This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Intercompany Accounting and Transfer Pricing in Oracle EBS 11i.10 Rixin Zhu Manager, Cost Management Systems Oracle USA, Inc. March, 2006

1-2 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Agenda Overview Supported Flows and Features Logical Transactions Parent Transactions Accounting Setups Material Transactions and Distributions Forms

1-3 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Overview Support of Internal Order Transfer Available in 11i.9 –Transfer Pricing + Intercompany Invoicing Enhanced Drop Shipment and Shared Procurement Available in 11i.10 –Internal Drop Shipment to Customer –Shared Procurement –External Drop Shipment Cross-Product Effort: –Inventory –Purchasing (Receiving) –Order Management –Cost Management –AR/AP

1-4 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. White Papers Transfer Price Accounting in Oracle SCM, Feb 2006 (Metalink Note: ) Overview of Intercompany Invoicing, July 2005 (Metalink Note: ) Intercompany Invoicing and Advance Pricing Integration, May 2002 (Metalink URL: bin/cr/getfile.cgi?p_attid= :284025)

1-5 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Internal Order Transfer Features Account for the shipment as an (external) Sales Order and account for the receipt as a Purchase Order. Deriving the Cost of Goods Sold Account for the shipping organization as per the standard Oracle functionality. Customers can choose whether to use the Transfer Price as the incoming cost to the receiving organization. Internal profit margin is supported in Margin Analysis Report. Sending Organization Inventory Cost: $102 Receiving Organization Inventory Cost: $108 Transfer Price: $120 Limitations No support of return and correction. Only support transfers across operating units. Only in-transit transfers are supported.

1-6 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Enhanced Drop Shipment and Shared Procurement Separate financial transaction flows from physical flows Support infinite number of intermediate operating units Allow intermediate operating units to record COGS and Revenue on the logical internal sale of goods Support documents for the transaction flow (intercompany invoices) Support forward as well as return flows Costing features –Perform all of the Inventory accounting distributions for a transaction flow in a single commit cycle, and display them together on the form –Costs and Quantities in intermediate organizations are not impacted

1-7 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Transaction Flows Shared Procurement Shared Procurement Purchase order is created in operating unit P and received in a warehouse in operating unit T, with one or more intermediate operating units Execution of the receipt (into RI) in warehouse T kicks off the creation of receiving accounting events and logical inventory transactions in I and P. Accounting takes place in all operating units to record the obligations and intercompany COGS / revenue. Item costs and quantities in the procuring and intermediate operating units are not impacted Procuring OU SP Ship To OU TI

1-8 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Transaction Flows Internal Drop Shipment to Customer Internal Drop Shipment to Customer Order is booked in operating unit O and shipped from a warehouse in operating unit F, with one or more intermediate operating units (source type: internal) Execution of the ship confirm from warehouse F kicks off the creation of logical inventory transactions in I and O Accounting takes place in all operating units to record the revenue and COGS for the transaction Ship From OU CI Order-Booking OU FO Limitation Internal drop shipment to internal organization is not supported. For example, if C is an internal organization and it is an internal sales order.

1-9 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Transaction Flows External Drop Shipment External Drop Shipment Order is booked in operating unit O and specifies a ship-from warehouse in operating unit F/T, with one or more intermediate operating units (source type: external). Run requisition import in F/T to create a requisition for the item. Run Autocreate process in F/T to create a purchase order. Be sure to specify operating unit P as the procuring OU, specify the supplier S, and the warehouse in F/T as the ship-to location for the PO. Approve the PO in operating unit P. Execute the direct delivery receipt in warehouse F/T to kick off the creation of RCV accounting events and INV logical transactions. Ship From/To OU CI Order-Booking OU F/TO Procuring OU SPI

1-10 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Procuring OU SP Ship To OU TI Logical Transactions Procurement Flow Functional Event: Perform Receive (into RI) in warehouse T The following logical transactions are created in INV as a result P logical PO receipt logical intercompany sales issue Ilogical intercompany procurement receipt logical intercompany sales issue T RECEIVELOGICAL RECEIVE

1-11 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Logical Transactions Shipment Flow Functional Event: Perform Ship Confirm out of warehouse F The following transactions are created in INV as a result F [physical] sales order issue logical intercompany sales issue Ilogical intercompany shipment receipt logical intercompany sales issue Ological intercompany shipment receipt logical sales order issue Ship From OU CI Order-Booking OU FO

