Managing Transfers

This chapter provides an overview of interunit transfers and describes how to:

• Set up interunit transfers.

• Define transfer prices.

• Establish inventory business unit pairs.

• Review interunit accounting examples.

Understanding Interunit Transfers

When you maintain warehouses and plants all over the world, you must be able to transfer goods among these locations and account for transfer costs, currency changes, taxes, and invoicing for business units involved in the transfer. In PeopleSoft Inventory, a transfer of stock between two inventory business units is known as an interunit transfer. There are three approaches to interunit transfers:

Note. This chapter discusses transferring stock between two Inventory business units. For information on shipping stock to internal departments or on behalf of another GL unit, see the Cost Management PeopleBook, Designing Inventory Accounting chapter. Read the sections “Designing Shipment On Behalf Of” and “Creating and Reversing Interunit Expensed Issues.”

This diagram illustrates the flow of an interunit transfer using only an intransit account:

Interunit transfers using only an intransit account

If the inventory business units transferring stock are linked to the same GL business unit, the system does not generate any affiliate interunit transactions. The intransit account must be defined as belonging to the source or destination business unit.

This diagram illustrates the flow of an interunit transfer with interunit receivables and interunit payables accounts when the source unit owns the intransit stock:

Interunit transfers with interunit receivables and interunit payables accounts when the source unit owns the intransit stock

In a transfer where the inventory business units are linked to two GL business units that may be part of the same legal entity, entries are recorded in the interunit receivables and payables accounts. Affiliate accounting is used and the interunit receivables affiliate and interunit payables affiliate entries should equal each other.

This diagram illustrates the cost flow of an intercompany sales transaction:

Intercompany sales approach

In an intercompany transfer, the inventory business units transferring stock want to transfer inventory in an “arm’s length” manner. In this case, an intercompany sale is recorded. The destination inventory business unit must be defined as a customer and the source GL business unit must be defined as a vendor. The billing business unit linked to the source inventory business unit performs the additional tasks of calculating value-added taxes (VAT), invoice generation, legal shipping documentation, accounting line creation, and voucher initiation. The AP voucher is recorded in the interface tables of the destination payables business unit where it can be processed and paid.

See Also

Transferring Stock Between Business Units

Defining Default Storage Location Structures and Attributes

Establishing InterUnit and IntraUnit Billing

Defining Additional Common Information

Understanding PeopleSoft ChartFields

Common Elements Used in This Chapter

Setting Up Interunit Transfers

PeopleSoft provides detailed instructions on setting up the system for interunit transfers.

See Setting Up Interunit and Intercompany Transfers.

Defining Transfer Prices

To define transfer prices, use the Item Transfer Price and Item Price Markup components. Use the STD_PRICE_INV_CI and MARKUP_PCT_INV_CI component interfaces to load data into the tables for these components.

This section provides an overview of how to transfer prices and discusses how to:

• Change an item's transfer price.

• Increase the cost of inventory stock.

Before transferring stock between business units, determine the method to use for valuing the intransit stock. Use the InterUnit Transfers/Expenses group box on the Fulfillment Setup page to make the selection. The transfer price can be changed manually on any line of a material stock request.

There are four different methods to value an interunit transfer:

• At Cost

  The system transfers the item at its cost in the source inventory business unit. This is the default method if you do not establish a transfer price, markup percentage, or if you select zero cost. If the item is using actual cost, the system uses the current value of the default actual cost from the Define Business Unit Item - General page. Average-cost items are transferred at the current average cost and standard-cost items are transferred at the current standard cost for the item.

• At a Transfer Price

  The system uses a fixed transfer price as the default for material stock requests. You can define the transfer price on the Item Transfer Price page. You can change the transfer price on any line of a stock request. If the transfer price differs from the item's cost (standard, weighted average, or actual) in the source inventory business unit, the system recognizes the gain or loss on the transfer.

• At a Percent Markup of Cost.

  The system creates the transfer price by increasing the cost of the inventory stock by a percentage markup. The material stock request uses the markup prices as the default, but you can change the transfer price on any line of a stock request. Define the percentage increase on the Item Price Markup page. For the source inventory business unit, a gain is recorded for the difference between the marked-up transfer price and the cost of the item.

