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Former Member

COGS Deferral in Dropshipment sales scenario


We have a scenario where COGS needs to be deferred in case of dropshipment because we are NOT only selling the components but we also render services along with product sales. In some contracts, we agreed to invoice our customer after the component is installed and services are completed. Here is the overview of the process:

1. CC1000 is the Sales Company and CC2000 is the manufacturing unit.

2. Sales Order is created in CC1000 and items requirements are gnerated in CC2000.

3.CC2000 manufactures the goods and does PGI as well. This is COGS in CC2000.

4. CC2000 creates an intercompany invoice to CC1000 and that posts COGS to CC1000 though EDI/IDOC process.

5. But we donot invoice the customer here, instead our service team starts working on installation of the component.

6. Once component is installed then billing will be generated for the client.

Now there is time lag between step 4 and step 6 when COGS is incurred but no revenue is posted. From matching principle point of view, we want to defer the COGS or move it into WIP untill we get the revenue posted.

Please share your views if you have come across such scenario or any suggestions.


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