11/28/2017 Document 1607921.

FAQ in COGS / DCOGS (Doc ID 1607921.1)

In this Document

Purpose
Questions and Answers
1 .What is the significance of Account_set_flag in the table RA_CUST_TRX_LINE_GL_DIST_ALL?
2.What are the different meanings of Potentially Unmatched Flag column value in
Cst_Revenue_Recognition_lines table ?
3.When and how COGS will be recognized for Ship only sales order Type ?
4.What is the functionality of COGS with respect to sales order type "Repair or Replace" ?
5.What is the role of tolerance amount Parameter in Cogs Revenue matching Report?
6.Whether Generate cogs Recognition Events program can be run in parallel for same ledger id ?
7.Why Referenced RMA hits COGS directly instead of DCOGS Account ?
8.How to fix the Rounding off issue occurs with respect to Deferred COGS Account?
9.Why Cogs revenue matching report has 'Nan' character for both Revenue and cogs ?
10.Can Inventory period be closed without running the COGS Recognition Events program ?
11.Is it possible to have COGS Recognition Transaction Date as Shipment date rather than closure
date for ship only sales order lines?
12.From where the Standard Cost adjustment account is picked up when there is a difference in Item
costs?
13.If the AR invoice line is deleted, will it result in Adjusting in Cogs ?
14.How to identify whether RMA is a Referenced or Unreferenced one?
15.What is the accounting treatment for Rejected sales order ?
16.what is the relationship between Cost manager and Generate cogs Recognition Events Program?
17.Under what circumstances, Distributions will not be created for COGS Recognition Transaction?
18.Why COGS is not getting recognized when invoice is created manually?
19.How to Generate the COGS Account from the Order Type ?
20.Is it possible to split COGS Account according to Sub-element wise ?
21. How the difference in Item costs is treated in case of Standard costing and Average costing?
22. Is There A Way To Turn Off Deferred COGS ?
23.If the AR invoice line is deleted, will it result in Adjusting in COGS?
24. Why COGS Transaction Quantity is Zero?
25. Whether "Record Order Management transactions" in Cost Management - SLA is optional ?
26.Need to change the COGS account on Inventory Organization parameters, is it allowed?
27.Whether Collect Revenue Information program and Generate cogs recognition events program
run at the Operating Unit level, instead at ledger level?
28. How COGS functionality works in case of Drop Shipments and Intercompany Accounting?
29.How the Transaction Date of COGS Transaction is derived ?
30. What is the meaning of column value of so_issue_account_type in the mtl_material_transactions
table with respect to 11i and R12 ?
References

APPLIES TO:

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Oracle Cost Management - Version 12.0.0 and later
Information in this document applies to any platform.
Note : Data Content in this document is reviewed and updated periodically. Please keep a track of this document from My
Oracle Support web page.
*** Checked on Relevance on 02/AUG/2016 ***

PURPOSE

Collating commonly asked functional questions in the COGS area.

This will help in:

Lesser time for Issue Identification.

Answering the functionality based questions.

QUESTIONS AND ANSWERS

1 .What is the significance of Account_set_flag in the table RA_CUST_TRX_LINE_GL_DIST_ALL?

After Revenue Recognition and Revenue Accounting is run from AR responsibility, Account_Set_flag will be updated.Column
value 'N' signifies that revenue recognition is run.

Account_Set_flag 'Y' signifies Revenue recognition is not performed. In that case, user needs to run the Revenue recognition
and revenue accounting program.

2.What are the different meanings of Potentially Unmatched Flag column value in Cst_Revenue_Recognition_lines
table ?

'U': Unprocessed. Revenue is completed and program Collect Revenue Recognition Information is done, but COGS Recognition
hasn't been happened yet. This status is applicable only for Ship only sales orders.

Y': Mismatched. Program found the om line, which has mismatch between revenue and COGS, at the beginning of program
Generate COGS Recognition Events.

NULL: Successful. Both COGS Recognition event and transaction are generated successfully. This will be updated from Y to
Null.

I': Investigation. This is an abnormal situation. If the COGS Recognition transaction is not only created but also Generate Cogs
recognition Events program errors out, it will be updated to 'I'. Have to analyze why the flag is updated to 'I'.

'P': Pending.

Case 1: If revenue is before sales order issue, even you run Generate COGS Recognition Events, COGS Recognition
transaction won't be created, so the flag will be updated from 'Y' to 'P'. After shipping the item, 'P' will be updated to 'Y' for
further process. After running Generate COGS Recognition Events, 'Y' will be updated to 'NULL' .

Case 2: If a om line has multiple sales order issue, COGS Recognition will happen only when full quantity is issued. If partial
quantity issued, still column value will be updated to 'P' from 'Y' and waiting for next COGS Recognition.