• At Zero Cost.

  The system values the intransit stock at zero. The zero cost method records the entire cost of the stock in the source business unit’s interunit transfer gain or loss account. You can use this method for the shipment of promotional or sample items. Select the Transfer at Zero Cost check box on the Fulfillment Setup page (for the entire Inventory business unit) or manually on the Material Stock Request - Accounting/Interunit Detail page or the Express Issue - Detail Override/Exceptions page. You can also select this check box on the Par Location Definition - Line Details page for issues to the par location.

Recording Gain or Loss for the Source Business Unit

When processing an interunit issue or receipt, the Transaction Costing process (CM_COSTING) determines any difference between the item’s cost and the transfer price. For an interunit transfer, the typical shipping accounting entry debits the intransit inventory account at the item’s transfer price and credits the inventory account at the item’s cost. Any difference between the transfer price and cost creates an additional entry associated with Transaction Group 300 (gain or loss on transfer price).

Recording Gain or Loss for the Destination Business Unit

When an interunit receipt is processed for the destination (receiving) business unit, any gain or loss is calculated for standard costed items only as a gain or loss on interunit transfers (300). For items using the average costing method, the transfer price is weighted into the new average cost for the item in the destination business unit. For items using the actual costing method, the transfer price becomes the actual cost for the receipts at the destination business unit.

See Also

Defining Basic Fulfillment Defaults

Pages Used to Define Transfer Prices

Changing an Item's Transfer Price

Access the Item Transfer Price page.

The system uses a fixed transfer price as the default on the material stock request. You can change the transfer price on any line of a material stock request:

• When shipping the stock from the source unit, if the transfer price differs from the item's cost (standard, perpetual average, periodic average, or actual), then the system recognizes the gain or loss on the transfer.

• When receiving the stock in the destination unit, the transfer price is used as the purchase price. For receipts:

  • If the item uses the actual receipt cost method, then the transfer price is used as the receipt cost of the item.

  • If the item uses the standard receipt cost method, then the system uses the standard cost to value the receipt and calculates a gain or loss.

Using the Item Price Markup Page

Access the Item Price Markup page.

The system can create the transfer price by increasing the cost of the inventory stock by a percentage markup. The system uses this markup price as the default on the material stock request, but the user can change the transfer price on any line in the stock request. Define the percentage increase on this page. For the source inventory business unit, a gain is recorded for the difference between the marked-up transfer price and the cost of the item. The system uses the transfer price as the purchase price for the receiving inventory business unit. For items using the average costing method, the transfer price is weighted into the cost of the item. For items using the actual costing method, the system adds a record for the quantity received at this marked-up transfer price. For items using the standard costing method, the system uses the standard cost to value the receipt and calculate a gain or loss.

See Also

Defining Basic Fulfillment Defaults

Establishing Inventory Business Unit Pairs

This section provides an overview of how to establish inventory business units and discusses how to define inventory business unit pairs.

The inventory pairs method enables you to define some of the parameters used by interunit transfers at the inventory business unit level. The remaining parameters are derived from the centralized interunit and intraunit processor. To use the inventory pairs method, select Use IN BU Settings Only or Use Both on the Installation Options - Inventory page.

See Selecting an Interunit Accounting Method for Stock Transfers.

Page Used to Establish Inventory Business Unit Pairs

Creating an Interunit Pair in PeopleSoft Inventory

To define interunit transfer pairs, use the InterUnit Transfers Accounting component. Use the InterUnit Transfer Accounting component interface (INTERUNIT_DEF_INV) to load data into the tables for this component.

Access the InterUnit Ownership page.

If you select Use Both or Use IN BU Settings Only on the Installation Options - Inventory page, then you are using the inventory business unit pairs for some or all of the interunit transfers. If you select Use IN BU Settings Only, you must define all business unit pairs on this page. If you select Use Both, you only need to define the inventory business unit pairs on this page when the intransit account is dependent on the inventory unit, not the GL unit. For pairs not defined on this page, the processes look to the interunit pairs in the centralized interunit and intraunit processor.

