Intercompany Inventory Transfer Examples

Arm's Length Intercompany Inventory Transfer Example

This scenario illustrates an intercompany inventory transfer between two subsidiaries, U.K. and EU.

• The EU subsidiary is the destination subsidiary and submits a purchase order for inventory item with transfer price of EUR 200. The base currency of the EU subsidiary is EUR.

• The U.K. subsidiary is the source subsidiary and creates a corresponding sales order throught the Manage Intercompany Sales Orders page. The inventory item is accessible by both subsidiaries. In the U.K. subsidiary, the Cost of Goods Sold (COGS) amount for the item is GBP 100.

• The U.K. subsidiary (source) fulfills the order and ships the item.

• The EU subsidiary (destination) receives the item into inventory. On the Item Receipt, the receiving standard cost is EUR 160.

• The EU subsidiary records a vendor bill.

• The U.K. subsidiary creates a sales invoice.

The following table presents the general ledger impact for each of the posting transactions involved in the inventory transfer.

For more information about arm's length inventory transfers, see Intercompany Inventory Transfers -Arm's Length.

Arm's Length Intercompany Inventory Return Example

In this scenario, the EU subsidiary returns the item from the previous example back to the U.K. subsidiary. The return is a complete reversal of the accounting impact of the original transfer.

• The EU subsidiary creates a vendor return authorization to initiate the return. The vendor return authorization must be created from the original purchase order and be linked to it. It must be in the same currency as the original intercompany purchase order and sales order pair.

• The U.K. subsidiary creates the return authorization through the Manage Intercompany Return Authorizations page.

• The EU subsidiary returns the item and records an item fulfillment.

• The U.K. subsidiary receives the item and records an item receipt. The U.K. subsidiary restock the item or discard it as an expense.

• The EU subsidiary records a vendor credit.

• The U.K. subsidiary issues a credit memo.

The following table presents the general ledger impact for each of the posting transactions involved in the inventory return.

For more information about intercompany inventory returns, see Intercompany Inventory Returns -Arm's Length.

Intercompany Drop Ship Example

This scenario illustrates an intercompany drop ship order involving two subsidiaries, U.K. and EU.

• The EU subsidiary is the sales subsidiary selling an item to Customer that is to be shipped from a warehouse in the U.K. subsidiary. The base currency of the EU subsidiary is EUR. The EU subsidiary creates a sales order in the amount of EUR 200 and identifies the U.K. subsidiary as the vendor for the transaction.

• The EU subsidiary submits a purchase order for inventory item with transfer price of EUR 200.

• The U.K. subsidiary is the warehouse subsidiary and creates a corresponding intercompany sales order through the Manage Intercompany Sales Orders page. The inventory item is accessible by both subsidiaries. In the U.K. subsidiary the Cost of Goods Sold (COGS) amount for the item is GBP 100.

• The U.K. subsidiary fulfills the order and ships the order directly to Customer.

• The U.K. subsidiary creates a sales invoice to bill the EU subsidiary.

• The EU subsidiary marks the dummy fulfillment for the intercompany purchase order as Marked Shipped.

• The EU subsidiary creates a vendor bill from the intercompany purchase order to bill the U.K. subsidiary.

The following table presents the general ledger impact for each of the transactions involved in the intercompany drop shipment.

For more information about an intercompany drop ship order, see Intercompany Inventory Drop Ship.

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