3.When and how COGS will be recognized for Ship only sales order Type ?

In case of Ship Only Orders, once the line is closed, it inserts a line in Cst_Revenue_Recognition_Lines table with
Potentially_unmatched_flag as U.

Once the Generate COGS recognition program is run, Potentially_unmatched_flag becomes NULL and COGS transaction will
be created in Mtl_Material_Transactions and Cst_Cogs_Events tables.

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4.What is the functionality of COGS with respect to sales order type "Repair or Replace" ?

Order Type 'Repair Replace' works like Ship only sales order.

In that case, the sales order line has to be closed in order to recognize the COGS.

5.What is the role of tolerance amount Parameter in Cogs Revenue matching Report?

Display Matched Lines = Yes:-

Report should display all the lines irrespective of revenue and cogs matching percentages. So here report displays all the lines
irrespective of Tolerance Amount.

Display Matched Lines = No:-

Here report shows only unmatched lines. This is to find out the mismatched lines. In this process, order lines which have
rounding off issues will also be displayed and ideally should not appear. To resolve the issue, "Tolerance Amount"
parameter is added .So, Once the Tolerance amount is given as 1, it excludes the lines with rounding off issues. So the
purpose of this parameter is useful only when Display Matched Lines is set as 'No'.

6.Whether Generate cogs Recognition Events program can be run in parallel for same ledger id ?

If incompatibility is set with Cost Manager,then Generate cogs program can be run in parallel for different ledger_id but not for
same ledger id.

7.Why Referenced RMA hits COGS directly instead of DCOGS Account ?

After performing Sales order issue if user has recognized revenue and user has run Collect Revenue Recognition Program and
Generate COGS Recognition Events Program and then if user have performed any Referenced RMA Receipt, then RMA hits
COGS Account instead of DCOGS Account Because, while performing Referenced RMA Receipt there is no balance in DCOGS
account.

The accounting entries are as follows:-

At the time of Sales order Issue:-
DCOGS Dr.
Inventory Cr.

At the time of COGS Recognition:-

COGS Dr.
DCOGS Cr.

At the time of Referenced RMA Receipt:-

Inventory Dr.
COGS Cr.

8.How to fix the Rounding off issue occurs with respect to Deferred COGS Account?

As the issue happens due to current accounting architecture, the workaround is to perform Manual journal adjustments to
balance the DCOGS account.

For a possible standard solution, there is Enhancement Request raised with Oracle Cost management to modify the COGS
Recognition design.

The Enhancement Request id:

Bug 10065100 - MODIFY COGS RECOGNITION TRANSACTION GENERATION TO AVOID DEBIT BALANCE IN DCOGS.

9.Why Cogs revenue matching report has 'Nan' character for both Revenue and cogs ?
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For the order lines, which have 'NaN' value for Revenue, user might not have created invoice for them.
For the order lines, which have 'NaN' value for COGS, user might not have collected revenue successfully for them.
Following is the checklist:
1) Invoice must be created.
2) Revenue Recognition should be completed.
3) Collect Revenue Information program should be completed. Invoice GL date should fall between Start Date and End Date.
4) Generate COGS Recognition Events program should be completed. If above steps are completed, the report should show
correct values.

10.Can Inventory period be closed without running the COGS Recognition Events program ?

If the costing method is used as "Average", "Standard", "LIFO", "FIFO", then inventory period can be closed without running the
Generate Cogs Recognition Events program. But GL period must be open. If GL period is closed then the program creates COGS
events in the next open GL period.

But if "Periodic Average Costing" is used then "Collect Revenue Recognition program " and "AR Period needs to be closed prior
closing the PAC period.In periodic Average costing organizations, only events and transactions that are within the current
periodic periods start and end dates will be processed.

11.Is it possible to have COGS Recognition Transaction Date as Shipment date rather than closure date for ship only
sales order lines?

Yes. It is possible. Costing Development has given an option for user to select the date on which COGS for a Ship Only Order
should recognized.

User can choose the date as closure date or shipment date by config the profile "CST: Ship Only Order COGS on Shipment or
Closure Date"

This Profile option "CST: Ship Only Order COGS on Shipment or Closure Date" set at Site level is introduced via
Patch 17026262:R12.BOM.C .

12.From where the Standard Cost adjustment account is picked up when there is a difference in Item costs?

Standard Cost Adjustment is nothing but the difference between the Item cost at the time of Sales order issue and Referenced
RMA Receipt.

The COGS account defined in the Organization Parameters window will be used for the Standard Cost Update Adjustment
account. This account will be defaulted from the Inventory Organization which has created referenced RMA Receipt.

13.If the AR invoice line is deleted, will it result in Adjusting in Cogs ?