See Also

Understanding Interunit Transfers

Using the Cost Elements Page

Setting Up Interunit and Intercompany Transfers

Reviewing Interunit Accounting Examples

These examples illustrate the accounting entries that you can create when using the three different types of interunit stock transfers:

Transferring Interunit Stock Using Only an Intransit Account

This example illustrates a stock transfer from inventory business unit US012 to inventory business unit US013. Both of these business units post to the same general ledger, and in this case, US012 owns the intransit inventory until it is received at the requesting business unit.

Example 1.1

The setup looks like this:

The accounting entry for the shipping transaction at USO12 looks like this:

If the location accounting check box is clear in the source business unit, the inventory credit account is derived from the Accounting Rules page (Account Distribution page) for the Inter Business Unit Transfer Shipments Transaction Group (031). If the location accounting check box is selected, the credit account is derived from the storage area from which the inventory is shipped. In either case, the debit account is always the intransit inventory account defined for the inventory business unit combinations on the InterUnit Ownership page or from the intransit account defined in the centralized interunit and intraunit processor. No affiliate interunit transactions are generated for US003.

The accounting entry for the receiving transaction at US013 looks like this:

If the location accounting check box is clear in the source business unit, the stores inventory debit account is derived from the Accounting Rules page (Account Distribution page) for the Inter Business Unit Transfer Receipts Transaction Group (022). If the location accounting check box is selected, the debit account is derived from the storage area to which the inventory is received. In either case, the credit account is always the intransit inventory account defined for the inventory business unit combinations in the InterUnit Ownership page or from the intransit account defined in the centralized interunit and intraunit processor.

Transferring Interunit Stock Using Interunit Receivables and Payables

Here are three examples of stock transfers for inventory business units that post to different PeopleSoft General Ledgers.

Example 2.1

This example illustrates a stock transfer from inventory business unit US001 to inventory business unit US012. These inventory business units post to different general ledgers and in this case US001 owns the intransit inventory until it is received. The units use the same currency. During setup, the intercompany (interunit sales approach) method was not selected for these two units. The setup looks like this:

The accounting entry for the shipping transaction at US001 looks like this:

If the location accounting check box is clear in the source business unit, the inventory credit account is derived from the Accounting Rules page (Account Distribution page) for the Inter Business Unit Transfer Shipments Transaction Group (031). If the location accounting check box is selected, the credit account is derived from the storage area from which the inventory is shipped. In either case, the debit account is always the intransit inventory account defined on the InterUnit Ownership page or the centralized interunit and intraunit processor.

The accounting entry for the receiving transaction at US012 looks like this:

If the location accounting check box is clear in the source business unit, the stores inventory debit account is derived from the Accounting Rules page (Account Distribution page) for the Inter Business Unit Transfer Receipts Transaction Group (022). If the location accounting check box is selected, the debit account is derived from the storage area to which the inventory is received. In either case, the credit account is always the intransit inventory account defined on the InterUnit Ownership page or the centralized interunit and intraunit processor.

Example 2.2

This example illustrates a stock transfer from inventory business unit US001 to inventory business unit US012. These inventory business units post to different general ledgers and in this case US012 owns the intransit inventory upon shipment from the source inventory business unit. The units use the same currency. During set up, the intercompany (interunit sales approach) method was not selected for these two units. The setup looks like this:

The accounting entry for the shipping transaction at US001 looks like this:

If the location accounting check box is clear in the source business unit, the Inventory credit account is derived from the Accounting Rules page (Account Distribution page) for the Inter Business Unit Transfer Shipments Transaction Group (031). If the location accounting check box is selected, the system derives the credit account from the storage area from which the inventory is shipped. In either case, the debit account is always the intransit inventory account defined for the inventory business unit combinations on the InterUnit Ownership page. In this instance, it’s the intransit inventory account in the US003 general ledger.

