Oracle Cost Management is a comprehensive solution that helps organizations project costs then performs cost accounting for supply chain transactions. These activities serve as a key component for complying with regulatory reporting and accounting requirements, for the streamlined use of working capital in organizations, and improved profitability for businesses. Oracle Cost Management is part of the Oracle E-Business Suite, an integrated set of applications that are engineered to work together.
Matching Cost of Goods Sold to 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 sales Order line to the revenue that is billed for that sales order line. Prior to this enhancement, the value of goods shipped from inventory were expensed to COGS upon ship confirm, despite the fact that revenue may not yet have been earned on that shipment. This enhancement synchronizes the recognition of revenue and COGS in accordance with the recommendations of generally accepted accounting principles.
The Cost Processor defers the recognition of COGS for a sales order issue transaction by placing the balance of the cost of the shipment into a deferred COGS account and journal line type.
Revenue Recognition Drives COGS Recognition
The Cost Processor now transfers the balance from the deferred account to the COGS account in the same proportion of revenue recognized for an order line.
• Oracle Receivables publishes a business event when the revenue recognition percentage changes.
• Oracle Cost Management subscribes to this event and adjusts the balances in the deferred and actual COGS accounts, ensuring that the COGS percentage equals the revenue recognition percentage.
Un-invoiced Order Lines
If a sales order shipment line does not get interfaced to Receivables, its associated deferred COGS balance is transferred to COGS when it is closed. Oracle Order
Management will raise a business event to Cost Management when the no interfaced shipment line is closed.
RMAs with Sales Order Reference
RMAs that reference a sales order shipment line with a deferred COGS balance will credit that balance when the accounting for the RMA receipt is performed. The credit will be apportioned between the deferred and actual COGS balances to maintain the existing revenue/COGS recognition percentage.
Drop Shipment Support
Revenue/COGS matching is supported in the customer-facing operating unit for drop shipments to customers. Intermediate (internal) operating units will not defer inter org COGS or match it to the inter-org revenue.
Support for Configured Items
Revenue/COGS matching is supported configured items.
• Assemble-to-Order (ATO) – synchronizes and matches revenue/COGS recognition for the top model.
• Pick-to-Order (PTO) –synchronizes and matches revenue/COGS recognition for any shippable item for its nearest invoice able parent, whether that is the item itself, the top model, an option, option class, etc.
Cost Ownership for RMA receipt transactions
This enhancement changes the way RMA receipts into inventory are valued.
Previously an RMA receipt replenishes inventory at the current on-hand inventory valuation. With this enhancement a referenced RMA is received into inventory at its original sales order issue cost. This ensures accurate and consistent revenue/COGS matching for RMA receipts.
Accounting Period Synchronization between Receivables and Costing
This enhancement introduces a dependency in the Receivables and Costing period close processes. Since the goal is to match revenue and COGS in each accounting period, Costing will process COGS recognition events in a closed inventory period until the Receivables period status is set to CLOSED.
Deferred COGS Reconciliation Report
This report lists revenue/COGS matching by sales order line, displaying the deferred/ actual COGS balances as well as the unearned/earned revenue balances. The report flags lines where the COGS recognition percentage does not match the revenue recognition percentage.
SLA - Subledger Accounting
The new Oracle Subledger Accounting (SLA) architecture allows users to customize the standard Oracle accounting entries. As a result of Cost Management’s uptake of this new architecture, users can customize Receiving, Inventory and Work in Process transactions.
Accounting entries are generated in a manner consistent with previous releases but are now created within the framework of the new Subledger Accounting architecture. This allows customers to leverage the following SLA features:
Flexible Journal Entry Setups
Users can control every aspect of the subledger journal entries associated with a sub ledger transaction. Users can define rules based on data drawn from sub ledger transactions, controlling which types of journal lines are created, how accounting flex fields are derived and how journal entries are described.
Multiple Accounting Representations
Using multiple accounting representations, users can generate journal entries to multiple accounting ledgers. Each accounting representation generated for a Legal
Entity could represent alternate accounting for the underlying subledger transactions.
Each accounting representation may use different charts of accounts, calendar and sub ledger accounting method. If a transaction-level alternate currency is used the accounting representation may also have different accounting currencies.
