r12.1 Om c15 Deffered Cogs v1.0

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Supply Chain Management (SCM) Boot Camp
Order Management - Understanding Deferred Revenue and COGS
Accounting
Agenda
Understanding Deferred Revenue and COGS accounting
Steps involved in Deferred Revenue and COGS accounting
Understanding Deferred Revenue and COGS
accounting
The basic fundamental behind the enhancement is that the COGS is
now directly matched to the Revenue.
The Matching Principle is a fundamental accounting directive that
mandates that revenue and its associated cost of goods sold must be
recognized in the same accounting period.
This enhancement will automate the matching of Cost of Goods Sold
(COGS) for a sales order line to the revenue that is billed for that sales
order line.
Deferred Revenue and COGS accounting
Step:1
When a Sales order is shipped the following accounting takes
place:
Inventory Valuation Account: Credit.
Deferred COGS account: Debit
Once the revenue is recognized, the user need to decide the
percentage he/she wish to recognize to the Revenue.
A COGS recognition transaction will be created to reflect a change
in the revenue recognition percentage for a sales order line.
Step:2
Run the Collect Revenue Recognition Information program. This
program will collect the change in revenue recognition
percentage based on AR events within the user specified date
range.
Step:3
Run the Generate COGS Recognition Events. This program will
create the COGS recognition transaction for each sales order
line where there is a mismatch between the latest revenue
recognition percentage and the current COGS recognition
percentage.
Step:4
The distribution for the COGS Recognition transaction
associated with the Sales Order transaction now would be as
follows:
Deferred COGS: Debit revenue percentage
COGS: Credit (Actual revenue percentage)
Step:5
Essentially the recognized COGS balance is to move the value
from Deferred COGS to COGS. This particular COGS
recognition transaction actually correspond to a revenue
recognition percentage change.
Navigate to: Cost > View Transactions > Material
Transactions > Distributions to view the Transactions.
Step:6
Once the whole cycle is complete Distributions for the
transaction will have 2 lines:
Transaction 1:
Inventory Valuation account: Credit. (Item_cost)
Deferred COGS account: Debit (item_cost)
Transaction 2:
Deferred COGS: Credit (Actual revenue percentage)
COGS: Debit (Actual revenue percentage)

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For Oracle employees and authorized partners only. Do not distribute to third parties.

2009 Oracle Corporation Proprietary and Confidential

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