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Transfer pricing for intercompany transfers

Discussion in 'Oracle SCM & Manufacturing' started by springtime, May 3, 2016.

  1. springtime

    springtime Active Member

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    Hi all

    I am dealing with an issue regarding transfer pricing. I have a Purchase Order and Receipt for an item.

    This item was shipped from one org in Asia to an Org in the same company in Canada. Its an intercompany order. But the accounting for the receiving of this item shows the transfer price(3.78), whereas the unit price in the Purchase order is show in in the invoice (3.15).

    Can anyone help me with how transfer pricing is calculated or set? How the INTERCOMPANY_PRICING_OPTION is set to use the PO price or the transfer price?

    Thanks
    Anjali
     
  2. Rabih

    Rabih Premium Member

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    I think you need to do a Direct Inter-Org without receiving to have the actual price on the transfer come up in the receiving organization. A normal Inter-Org with receiving takes the cost of the shipping organization (at the time of receiving) and applies it on the date of receiving. So even when you ship at 3.15 and wait a few weeks to receive in the receiving organization you will get the new cost from the shipping organization. A direct Inter-Org does not require receiving and applies the cost exactly as is from shipping organization. Otherwise, current average or standard cost from shipping organization multiplied by transaction quantity plus freight charges and transfer credit charges is applied with the transfer. That's probably why you see 3.15 change to 3.78. For a direct receipt, the organization that receives the material does not perform a transaction. The shipping organization performs a ship transaction to the receiving organization. Inventory considers the transfer a receipt in the receiving organization and updates the cost as is from the shipping organization.

    Hope that helps.
    Rabih
     
  3. springtime

    springtime Active Member

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    Thanks for your reply. This helps me understand!