How Landed Cost Management and Accounts Payable Accounting flow [ID 1310019.

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For Landed Cost Management, the accounts should be set up in the following hierarchy: Define Landed Accounts (can be expense or Accruals based on the business need) Landed Cost Account (parent) Landed Cost Absorption (Child) Invoice Price Variance a/c (Child) Exchange Rate Variance a/c (Child) Tax Variance a/c (Child) Default Charges a/c (Child) When the invoices are created in AP for LCM enabled receipts, the AP accrual account is debited. The Landed cost absorption account is used in Receiving to credit the difference between the PO price and the estimated landed cost. For reconciliation users need to run following 2 reports: AP-PO reconciliation report (in Costing) SLA Open Account balances listing for LCM absorption a/c (in SLA) My Note: When running the Open Account balances listing report, the parameter Report Definition has not LoV.

Taking an example: At PO creation Item PO Price: $9 (invoice matching: receipt) Tax set up; exclusive tax: 10%; recoverable rate: 50% Item cost (estimated): $9, Tax Non Recoverable $ 0.45 Freight (estimate): $1 Landed Cost calculation Item cost: $9/ each Tax (non recoverable): $0.45/each Freight: $1/each Estimated landed cost: $10.45/each In this case difference of $1 (10.45 -9.45) is credited to the Landed Cost Absorption account.

LCM ------For LCM only the below mentioned changes are proposed in AP: When the Invoices are matched to LCM receipts, the default account code combinations for certain accounts must be changed. These accounts are IPV, ERV and Tax variance accounts. For these Code Combinations, the default accounts must be derived and defaulted with the respective LCM specific account code combinations setup in the receiving parameters of Inventory Organization. For Freight, Miscellaneous and Tax Invoices matched to LCM receipts the account code combination must be defaulted to Charge Account setup in the receiving parameters of Inventory organization for LCM. This field must be non editable for invoices matched to LCM enabled shipments. AP ---From AP perspective we do not try to balance the Landed Absorption account. We still debit the accrual at the PO price and the difference goes to the LCM charge accounts for LCM enabled (instead of the normal accounts for IPV, ERV TRV etc.). You may need to take care as to what accounts they are giving at various level in the LCM screen and accordingly they need to reconcile. Please find the example: This shows how the accounting will happen and how the absorption account will be balanced. Following is the landed cost example with taxes Costing Method: average costing At PO creation Item PO Price: $9 (invoice matching: receipt) Tax set up; exclusive tax: 10%; recoverable rate: 50% At receipt: Receipt qty = 10 each Item cost (estimated): $9/each Freight (estimate): $1/each Landed Cost calculation Item cost: $9/ each Tax (non recoverable): $0.45/each Freight: $1/each Estimated landed cost: $10.45/each

Invoice Side Item Invoice comes at $110 (Item $100 + Tax $10, $5 recoverable and $5 non recoverable), and Freight Invoice $20 Actual Landed Cost = $125 (Item 105 + Freight $20), Unit LC = 12.5. Calculated by LCM and this creates a record in costing interface which is processed by costing to create adjustments) On hand at the time of Cost update is 5 each: Event Receipt Account AP Accrual (at PO price) Landed Cost Absorption Delivery Organization Inventory Valuation Receiving Inspection Item Invoice AP Accrual (Item Price on PO) AP Accrual (Non recoverable tax) $90 $4.5 $115 $115 Debit Credit $94.5 $10

Receiving Inspection $104.5

Tax Variance (Tax $0.5 Variance Account Provided by LCM will be defaulted here) Recoverable Tax IPV (Provided by LCM will be defaulted here) AP Liability Freight/Misc./ Tax Invoice Charge (Charge $20 Account Provided by LCM will be $5 $10

$110

defaulted here) AP Liability Landed Cost adjustment transaction: Receipt Receiving Inspection $20.5 = 10 * (12.5 10.45) Landed Cost Absorption Landed Cost Receiving Inspection adjustment transaction: Delivery Landed Cost Absorption Average Cost adjustment transaction (triggered by LCM Adjustment) Landed Cost Absorption $20.5 $20.5 $20.5 $20.5 $20

Organization Inventory Valuation Landed cost Variance

$10.25 $10.25

Regarding Actual Freight Invoice: When LCM is enabled the PPV is with respect to Landed Cost and not PO Price. So it doesn't matter if the PO price is same as Invoice price or not. For inventory the incoming cost is Landed Cost and the difference between landed cost and std inventory cost goes to PPV. When customer uses LCM they want inventory cost to be equal to Landed Cost in avg/fifo/lifo costing. When the customer uses the LCM with Std costing they expect Landed Cost = Inventory + PPV Now, in the example at the end of the cycle Landed Cost = 7300

Inventory std = 5000 so the PPV should be 2300 . When LCM is enabled the PPV is with respect to Landed Cost and not PO Price. So it doesn't matter if the PO price is same as Invoice price or not. For inventory the incoming cost is Landed Cost and the difference between landed cost and std inventory cost goes to PPV. According to the design currently by default in oracle apps what we have is for the example Landed COst = 7300 Inventory Std = 5000 Liability Cr (5,500+1800) = Cr 7300 Inventory Dr 5000 PPV Dr (500+300+1500)= Dr 2300 Landed Cost Absorption Cr (1500+1800) = Cr 3300 IPV DR 1500 LCM Default Charge Dr 1800 What normally customers do is have Landed Cost Absorption, IPV and LCM Default Charge account to point to same parent and do the reconciliation at the parent level so that the Total value at that parent level is 0. If the customer wants to have any change to this default behavior they should engage their technical contacts to have custom solution.