Re: [sap-acct] FOB Destination - Accounting treatment

Posted by Roy B (SAP Financials Expert)
on Jul 26 at 12:20 PM
I have come across a requirement to post a goods receipt for stock in transit when title passes at the time of loading onto a ship (FOB) under the contract. Title passes when you are responsible for the insurance or, in this case, freight and insurance. In other words when the vendor has delivered to the ship and the goods have been loaded he has fulfilled his side of the contract and from that moment the goods are our risk even though they are not available to us because they are on the high seas and will be for some weeks.

What we did was to create a virtual plant called goods in transit and to do the GR into that plant. Then, when the goods arrived and were available to sell, we did a stock transfer order (STO) from plant to plant. This effectively solved the problem for us that time.

Regards, Roy

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Roy Brookes FFA, FInstBA,
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---------------Original Message---------------
From: Bo Gustavsson
Sent: Tuesday, July 26, 2011 12:03 PM
Subject: FOB Destination - Accounting treatment

This is a good question and I will provide the answer. When you post the 'actual goods issue date' during post goods issue you should use the date at FOB destination. Example would be if it takes two days to truck the goods to FOB from the shipping point then you would add two days to the date when the post goods issue is transacted but use an actual post goods issue date plus two days. Like you indicate I have never come across a need to report the in transit inventory as such. It will usually just be inventory. If you use the correct actual post goods issue date the accounting will be fine since the cost of goods sold will be in the correct accounting period. The copy control should such that the actual post goods issue date is copied to the billing document as the invoice date (also the posting date for the invoice). Now, whether you actually issue the invoice at time of goods issue posting or the time of the FOB destination wouldn't really matter for the accounting treatment.

For some reason it is always assumed that the actual post goods issue date is the system date as its defaulted by the system during post goods issue when this date should be in accordance with the terms. Some may say that we don't know what the actual date will be for the FOB destination, but in most cases you can argue that as long as you have a good lead time estimate that will be plenty good enough. If there are some exceptions you can always make an accrual entry for purpose of month-end or otherwise. The POD functionality I would only deem required if you are talking special projects when it's not a FOB destination, but rather a construction project milestone of some kind where we have no way to know the actual goods issue date in advance because it is depending on sign off of software functionality or otherwise (say not tangible goods but rather some intangible stuff).

I know this is a little late but hope it can help anyway.

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