Inquiries, Drilldown, and Reporting
Based on its common data model, SLA provides detailed subledger accounting reports and inquiries that satisfy local fiscal and business requirements for the reconciliation between sub ledgers and accounting transactions
Previously, users could customize certain aspects of the standard accounting in Cost
Management using distribution hooks. These customizations will need to re implement their extensions within SLA to maintain their customized accounting behavior.
Accrual Reconciliation and Write-Off Enhancements
The Accrual Reconciliation report and the associated Write-Off process are enhanced to improve processing performance and feature usability.
Enhanced Load Program
• The transaction data load process is run independently from the Accrual Reconciliation report generation process.
• Data for balanced accrual transactions are no longer stored. This significantly reduces the volume of generated data increases processing performance.
• Users may optionally refresh the accrual data. Rather than reloading all data during each run of the load program users can restrict the data load to data that has changed since the last run.s
Flexible Accrual Reconciliation Reports
• Three new Accrual Reconciliation reports are available.
• The Accrual Reconciliation Summary Report allows users to view the accrual accounts with outstanding balances. For each account the accrual balance by transaction type is displayed.
• The Payables and Purchase Order Accrual Reconciliation Report allow users
to view Payables and PO transactions at the PO distribution and/or transaction level. At the PO distribution level the report shows the summarized balances from each transaction source. At the transaction level the report shows the details of all transactions within a distribution.
• The Miscellaneous Accrual Reconciliation Report allows users to view the
Inventory and miscellaneous Payable transactions in an accrual account.
• All the reports are generated using Oracle XML Publisher technology that facilitates report customization and allows accrual data to be exported to a spreadsheet for further analysis.
Enhanced Write-Offs Process
• Three new accrual Write-Offs forms allow users to write-off aged or erroneous accrual balances.
• The Payables and Purchase Order Write-Off form displays accrual balances at the PO distribution level. The user can select a specific distribution and view the associated transactions for that distribution.
• The Miscellaneous Write-Off form is similar to the 15.10 version that lists ungrouped transactions and allows users to select individual transactions for write-off.
• Both forms allow users to select all transactions displayed in the query form facilitating the mass write-off of transactions.
• The View Write-Offs form allows users to view and reverse written-off transactions.
• A redesigned write-off report allows users to view write-off amounts and their associated transactions.
• All of the forms generate write-off accounting entries that are transferred to the General Ledger The Periodic Costing Process is enhanced in the following areas:
Accounting for Inter-Organization Transfers
• The accounting template for periodic costing inter-organization transfers is now consistent with the template used for perpetual cost methods. The template adds inter-org Payables/Receivables, in-transit and accounting by cost group.
• The Periodic Costing accounting template for internal sales order transfers across Operating Units is now consistent with the template used for perpetual cost methods. The template adds inter-org COGS and accrual using a specified transfer price.
Enhanced Periodic Costing Algorithm
• The periodic item cost is calculated after taking into account all cost owned transactions rather than being calculated after each transaction. This enhancement produces a more accurate periodic item cost and minimizes the generation of variances.
• The Periodic Item Cost Change report provides details on the calculation of each item’s period end cost.
Enable MOH Absorption Rules for PAC
• Material overhead absorption rules are now supported in periodic average cost organizations.
Periodic Costing Support for EAM
• Enterprise Asset Management work orders are now supported in periodic average costing organizations.
• The Periodic Cost Estimations processor allows users to estimate EAM work order costs based on an item’s periodic average cost.
• The Periodic EAM Work Order Report can be used to compare estimated charges against the actual charges incurred for each EAM work order.
Support for Final Completion
• Periodic average cost processes respect the WIP job final completion flag. If the final completion flag is checked, all incurred costs will be absorbed into the completion cost.
Completion Costs Based on Required Quantity
• Users can optionally base the completion costs on the required quantity defined on the job’s Bill of Material rather than the actual quantity issued to the job.
• When the completion cost is based on actual quantity, unrelieved scrap values are absorbed into the completion cost.
