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Oracle

Value Chain Execution


Cloud
Implementing Supply Chain
Financial Orchestration
Release 9

Oracle Value Chain Execution CloudImplementing Supply Chain Financial Orchestration


Part Number E55673-03
Copyright 2011-2014, Oracle and/or its affiliates. All rights reserved.
Authors: Carl Casey, Pallavi Ghosh
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Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Contents
Preface

Overview

Supply Chain Financial Orchestration: Overview


Financial Orchestration Flow: How it Works

........................................................................................................ 1

.............................................................................................................. 4

Implementing

Implementing Oracle Fusion Financial Orchestration: Procedure

................................................................................ 6

Importing Business Unit, Customer, and Supplier Data: Procedure ........................................................................... 7

Manage Documentation and Accounting Rules


Documentation and Accounting Rules: Explained

..................................................................................................... 9

Accounting Rule Currency Options: Explained

.......................................................................................................... 9

Accounting Rule Conversion Types: Explained

.......................................................................................................... 9

Accounting Rule Trade Distributions: Explained

........................................................................................................ 9

Track Profits in Inventory: Explained

....................................................................................................................... 10

Intercompany Invoices in Financial Orchestration: Explained

................................................................................... 10

Specifying Events That Apply Documentation and Accounting Rules: Procedure ..................................................... 10

Manage Supply Chain Financial Orchestration Transfer Pricing Rules


Transfer Pricing Rules: Explained

............................................................................................................................ 12

Accounting Transfer Price: Explained

...................................................................................................................... 12

Transfer Pricing Markup Percentage: Explained

Incoterms: Explained

13

............................................................................................................................... 13

............................................................................................................................................... 13

Primary Financial Route: Explained

...................................................................................................... 12

Manage Supply Chain Financial Orchestration Buy and Sell Terms


Buy and Sell Terms: Explained

12

......................................................................................................................... 13

Manage Supply Chain Financial Orchestration System Options


Financial Orchestration System Options: Explained

14

................................................................................................. 14

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Manage Profit Center Business Unit Party Relationships

15

Profit Center Business Units: Explained

.................................................................................................................. 15

Intercompany Buyer Profile: Explained

.................................................................................................................... 15

Intercompany Seller Profile Explained: Explained

..................................................................................................... 16

What happens if I modify the supplier or customer for the legal entity? ................................................................... 16
When can I delete an intercompany buyer or seller profile?

Manage Supply Chain Financial Orchestration Qualifiers


Financial Orchestration Qualifiers: Explained

.................................................................................... 16

............................................................................................................ 17

Manage Supply Chain Financial Orchestration Flows


Financial Orchestration Flows: Explained

18

................................................................................................................. 18

Setting Priorities for Financial Orchestration Flows: Explained

10

17

Creating Financial Orchestration Flows


Creating Financial Orchestration Flows: Worked Example

................................................................................. 18

20

....................................................................................... 20

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Preface

Preface
This Preface introduces information sources available to help you use Oracle Applications.

Oracle Applications Help


Use the help icon to access Oracle Applications Help in the application.

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Oracle Applications Guides


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Oracle Help Center at http://docs.oracle.com/

Other Information Sources


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Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 1

Overview

Overview

Supply Chain Financial Orchestration: Overview


Oracle Fusion Supply Chain Financial Orchestration is a configurable application that you can use to manage an intercompany
transaction, which is a type of transaction that occurs between a seller and a buyer, where the seller provides a product or
service to the buyer, and this buyer resides in the same enterprise as the seller but in a different legal entity or business unit.
Financial Orchestration can also support an intracompany flow where a financial orchestration exists between two different
profit center business units that belong to the same legal entity. You can use Financial Orchestration to separate the physical
part of this transaction from the financial part of the transaction. The following diagram illustrates an example of this internal

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 1

Overview

buyer and seller relationship. It includes an intercompany transaction that occurs in Vision Corporation, which is a fictitious
company that makes and sells computer products.

In this example, a financial orchestration flow exists between the Vision Distribution Center, located in Singapore, and Vision
Operations, located in North America. The Vision Distribution Center sends the physical product that is involved in the
transaction to retailers. It also sends the financial information and transfers ownership of the product in the financial books
for the transaction to Vision Operations in North America. Each of these organizations constitutes a separate legal entity that
resides in Vision Corporation. However, they reside in different countries, and they each require separate accounting and tax
reporting. You can use Oracle Fusion Supply Chain Financial Orchestration to capture, process, and perform an accounting
of the events that occur during an intercompany transaction in an enterprise that is similar to Vision Corporation. For example,
you can use it to do the following work:
Create documentation and accounting rules that specify the type of accounting documentation to create.
For example, whether or not to create an intercompany invoice, to track profits in inventory, or to track trade
distributions.

