Periodic Cost Adjustment in Oracle Fusion Cloud — End‑to‑End Guide
1. What is Periodic Cost Adjustment?
A Periodic Cost Adjustment is a period‑end correction that updates item costs and inventory valuation in Oracle Fusion when final costs become known after initial transaction postings. It’s used in Periodic Average Costing (PAC) or other period‑based costing methods where costs are finalized at period close.
In short: it trues up provisional costs (receipts-based) to actual costs (including invoices, landed costs, FX differences) so financials reflect true inventory value and COGS.
2. Why it’s needed
- Landed cost allocation: freight, duties, insurance allocated to received quantity after invoices arrive.
- Invoice price variance: supplier invoice differs from receipt price.
- FX revaluation: currency fluctuations that affect landed costs.
- Accurate financial reporting: Ensure inventory and COGS are not misstated at period end.
3. How it works — Periodic Costing flow
- Capture all material transactions for period (receipts, issues, returns).
- Receive supplier invoices and landed cost adjustments into the system.
- Run the Periodic Cost Processor (or equivalent process) to compute final item costs for the period.
- System calculates the variance between provisional and actual costs and creates Periodic Cost Adjustments.
- Posting: the adjustment journals are generated and posted to GL (after review/approval depending on config).
4. Numeric example
Scenario:
- Received 200 units of Item X at provisional unit price $20 → provisional inventory = $4,000.
- Later, freight invoice of $200 and supplier invoice variance of $100 are received (total extra $300).
- Actual cost = $4,300 → new unit cost = $21.50.
Periodic Cost Adjustment amount: +$300 to inventory valuation (and corresponding variance account) for the period.
5. Accounting impact
| Event | Debit | Credit |
|---|---|---|
| Periodic cost adjustment (increase) | Inventory Valuation | Cost Variance / Adjustment |
| Periodic cost adjustment (decrease) | Cost Variance / Adjustment | Inventory Valuation |
| When invoice posted later | Cost Variance (reverse) | Accounts Payable |
Note: exact ledger accounts depend on your chart of accounts and costing setup (inventory valuation accounts, variance accounts, landed cost accruals, etc.).
6. Where to run this in Oracle Fusion
- Cost Management work area — Manage Periodic Cost Adjustments or Periodic Cost Processor.
- Run reports: Periodic Item Cost Report, Inventory Valuation Report, Cost Adjustment Journal.
- Review and approve generated journals before posting to GL (depending on business flow).
7. Setup & configuration considerations
- Enable the appropriate costing method (Periodic Average Costing) for the inventory organization.
- Configure landed cost elements and cost allocations if you use landed cost functionality.
- Define GL accounts for inventory valuation, cost variances, and landed cost accruals.
- Set period close controls: ensure all invoices/receipts for the period are entered before running the periodic processor.
- Decide on automation: schedule processing vs manual run for review control.
8. Best practices & FAQs
Best practices
- Keep a strict cutoff for period transactions and invoices to avoid frequent reopenings.
- Use landed cost automation to capture freight/duties timely.
- Reconcile inventory valuation reports to GL after posting adjustments.
- Document accounting policy for cost variances and reversals.
Frequently asked
- Q: Can I reverse periodic cost adjustments?
- A: Yes, but reversing usually requires reopening the cost period or running corrective adjustments depending on the system configuration and audit controls.
- Q: Are periodic cost adjustments posted to GL?
- A: Yes — the system generates adjustment journals that should be reviewed and posted to the General Ledger.
- Q: What happens if I miss an invoice after period close?
- A: You’ll need to correct via subsequent period adjustments or reopen the period (depending on your control policies). Frequent misses indicate process gaps in invoice capture.
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