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There is a subsidiary company in USA and another subsidiary company in Australia under the one group of companies. USA company manufactured a raw material at the cost of 75USD and sells at 100USD to Australian company. Currently in IFS, selling company in USA inventory is valued at 75USD where as buying company’s inventory in Australia is valued at 100USD.

But Australian company wants to value the received inventory at 75 USD and not to value at 100USD because the received inventory should be valued at cost for the group and they do not want to include 25USD markup in inventory which increases cost of sales when Australian company selling  finished goods to their customers. Is there anyway to handle this scenario with this current setup as shown below?

 

 

Hi @HoiNiresT isn’t it possible for US Company to sell at 75 USD to the Australian company? 

We use a somewhat similar scenario when we do Internal Trade. Let’s say, we sell the part at USD 500 externally. We have an object property defined in IFS to acquire 5% less of USD 500 in the internal PO we raise to acquire the part from the internal supply site. The Internal CO will also have that price which is 5% less. So the Australian company has to purchase at the same cost 75 USD. Do you think such a setup is going to help? Our Inventory valuation method is FIFO though. I think FIFO also valuates similar to Weighted Average. 

Hi again @HoiNiresT , to go with the above setup (Internal CO and PO having same price), you will have to keep the ‘Send order Price’ ticked in Supplier for Purchase Part. Hope my explanation is clear. I meant to say when the Internal PO created,  in our case it fetches a 5% lesser price automatically. 

Hi @HoiNiresT isn’t it possible for US Company to sell at 75 USD to the Australian company? 

We use a somewhat similar scenario when we do Internal Trade. Let’s say, we sell the part at USD 500 externally. We have an object property defined in IFS to acquire 5% less of USD 500 in the internal PO we raise to acquire the part from the internal supply site. The Internal CO will also have that price which is 5% less. So the Australian company has to purchase at the same cost 75 USD. Do you think such a setup is going to help? Our Inventory valuation method is FIFO though. I think FIFO also valuates similar to Weighted Average. 

Thanks Enzo! Unfortunately we need to have mark up of 25USD due to the transfer pricing policy. Thus Australian company has to buy at 100 USD and not 75USD.

@HoiNiresT oh ok. Then they wish to undervalue at 75USD. That just beats me :thinking:

@HoiNiresT oh ok. Then they wish to undervalue at 75USD. That just beats me :thinking:

Thanks again Enzo. Do we need to undervalue the price or inventory?

 

Do we need to undervalue the price or inventory?

@HoiNiresT Inventory I mean. Isnt that what your Australian entity plans to do when they wish to purchase at 100 USD and value at 75 USD only? I have no good answer if that’s the case, sorry. 

@HoiNiresT, at AU company would you invoice (supplier invoice) this for 75USD? This shall create a revaluation for AU company inventory. 

 

Do we need to undervalue the price or inventory?

@HoiNiresT Inventory I mean. Isnt that what your Australian entity plans to do when they wish to purchase at 100 USD and value at 75 USD only? I have no good answer if that’s the case, sorry. 

We ll check this option and see

@HoiNiresT

If the Australian company is not going to value the inventory based on purchase cost, why do they use Weighted average inventory valuation method with Transaction based invoice consideration?

If they consider using Standard Costing /Ignore invoice price invoice consideration, then they can set up per unit material cost as 75 USD though the purchase price is 100USD. 

 

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