what is meant by deferred cogs in r12

7/26/2019 What is Meant by Deferred COGS in R12

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WHATISMEANTBYDEFERRED

COGS INR12Posted by Raju ERP

The deferred COGS of goods account is the new feature introduced in Release 12. The basic fundaental

behind the enhanceent is that the COGS is now directly atched to the Re!enue. The sae was not

"ossible till now.

Prior to this enhanceent# the !alue of goods shi""ed fro in!entory were e$"ensed to COGS u"on shi"

confir# des"ite the fact that re!enue ay not yet ha!e been earned on that shi"ent. %ith this

enhanceent# the !alue of goods shi""ed fro in!entory will be "ut in a &eferred COGS account. 's

"ercentages of Re!enue are recogni(ed# a atching "ercentage of the !alue of goods shi""ed fro

in!entory will be o!ed fro the &eferred COGS account to the COGS account# thus synchroni(ing

the recognition of re!enue and COGS in accordance with the recoendations of generally acce"ted

accounting "rinci"les.

The )atching Princi"le is a fundaental accounting directi!e that andates that re!enue and its

associated cost of goods sold ust be recogni(ed in the sae accounting "eriod. This enhanceent will

autoate the atching of Cost of Goods Sold *COGS+ for a sales order line to the re!enue that is billed

for that sales order line.

The deferral of COGS a""lies to sales orders of both non,configurable and configurable ites *Pic-,To,

Order and 'sseble,To,Order+. t a""lies to sales orders fro the custoer facing o"erating units in the

case of dro" shi"ents when the new accounting flow introduced in 11./.10 is used. 'nd finally# it also

a""lies to R)'s that references a sales order whose COGS was deferred. Such R)'s will be accounted

using the original sales order cost in such a way that it will aintain the latest -nown COGS recognition

"ercentage.

To set the deferrred COGS account.

n!entory ,, Setu" ,, Organi(ation ,, Paraeters ,, Other 'ccounts

' new account is added which is referred as the &effered COGS accounts.

E% 'CCOTG 3


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Release 12 3

%hen a Sales order is shi""ed the following accounting ta-es "lace3

n!entory 4aluation 'ccount 3 Credit.&eferred COGS account 3 &ebit

Once the re!enue is recognised# you would need to decide the "ercentage you wish to recogni(e the

Re!enue. ' COGS recognition transaction will be created to reflect a change in the re!enue recognition

"ercentage for a sales order line.

The ste"s to generate such transactions are as follows3

1. Run the Collect Re!enue Recognition nforation "rogra. This "rogra will collect the change in

re!enue recognition "ercentage based on 'R e!ents within the user s"ecified date range.

2. Run the Generate COGS Recognition E!ents. This "rogra will create the COGS recognition

transaction for each sales order line where there is a isatch between the latest re!enue recognition

"ercentage and the current COGS recognition "ercentage.

ote that users can choose how often they want to create the COGS Recognition E!ents.

a!igation to run the COGS recognition re5uest 3

, Cost 6 COGS Recognition 6 Collect Re!enue Recognition nforation

, Cost 6 COGS Recognition 6 Generate COGS Recognition E!ents

, Cost 6 4iew Transactions 6 )aterial Transactions

The distribution for the COGS Recognition transaction associated with the Sales Order transaction now

would be as follows3

&effered COGS 3 &ebit y re!enue "ercentage

COGS 3 Credit *'ctual re!enue "ercentage +

Thus# essentially the recogni(ed COGS balance is to o!e the !alue fro &eferred COGS to COGS.

This "articular COGS recognition transaction actually corres"ond to a re!enue recognition "ercentage

change.


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7ou can !iew the transactions as 3

a!igation3

, Cost 6 4iew Transactions 6 )aterial Transactions 6 &istributions

' new COGS Re!enue )atching Re"ort shows the re!enue and COGS inforation of sales order that fallwithin the user s"ecified date range by sales order line

S)P8ER TER)S * Table le!el details + 3

Once the whole cycle is co"lete we will ha!e 2 transactions lines in tl9aterial9transactions.

1. Sales Order

2. COGS Recognition transaction

'ccounting will be in tl9transaction9accounts and the Subledger accounting tables as follows3

Transaction 13

n!entory 4aluation 'ccount 3 Credit. *ite9cost+

&eferred COGS account 3 &ebit *ite9cost+

Transaction 23

&effered COGS 3 Credit *'ctual re!enue "ercentage+

COGS 3 &ebit *'ctual re!enue "ercentage +

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what is meant by deferred cogs in r12

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