The accounting entry for the receiving transaction at US012 looks like this:

If the location accounting check box is clear in the source business unit, the stores inventory debit account is derived from the Accounting Rules page (Account Distribution page) for the Inter Business Unit Transfer Receipts Transaction Group (022). If the location accounting check box is selected, the debit account is derived from the storage area to which the inventory is received. In either case, the credit account is always the intransit inventory account defined for the inventory business unit combinations on the InterUnit Ownership page.

Example 2.3

This example illustrates another accounting scenario when transferring items between inventory business units that post to different general ledgers. The inventory business units use the same currency. During set up, the intercompany (interunit sales approach) method was not selected for these two inventory business units. In this case there is a difference between the item cost and the transfer price for the item, and the quantity of the item shipped is different from the quantity of the item received. In this situation, additional postings occur. The adjustment intransit transaction is recorded in the business unit that owns the intransit inventory.

The setup looks like this:

The accounting entries for the shipping transaction (US001 ships 10) look like this:

The gain or loss is determined by computing the difference between the item's cost and its transfer price, multiplied by the quantity shipped.

The accounting entries for the receiving transaction (US012 receives only 5) looks like this:

The 50.00 USD is derived from the receipt quantity of 5 multiplied by the item's standard cost of 170.00 for US012.

The gain or loss at the receiving business unit is calculated as the difference between the transfer price of 165.00 and the standard cost of 170.00 for the item in business unit US012. If the item received is using the weighted average or actual costing method, no gain or loss entry is created. The gain or loss amount is based on the quantity of the item received.

The write off of intransit inventory is calculated as the difference between the quantity shipped and the quantity received, multiplied by the transfer price of the item.

Transferring Interunit Stock Using the Interunit Sales Approach (Intercompany)

These examples illustrate different types of accounting transactions that can be generated for intercompany transfers.

Example 3.1

This example illustrates an intercompany inventory transfer from business unit US002 to business unit US013. These business units post to different general ledgers but have the same base currency. US013 assumes ownership at the time of shipment. The item is standard costed for US013 and can be any cost type for US002. In this case, there are differences between the item cost in the source business unit, the item transfer price, and the item cost in the destination business unit. Here is what the setup looks like for this example:

Here is what the accounting entries in PeopleSoft Inventory look like upon shipment:

If the location accounting check box is clear in the source business unit, the inventory credit account (2) is derived from the Accounting Rules page (Account Distribution page) for the Intercompany Cost of Goods transaction group (301). If the location accounting check box is selected, the inventory credit account is derived from the storage area from which the inventory is shipped. In either case, the debit account (1) is the source interunit account defined for the inventory business unit combination on the InterUnit Pair page or InterUnit Template page of the centralized interunit and intraunit processor.

US001 doesn’t use the gain or loss on Transfer Price transaction group (300); the margin between the cost of the inventory transferred and the transfer price is intrinsic in the difference between the intercompany sales and the intercompany cost of goods sold.

The intercompany intransit account (3) is defined on the Interunit Ownership page. This transaction belongs to the InterCompany Transfers transaction group (035).

The intercompany accrued liability account (4) is the destination interunit account defined for the inventory business unit combination on the InterUnit Pair page or InterUnit Template page of the centralized interunit and intraunit processor. This transaction belongs to the Intercompany Transfers transaction group (035).

Here is what the accounting entries for PeopleSoft Billing look like during the same period as the shipment:

Here is what the accounting entries for PeopleSoft Inventory look like upon putaway:

If the location accounting check box is clear in the destination business unit, the inventory debit account (5) is derived from the Accounting Rules page (Account Distribution page) for the InterCompany Receipts transaction group (025). If the location accounting check box is selected, the inventory debit account is derived from the storage area into which the inventory is received.

The intercompany intransit account (6) is defined on the Interunit Ownership page. This transaction belongs to the InterCompany Receipts transaction group (025).