Functionally, A invoiced line cannot be deleted once the revenue is recognized, it will corrupt Accounts Receivables module.

Deleting of an Invoice line after a Sales Order is Shipped and Invoiced and revenue is recognized, there would not be any
adjustment to the COGS account and this would most likely cause reconciliation issues and a manual adjustment would be
required.

14.How to identify whether RMA is a Referenced or Unreferenced one?

Navigate to Order Management Responsibility > Sales orders form > Query the Sales Order Number> Line Items(Tab) >
Returns (Tab).
Here, check Line Type and Reference columns. If it is a referenced RMA, then Sales order Number will be populated in the
Reference column.

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SQL to identify:
1)Select reference_line_id from oe_order_lines_all
where line_id=&rma_line_id;

2) Select trx_source_line_id from mtl_material_transactions

where transaction_id=&transaction_id; /* Use RMA Receipt */

15.What is the accounting treatment for Rejected sales order ?

There is no accounting when a sales order line is rejected.

Cost Management only creates accounting when the rejected items are received and then either delivered to a regular or a
scrap asset sub-inventory.

16.what is the relationship between Cost manager and Generate cogs Recognition Events Program?

1st procedure creates COGS Recognition events/transactions and commits the database.
2nd procedure pick up those uncosted events/transactions and create their accounting in Mtl_Transaction_Accounts table.

If by any chance, if these transactions error out, then they can be resubmitted, so in that case if Cost Manager runs prior to
Generate cogs program, it will pick up and do accounting.

In the older code, if cost manager is running after 1st phase of Generate COGS Recognition program then it will pick up those
uncosted transactions and do accounting.

But as per the latest code, if Generate COGS program is running then cost manger won't pick up those uncosted COGS records.
(so if they error out and submitted using cost manager then cost manager processes those records).

17.Under what circumstances, Distributions will not be created for COGS Recognition Transaction?

Distribution will not be created for COGS Recognition under the following scenarios:

i. The Sales Order Issue quantity and RMA quantity are equal and are in same or different period. [SO ISSUE > RMA > COGS]

ii. The Item costs is "ZERO" check the new cost in CST_REVENUE_COGS_MATCH_LINES table. It will be "Null".

iii. Both the COGS % and Prior COGS % are same (0 or any value) in CST_COGS_EVENTS table.

18.Why COGS is not getting recognized when invoice is created manually?

Manual AR invoices linked to a Sales Order are not considered for COGS recognition.

Only invoices created through Auto Invoice program are getting considered for COGS recognition.

This is not a bug, the matching between Receivables invoice (in AR) and Sales Order shipment is controlled by Order
Management (OM).

If the AR invoice is not from OM, the link between AR and Inventory (INV) is not maintained.

Bug 14823225 - MANUAL AR INVOICES LINKED TO SALES ORDER ARE NOT CONSIDERED FOR COGS RECOGNITION

19.How to Generate the COGS Account from the Order Type ?

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In order to generate the COGS account from the Cost of Goods Sold account assigned to the order type (A.K.A. OM Transaction
Type) of the order, the seeded COGS workflow needs to be modified to change the default node from Get CCID for a line to Get
CCID from the Order Type ID.

Refer Doc ID 414314.1- How to Generate the COGS Account from the Order Type

20.Is it possible to split COGS Account according to Sub-element wise ?

No.This is not possible through Oracle standard functionality.

The fundamental feature of EBS Costing is to do accounting at cost element level (Material, Material Over head, resource, over
head etc..)

We don't do accounting at sub-elemental level. It may be possible if you design and implement a major SLA customization with
your own accounting template and account derivation rules.

'For logical inter-company sales order issue transaction type, out of the box there is always one I/C COGS account, so there
wouldn't be split of distributions by cost elements. If the customer wants to accomplish this, they need to build some advanced
custom sources and/or rules for this transaction type that retrieve the elemental costs'.

21. How the difference in Item costs is treated in case of Standard costing and Average costing?

Let us explain with a small example.

Eg. Current average cost as on 11-JAN - $10, Then Sales Order Issue - $10

Current average cost as on 15-JAN - $15

In case of Standard costing, the Sales Order Issue is hit at Item costs $10.

Incase of RMA, Inventory account is hit at $15, DCOGS/COGS Account is hit at $ 10 and the difference of $2 is captured as
"Standard Cost Adjustment account.

In Case of Average costing, FIFO, LIFO, the Sales Order Issue is hit at the current Average cost $10.

RMA cost will be decided based on whether it is referenced or unreferenced.

If a Referenced RMA is done on 15-JAN - Treated as Cost Owned Transaction $10

If an Unreferenced RMA is done on 15-JAN - Treated as Cost Derived transaction $15

22. Is There A Way To Turn Off Deferred COGS ?

No,but consider the following workaround that mimics the 11i (pre-DCOGS functionality).