• When the completion cost is based on required quantity, unrelieved scrap values are absorbed into the completion cost only when the final completion flag is checked
Value Reports Enhancements
On-hand, in transit, and Receiving valuation reports have a new optional ‘as-Of
Date’ parameter. When the user specifies an as-of date, the reports display valuation data up to the specified ‘As-Of Date’. If no date is specified, the report displays valuation data up to the current system date.
The submission process for existing value reports is consolidated to reflect whether the report displays value by sub-inventory or by cost group. Users of the existing reports will now run the corresponding reports listed in the New Report column.
Old Report New Report
Inventory Value Report Inventory Value Report – by Sub inventory
Inventory Value Report – Warehouse
Inventory Value Report – by Cost Group
All Inventories Value Report All Inventories Value Report – by
All Inventories Value Report – Average Costing
All Inventories Value Report – Warehouse
All Inventories Value Report – by Cost
Elemental Inventory Value Report Elemental Inventory Value Report – by
Elemental Inventory Value Report – Average
Elemental Inventory Value Report –
Elemental Inventory Value Report – by Cost
The Receiving Value by Destination Account Report, Sub inventory Account Value
Report and Cost Group Account Value Report are now obsolete.
Period Close Diagnostics
The period close process is enhanced to allow users to easily identify the pending and
UN costed transactions that prevent period close.
The existing Inventory Accounting Periods form now supports drilldown to the associated transaction forms. This allows users to more quickly view the details of the transactions that preventing period close.
Workflow to Notify Users of Errors in Costing
A new workflow notifies users of transactions that fail the costing process. This facilitates the timely identification and resolution of costing errors and minimizes problems during the period close process
Period Close Pending Transactions Report
This new report displays the details of all transactions preventing period close. This report, based on Oracle XML Publisher technology can be easily customized to meet user requirements.
Discrete/ OPM Inventory Convergence
Oracle Cost Management adds its support to the OPM (Oracle Process Manufacturing) Inventory convergence initiative. In the past, Oracle process manufacturing customers used OPM’s
Inventory Management module. With this release OPM customers can migrate to Oracle Inventory for their inventory management needs.
This integration provides OPM users with a seamless integration to the e-Business Suite while maintaining the existing user experience for discrete users. It is important to note that the discrete Oracle Cost Management Costing and OPM Process Costing applications are not converged and remain distinct applications.
• Oracle Cost Management forms, concurrent programs and reports are modified to prevent an OPM organization user from accessing discrete costing setup forms, reports and other programs. This validation is needed to ensure that process transactions are not accounted for in both the discrete and process costing applications.
• Material transfers between process and discrete inventory organizations are costed based on a specified transfer price. A new “Inter org Profit/Loss” account, captures the difference between the sending organization’s periodic cost and transfer price.
For more details on OPM Inventory Convergence, please refer to the Oracle Process Manufacturing Release Content Document.
Fixed Component Usage Support
This enhancement adds support for lot-based materials that have a fixed usage regardless of the job size for discrete WIP jobs, OSFM lot-based jobs and Flow Manufacturing. This feature provides a more accurate valuation of assembly cost where fixed quantities of materials are used for a job.
For more details on this feature, please prefer to the Work in Process section of this document.
Component Yield Support
Users now have the flexibility to control the value of component yield factors at WIP job level. The transaction logic now considers pre-yield BOM quantity per assembly rather than the quantity inflated by shrinkage. This enhancement eliminates the generation of unrealizable decimal quantities in WIP jobs.
Users can continue to have the back flush transactions include the yield by using the new “Include Component Yield” parameter in the WIP Parameters form. If the parameter is unchecked, back flush transactions will not consider component yield. The user can control the actual quantities used by either overriding the quantity during back flush transactions or by entering manual component issue transactions.
For more details on this new feature, please refer to the Work in Process section of this document.
Period End Accruals Enhancements
Enhancements to the Period End Accruals program and the UN invoiced Receipts report provide performance and usability improvements.
Calculate Accrual Balances at PO Distribution Level
• In prior releases, the period-end accruals process calculated an accrual amount at the PO shipment level and prorated it among its associated accounting distributions. In this release the accrual amount is calculated at the accounting distribution level more accurate accrual accounting entries.