US003 uses the gain or loss on Transfer Price transaction group (300) here, because the item received is a standard costed item and the standard cost differs from the transfer price. Because the standard price is less than the transfer price, the intercompany intransit account (8) is credited and the intercompany gain or loss account (7) is debited. If the standard price were more than the transfer price, you would make the opposite entries. Here is what the accounting entry looks like for PeopleSoft Payables upon voucher processing:

Here is what the accounting entry looks like for the open payable and receivable settlement:

Example 3.2

This example illustrates an intercompany inventory transfer from business unit US002 to business unit US013. These business units post to different general ledgers but have the same base currency. US013 assumes ownership at the time of shipment. The item is actual costed or average costed for US013 and can be any cost type for US002. In this case, the item transfer price and the item cost in the source business unit differ.

This example differs from the previous one only in the accounting entries for PeopleSoft Inventory upon putaway. In this example, the item is an actual or average cost item for US013. Here is what the accounting entries look like in PeopleSoft Inventory upon putaway:

Example 3.3

This example illustrates an intercompany inventory transfer from business unit US012 to business unit FRA02. These business units post to different general ledgers and have different base currencies. FRA02 assumes ownership at the time of shipment. The item is standard costed for FRA02 and can be any cost type for US012. In this case, there are differences between the item cost in the source business unit, the item transfer price, and the item cost in the destination business unit.

Here is what the accounting entries look like in PeopleSoft Inventory upon shipment:

If the location accounting check box is clear in the source business unit, the inventory credit account (2) is derived from the Accounting Rules page (Account Distribution page) for the InterCompany Cost of Goods transaction group (301). If the location accounting check box is selected, the inventory credit account is derived from the storage area from which the inventory is shipped. In either case, the debit account (1) is the source interunit account defined for the inventory business unit combination on the InterUnit Pair page or InterUnit Template page of the centralized interunit and intraunit processor.

US012 doesn’t use the gain or loss on Transfer Price transaction group (300); the margin between the cost of the inventory transferred and the transfer price is intrinsic in the difference between the intercompany sales and the intercompany cost of goods sold.

The intercompany intransit account (3) is defined on the Interunit Ownership page. This transaction belongs to the InterCompany Transfers transaction group (035). The amount of this entry is in FRA02 base currency of EUR.

The intercompany accrued liability account (4) is the destination interunit account defined for the inventory business unit combination on the InterUnit Pair page or InterUnit Template page of the centralized interunit and intraunit processor. This transaction belongs to the InterCompany Transfers transaction group (035). The amount of this entry is in FRA02 base currency of EUR. Here is what the accounting entries look like for PeopleSoft Billing for the same period as shipment:

Here is what the accounting entries look like for PeopleSoft Inventory upon putaway:

If the location accounting check box is clear in the destination business unit, the inventory debit account (5) is derived from the Accounting Rules page (Account Distribution page) for the InterCompany Receipts transaction group (025). If the location accounting check box is selected, the inventory debit account is derived from the storage area into which the inventory is received.

The intercompany intransit account (6) is defined on the Interunit Ownership page. This transaction belongs to the InterCompany Receipts transaction group (025).

FRA01 uses the gain or loss on Transfer Price transaction group (300) here since the item received is a standard cost item and the standard cost differs from the transfer price. Because the standard price is less than the transfer price, the intercompany intransit account (8) is credited and the intercompany gain or loss account (7) is debited. If the standard price were more than the transfer price, you would make the opposite entries.

Note. Entries are in FRA01 base currency of EUR.

Here is what the accounting entry looks like for PeopleSoft Payables upon voucher processing:

Here is what the accounting entry looks like for open payable and receivable settlement:

Example 3.4

This example illustrates an intercompany inventory transfer from business unit US012 to business unit FRA02. These business units post to different general ledgers and have different base currencies. FRA02 assumes ownership at the time of shipment. The item is actual costed or average costed for FRA02 and can be any cost type for US012. In this case, there are differences between the item transfer price and the item cost in the source business unit.

This example differs from the previous example only in the accounting entries for PeopleSoft Inventory upon putaway. In this example, the item is an actual or average cost item for FRA02.

Here is what the accounting entries look like for PeopleSoft Inventory upon putaway:

Note. Transaction Group 042 (IBU Transfer Adjustments) works the same for intercompany receipts as it does for interunit receipts.

See Also

Transferring Stock Between Business Units

Establishing InterUnit and IntraUnit Billing