The R12 Revenue-COGS matching functionality requires not only the new DCOGS account, but also a series of concurrent
programs to be run at regular basis. The DCOGS account is set up at inventory organization level only, while the COGS account
is usually defined at item level. Unless you have the same COGS account for all items, hence doing something simple like
making the DCOGS account and the COGS account the same does not make sense.

You need a custom trigger on mtl_material_transactions table to make the so_issue_account_type column to be null whenever
a record is created. This will forgo the DCOGS functionality.

In this way, the transaction will be costed hitting COGS directly just like 11i transactions.

Also

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Disable the DCOGS functionality (to go back to the exact old 11i functionality):
Option 1:
If in the case of the customer they are not obliged to comply to SOX, user
can use the Subledger account feature to inhibate the "Deferred COGS"
functionality.
As the COGS is a accounting requirement, user can setup SLA ADR to match the
DCOGS account to their expected COGS account. Then assign the COGS account to
the DCOGS accounting entry. By doing so, user will have the COGS book at the
sales order shipment. If the user decided to go that way, user will no longer
required to run those programs: "Collect Revenue Information" and "Generate
COGS event".

Option2:
- Disable all the Revenue-COGS matching concurrent programs in your instance.
- Configure the SLA rules engine for sales order shipment, RMA, logical sales
order shipment, and logical RMA so that they hit true COGS account
immediately. This option is the recommended one in R12.
- Alternatively, the logic in the cost management account generation hook can be written to achieve the same result.

Please note that Oracle support/Development does not support customer customization.

23.If the AR invoice line is deleted, will it result in Adjusting in COGS?

'Deleting of an Invoice line after a Sales Order is Shipped and Invoiced and revenue is recognized, there would not be any
adjustment to the COGS account and this would most likely cause reconciliation issues and a manual adjustment would be
required

Functionally, A invoiced line cannot be deleted once the revenue is recognized, it will corrupt AR.

24. Why COGS Transaction Quantity is Zero?

If sales order Issue and RMA Receipt is performed for the full quantity and after RMA Receipt if user has run Collect Revenue
Recognition Program and Generate COGS Program, then the Transaction Quantity for COGS Transaction will be ZERO.

Since, transaction quantity is ZERO, there won't be any distributions for the same.

25. Whether "Record Order Management transactions" in Cost Management - SLA is optional ?

Record Order Management transactions is optional because Cost Manager does the same job as what record order
management transactions request will do for COGS related transactions.

Record Order Management transactions is required only for 'OPM' enabled Inventory organizations.

26.Need to change the COGS account on Inventory Organization parameters, is it allowed?

Once the account is defined in Inv Org Parameters form, then the field will be grayed out.

COGS account is set in Inv > Org > Parameters form/ Items form / Workflow / ADR Rules.

27.Whether Collect Revenue Information program and Generate cogs recognition events program run at the
Operating Unit level, instead at ledger level?

Currently the functionality is that these programs run at Ledger level and not at OU Level.

28. How COGS functionality works in case of Drop Shipments and Intercompany Accounting?
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For internal drop shipments to customers, Cost Management only synchronizes revenue and COGS in the customer facing
Operating Unit (OU) when advanced accounting is enabled. Revenue/COGS synchronization is not performed in the non-
customer facing operating units. Costing books the entire sales order shipment amount to COGS.

29.How the Transaction Date of COGS Transaction is derived ?

The TRANSACTION_DATE in MTL_MATERIAL_TRANSACTIONS table for COGS transaction depends on the LAST_EVENT_DATE
in CST_REVENUE_RECOGNITION_LINES table.

When the Collect Revenue Recognition Information program is run, it inserts a line in the CST_REVENUE_RECOGNITION_LINES
(CRRL) table. This is populated by Accounts Receivables (AR) code.

This is the Revenue Recognition date and can be checked from the RA_CUST_TRX_LINE_GL_DIST_ALL table, column name
GL_Date.

30. What is the meaning of column value of so_issue_account_type in the mtl_material_transactions table with respect
to 11i and R12 ?

For 11i transactions, so_issue_account_type is Null in the Mtl_material_transactions table, which means No deferred COGS.

For R12 transactions, so_issue_account_type is 2 in the Mtl_material_transactions table, which means to use the new
deferred COGS functionality.

REFERENCES

NOTE:1060202.1 - Understanding COGS and DCOGS Recognition Accounting

NOTE:414314.1 - How to Generate the COGS Account from the Order Type
NOTE:1565831.1 - DCOGS Balance Diagnostics
NOTE:1528307.1 - COGS Accounting From RMA Perspective and Understanding RMA related accounting entries
NOTE:1307906.1 - COGS Dataflow and Diagnostics [Video]
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