• The Period End Accruals program and the UN invoiced Receipts report now use a common API. This change eliminates differences in calculated amounts in the two processes.
• The Un invoiced Receipts report layout now displays the accrual amount, received quantity, billed quantity and unit price at the PO distribution level.
The sum of these accrual amounts along with PO currency and functional currency is displayed at the PO shipment level.
• The period end accruals process in Periodic Costing is modified to calculate accrual balances at the PO distribution level.
Exclude Prepayment type of Invoices
• The period end accruals program and the UN invoiced Receipts report process now correctly exclude factor prepayments in the accrual calculations.
Ledger Architecture/Legal Entity uptake
Oracle Cost Management processes are enhanced to support the new Ledger and Legal Entity architecture. In this new architecture, Ledgers replace Set of Books. Each Operating Unit is associated with a Primary Ledger. Multiple Legal Entities can be tied to a Ledger through the accounting set up flow. The existing link between Operating Unit and Legal Entity is no longer be maintained. For more details on this new feature, please refer to the Oracle Financials Release Content Document
Multi-Org Access Control
Multi-Org Access Control enables companies that implement a Shared Services operating model to efficiently process business transactions by allowing them to access, process, and report on data for an unlimited number of operating units within a single applications responsibility. This increases the productivity of Shared Service Centers as users no longer have to switch applications responsibilities when simultaneously processing transactions for multiple operating units. Data security is maintained using security profiles that are defined for a list of operating units and determine the data access privileges for a user. For more details on this new feature,
Cost Rollup Enhancements
Creating Snapshot of Bill of Materials
The Supply Chain Rollup process is enhanced to optionally store a snapshot of the
Bill of Materials used. The snapshot is copied to an alternate Bill of Material as specified by the user
Decommission Assembly Cost rollup
• Assembly Cost Rollup is obsolete and replaced by the Supply Chain Cost Rollup process.
• The Consolidated Bill of Material report and the Indented Bill of Material report that are based on the Assembly Cost Rollup are now obsolete. These are replaced by the Supply Chain Consolidated Bill of Material report and the Supply Chain Indented Bill of Material report.
EAM Direct Item Delivery of PO Service Lines
Oracle Cost Management now supports direct item delivery of service line types to
EAM work orders. There is however no support for Outside Processing.
Install Base Convergence
The Cost Estimations process and the Cost processor are enhanced to support the mapping between an EAM Asset and an IB Instance.
EAM Budgeting and Forecasting Support
In prior releases costs calculated by the cost estimations process are stored on the basis of maintenance cost buckets:
This method of bucketing estimated charges does not provide visibility as to the GL accounts being charged. The Cost Estimations process is modified to specify the GL accounts that are setup to be charged. This information can then be used for budgeting and forecasting purposes.
For more information on these features, please refer to the Enterprise Asset Management section of the Oracle Maintenance Management Release Content Document.
Costing Support for Chargeable Subcontracting
Oracle Cost Management now supports costing for Chargeable Subcontracting.
Chargeable Subcontracting is a concept used in Japan, Korea and Taiwan with subcontract manufacturers. On delivery of OSA items any difference between current standard cost and OSA price is posted to a Chargeable Subcontracting Variance account instead of a Purchase Price Variance account.
Payables Invoice Lines Architecture
Oracle Cost Management adds support for the architectural changes introduced by Oracle Payables in this release. The Period-End Accruals, Accrual Reconciliation and Periodic
Costing processes and the associated reports are enhanced to support the new Payables architecture.
For more details on the new Oracle Payables technical architecture, please refer to the Oracle Payables Release Content Document.
Bonus during Moves
Oracle Cost Management adds support for the new Bonus during Move transaction introduced by Oracle Shop Floor Management. This OSFM feature allows an operator to enter the progress of a job in terms of bonus, scrap and good quantity at each operation.
The Bonus transaction entered during a move is costed in the same manner as an Update Quantity transaction.
For more details on the new transaction, please refer to the Shop Floor Management section of this document.
Job Close in PL/SQL
In this release, the job close program and the job close variance program are migrated from Pro*C to PL/SQL. This enhancement provides performance improvements but does not change job close functionality.