BCS Interunit elimination of sales/COGS

[Former Member]

Hi Experts,

When the Inter unit sales is autoamatically eliminated against the COGS, how can we make sure that appropriate amount is correct. This is in scenario when the fully interunit sales may not have been sold by other interunit who is receiving the items.

We cannot assume that full sales amount is the correct one to be eliminated and sold by the other counterpart.

Regards,

Shivaji

[Former Member · Accepted solution]

Hi Shivaji,

Please do not repeat your question several times. The one is enough.

Your question, at least for me, is too vague. Please formulate it more clearly. Example would be most appropriate.

BTW, the SEM-BCS-related questions you may post now in BPX-CPM forum.

[Former Member · Accepted solution]

Hi experts,

I will explain this by example.

A company has sold 100000$ worth of inventory to partner company B.

Out of this B has only sold 80000$ worth of inventory to outside customer.

When the automatic IU elimination of sales vs COGS happens, how do I ensure that only 80000$ is eliminated and not the full $100k?

Can some one explain how the IU sales vs COGS elimnation happens?

Regards,

Shivaji

[Former Member · Accepted solution]

Hi,

Actually, in these operations there are two types of eliminations: unrealised sales/COGS and unrealised profit in inventory. Which one do you mean?

[Former Member · Accepted solution]

I was referring to Sales / COGS.

[Former Member · Accepted solution]

So, it passed more than 2 month after your last reply. You might get more knowledge in the subject.

Could you now formulate exactly your question?

[dan_sullivan · Accepted solution]

The elimination method may be triggered by including the Sales account(s) in the method and posting the "differences" to the COGS accounts. This ensures that the 100000$ sale is eliminated with the offset to COGS. As B purchased the inventory for this amount the elimination is correct accounting. Therefore what remains and is not eliminated is company B's sale of 80000$, plus A's true cost (COGS). This is the correct way to account for this.

[Former Member · Accepted solution]

Hi Shivaji,

As far as I understand,

I think that you tried to do following journal when you do Elimination of Sales/COGS :

Sales 80K

-> COGS -80K

And when you do the Elimination of Inventory (Unrelized profit), you will adjust the Sales and COGS again like following (I assumed the gross profit = 10%):

Sales 20

-> COGS -18

-> Inventory -2 (10% * 20)

If I combine those journal, here they are :

Sales 100

-> COGS -98

-> Inventory -2

<b>It can be done in accounting concept.</b>

<u>But in BCS system, here is how they will be handled :</u>

When you sold 100.000 within company group, You have to eliminate this sales when you do the consolidation because this is ilegal.

So you should eliminate the full of 100K

(Because you define in RFD that A has partner unit B for ITEM Sales 100K, but B has no partner unit in A since B sold the inventory to outside customer. Elimination in system only will eliminate both A and B if they match each other. SO system only take 100K worth in A to be eliminate)

Journal as follow :

Sales 100

-> COGS -100

On the other hand,

B has 100K of COGS (because A sold to B). And then B sold 80K worth to outside customer. So now, B only has 20K of Inventory. This will be handle in Elimination of unrealized profit).

Journal as follow :

COGS 2 (unrealized profit)

-> Inventory -2

<i>If i combise those journal,

the result will be the same as the accounting concept.</i>

Hope this helps and solve your problem.

[Former Member · Accepted solution]

Hi U-one,

Could you tell me which functions do you use for this scenario?

Interunit Profit/Loss in Transferred Inventory ?

Thank you,

Jeff

[dan_sullivan · Accepted solution]

A feature of BCS includes Profit/Loss in Inter-Unit Inventory is available, but must be activated in the databasis and cons area to open access to the customization for this.

[Former Member · Accepted solution]

hi Jeff,

Yes, it is using Interunit Profit/Loss in Transferred Inventory to calculate unrealized profit.

[Former Member · Accepted solution]

Well done, U-one!

Though, a little correction: two scenarios. One is IPI as you mentioned. The 2nd one is elimination of revenue and COGS.