1-12 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Ship From/To OU CI Order-Booking OU F/TO Procuring OU SPI Logical Transactions External Drop Shipment Procurement + Shipment flow Functional Event: Perform DIRECT DELIVERY receipt of item into warehouse F/T The following logical (no physical) transactions are created in INV as a result Plogical PO receipt logical intercompany sales issue Ilogical intercompany PROCUREMENT receipt logical intercompany sales issue F/T logical PO receipt – replaces delivery to inventory logical intercompany sales issue Ilogical intercompany SHIPMENT receipt logical intercompany sales issue Ological intercompany SHIPMENT receipt logical sales order issue DELIVER RECEIVELOGICAL RECEIVE

1-13 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Parent Transactions Accounting for all related logical events created at once Grouping is achieved by linking all logical events together via the parent transaction ID – new column in mtl_material_transactions Parent transaction is always in the FROM operating unit of the flow –Physical transaction if one exists (shipment flows): sales order issue and RMA receipt –Logical transaction otherwise: Logical PO receipt and Logical RTV in procurement flows. Logical PO receipt during deliver in shipment flows of external drop shipments All accounting for a single flow is displayed together on the Material Distributions form (grouped together by parent transaction ID)

1-14 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Parent Transactions Logical PO receipt Procurement Flows Forward Logical RTV Return [physical] Sales Order Issue Shipment Flows [physical] RMA receipt SS CC Shipment Flow – External Drop Ship Logical PO Receipt (created during direct deliver) C … PP PP P

1-15 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Accounting – Internal Order Option 1: Price As Incoming Cost Event INV Valuation (O1) Sending Organization O1 Inventory Cost: $102 Receiving Organization O2 Standard Cost: $108 Transfer Price: $120 FOB Shipment COGS (O1) 1. Shipment102 In-transit (O2) Accrual (O2) PPV (O2) INV Valuation (O2) 2. Receipt 108 I/C Receivable (O1) I/C Revenue (O1) 3. I/C AR 120 I/C Payable (O2) 4. I/C AP120 Accrual (O2)

1-16 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Accounting – Internal Order Option 2: Price Not As Incoming Cost Event INV Valuation (O1) Sending Organization O1 Inventory Cost: $102 Receiving Organization O2 Standard Cost: $108 Transfer Price: $120 FOB Shipment COGS (O1) 1. Shipment102 In-transit (O2) Accrual (O2) PPV (O2) INV Valuation (O2) 2. Receipt 108 I/C Receivable (O1) I/C Revenue (O1) 3. I/C AR 120 I/C Payable (O2) 4. I/C AP120 Accrual (O2) Profit In Inventory (O2)

1-17 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Accounting Procurement Flow – P Ship From/To OU CI2 Order-Booking OU F/TO Procuring OU SPI 1020 Event 1. RCV Receive 2. INV Log PO Rcpt 3. INV Log I/C Ship AccrualClearing Inv Valuation I/C COGS

1-18 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Ship From/To OU CI2 Order-Booking OU F/TO Procuring OU SPI Accounting Procurement Flow – I Event 1. RCV Receive 2. INV Log I/C Proc Rcpt 3. INV Log I/C Ship I/C AccrualClearing Inv Valuation I/C COGS

1-19 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Ship From/To OU CI2 Order-Booking OU F/TO Procuring OU SPI Accounting Shipment Flow – F/T Event 1. RCV Receive 2. INV Log PO Rcpt 3. INV Log I/C Ship Clearing Inv Valuation I/C COGS I/C Accrual

1-20 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Ship From/To OU CI2 Order-Booking OU F/TO Procuring OU SPI Accounting Shipment Flow – I Event 1. INV Log I/C Ship Rcpt 2. INV Log I/C Ship Inv Valuation I/C COGS 40 I/C Accrual

1-21 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Ship From/To OU CI Order-Booking OU F/TO Procuring OU SPI Accounting Shipment Flow – O Event 1. INV Log I/C Ship Rcpt 2. INV Log SO Issue Inv Valuation I/C COGS 50 I/C Accrual

1-22 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Setups Transaction Flow

1-23 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Setups Intercompany Relations

1-24 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Setups Transfer Price

1-25 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Forms Material Transactions Form

1-26 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Forms Material Distributions Form

1-27 This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Forms Material Distributions Form (2)

This presentation is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making a purchasing decision. Thank You.