R12 introduced a new feature for deferring COGS for the sales order shipments according to the revenue being recognized based on the revenue recognition and cost matching principles of GAAP.
With this feature, sales order revenue and the associated COGS are recognized in the same period and in the same proportion.
When the sales order is shipped, the following accounting happens:
Dr Deferred COGS
Cr Inventory
One can run the below 3 programs from SLA/Costing responsibilities:
- Record Order Management Transactions
- Collect Revenue Recognition Information
- Generate COGS Recognition Events
The 3rd program creates logical transactions in Inventory.
When the revenue is recognized (full/partial) in Account Receivable and after running the cost process, the below accounting happens:
Dr COGS
Cr Deferred COGS
This deferred COGS account is setup in organization parameter. The ‘COGS Revenue Matching Report’ can be run to show the sales order line details along with the earned revenue and deferred COGS.
If we do not need the grouping by sales order, customer, order date and currency, then we can run this XML report producing RTF output (by changing the option while submitting the report) which can be copied to excel for ease of analysis.
I used this report as a means of analyzing the promotions/discounts wherein the items are shipped free there by recognizing no revenue but there would be COGS.
