfer Price:
- from OU1 to OU2: $11
- from OU2 to OU3: $12
- from OU3 to OU4: $13
Accounting Entries for Intercompany Transfers with Intermediate Nodes and FOB Shipment
| Transaction | OU1 (Physical Shipping OU) | OU2 (Logical) | OU3 (Logical) | OU4 (Physical Receiving OU) |
|---|---|---|---|---|
| Intercompany Shipment |
Cr Inventory $10 Dr Intercompany COGS $10 |
Dr Intransit $13 Cr Intercompany Accrual $13 |
||
|
Logical Intercompany Sales Issue |
<No Accounting> |
|||
|
Logical Intercompany Shipment Receipt |
Dr Inventory $11 Cr Intercompany Accrual $11 |
|||
|
Logical Intercompany Sales Issue |
Cr Inventory $11 Dr Intercompany COGS $11 |
|||
|
Logical Intercompany Shipment Receipt |
Dr Inventory $12 Cr Intercompany Accrual $12 |
|||
|
Logical Intercompany Sales Issue |
Cr Inventory $12 Dr Intercompany COGS $12 |
|||
|
Logical Intercompany Shipment Receipt |
<No Accounting> |
|||
|
Intercompany Receipt |
Cr Intransit $13 Dr Inventory $13 |
Steps to Enable
For additional Inventory setup details, refer to the Inventory Management What's New document.
A new site level profile INV: Create Logical Transactions for Intercompany Internal Sales Orders has been introduced with the default value of NO. To enable this feature, set the profile value to YES.
Profile to Create Logical Transactions for Intercompany Internal Sales Orders
Key Resources
- Oracle E-Business Suite News and Information: oracle.com/ebs
- Oracle E-Business Suite Product Documentation: https://docs.oracle.com/cd/E26401_01/index.htm
- Oracle University: https://www.oracle.com/education
- Oracle Support: https://www.oracle.com/support