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 1

Overview

Create transfer pricing rules that specify whether to use the transaction cost, a purchase order price, or the sales
order price as the basis to calculate the intercompany transfer price between the seller and the buyer. You can
create transfer pricing rules that apply a markup or markdown percentage on the internal sale.
Create buy and sell terms that specify the selling and buying legal entities, the business units within these entities
that constitute the buyer and seller, the documentation rules, accounting rules, and transfer pricing rules to use, the
payment terms to use, incoterms and incoterm locations, and tax determinants.
Create intercompany buyer profiles and intercompany seller profiles that Financial Orchestration uses to create the
intercompany invoice. You can specify the business units that provide the procurement and payables invoicing for
the profit center business unit, the business unit that provides receipt accounting information, the bill-to business unit
and bill-to locations, and the procurement business unit.
Create financial orchestration qualifiers that specify when and under what conditions to run a financial orchestration
flow. For example, you can create a rule that specifies to run an orchestration flow only if a particular supplier is
involved in the transaction, and only if the flow is a procurement flow.
Create financial orchestration flows. You can specify the legal entities and business units that are involved in a flow,
the financial orchestration qualifiers that control when to use the flow, the financial routes to use for the flow, the
buy and sell terms to use with the flow, and the date when the flow goes into effect. You can also specify a priority
among different flows.
In summary, Oracle Fusion Financial Orchestration helps your company to meet the following business objectives:
Support complex, global structures without compromising supply chain efficiency.
Model your corporate tax structures in a global environment efficiently without impacting the physical movement of
goods. This capability helps to make sure you can get goods and services to your customers as quickly as possible,
and lower your total supply chain costs at the same time.
Optimize operational efficiency by centralizing sourcing and order management functions.
Run financial orchestration flows without impacting the physical movement of goods.
Define business rules for financial orchestration flows that support a variety of physical movements in your supply
chain. This capability can reduce implementation costs and cycle time, and it allows you to react effectively to
corporate reorganizations or acquisitions.
In general, this implementation guide uses the phrase Financial Orchestration to describe the Financial Orchestration work
area and the work that it does. This work area is part of the Oracle Fusion Financial Orchestration product offering.

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 1

Overview

Financial Orchestration Flow: How it Works


The following diagram illustrates a typical financial orchestration flow that Financial Orchestration manages.

Explanation of Callouts
A financial orchestration flow includes the following steps:
1. A Fusion Supply Chain application, such as Inventory and Receiving, sends a notification that a supply chain event
occurred, such as a shipment transaction.
2. Financial Orchestration receives the supply chain event. For more information, see Specifying Events That Trigger
Documentation and Accounting Rules: Procedure.

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 1

Overview

3. Financial Orchestration identifies the financial orchestration flow that it must use in reply to the event. It uses the
configuration that you specify on the following pages to identify this flow:

Manage Supply Chain Financial Orchestration Qualifiers

Manage Supply Chain Financial Orchestration Flows


For more information, see Creating Financial Orchestration Qualifiers: Procedure and Financial Orchestration
Flows: Explained.

4. Financial Orchestration creates an instance of the financial orchestration flow that it identified in step 3.
5. Financial Orchestration creates the tasks that it uses to run the instance.
6. Financial Orchestration interacts with one or more Fusion applications. It can interact with the following Fusion
applications while the instance runs. It can exchange information about the instance with these applications
automatically, so you are not required to do any configuration to enable these interactions:

Distributed Order Orchestration. Provides the Orchestration Order information for shipment flows.

Procurement. Provides the Purchase Order information for procurement flows, and confirms whether or not a
financial orchestration flow that does validation is available when it creates or updates a global procurement
purchase order.

Product Information Manager. Provides information about the products that Financial Orchestration uses for
each supply chain transaction.

Financials. Provides information about the supplier and customer that Financial Orchestration associates with
each legal entity. To get this information, Financials uses the advanced global intercompany that you specify
when you set up Financials. Financial Orchestration interfaces the intercompany receivables and payables
invoices to Financials.

Materials Management and Logistics. Sends a notification to Financial Orchestration that indicates that a
transaction occurred in the physical supply chain, such as a shipment or a receipt. It also sends other details
about each transaction.

Managerial Accounting. Tracks cost elements. For more information, see Cost Components, Cost Elements,
and Analysis Groups: Explained.

7. Financial Orchestration uses various Web services to interact with other Fusion applications that provide and store
costing, receivables, and payables data.
8. After you complete the setup, you can use the Monitor Financial Orchestration Execution page to monitor and
correct problems that might occur during the financial orchestration flow.

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 2

Implementing

Implementing

Implementing Oracle Fusion Financial Orchestration:


Procedure
This topic describes how to implement Oracle Fusion Supply Chain Financial Orchestration. For more information about this
offering, see Supply Chain Financial Orchestration: Overview.
1. Import the data that Financial Orchestration uses to create relationships between each business unit, customer, and
supplier for intercompany invoices.
For more information, see Importing Business Unit, Customer, and Supplier Data: Procedure.
2. Log into Fusion.
Make sure you use a login that allows you to add a new implementation project that includes the Supply Chain
Financial Orchestration product offering. Consult with your system administrator to determine the login that you
must use.
3. In the Navigator, click Setup and Maintenance.
4. On the Setup and Maintenance page, click Configure Offerings.
5. On the Configure Offerings page, do the following work:

Make sure the Implementation Status for the Supply Chain Financial Orchestration offering is Implemented. If
it is not implemented, then implement it now.

Make sure the Implementation Status for the Materials Management and Logistics offering is Implemented. If
it is not implemented, then implement it now.
If these offerings do not exist, or if you cannot implement them, then consult with your system administrator to
determine how to implement them, implement them, and then resume this procedure.

6. Create an implementation project:

On the Setup and Maintenance page, click Manage Implementation Projects.

On the Manage Implementation Projects page, click Actions, and then click Create.

In the Name field, enter a value that describes your project, and then click Next.
For example, enter My Financial Orchestration Project.
On the Create Implementation Project: Select Offerings to Implement page, include the Supply Chain
Financial Orchestration offering, and then click Save and Open Project.
The application creates an implementation project that you can use to customize Financial Orchestration.

7. In the Task list, expand the Supply Chain Financial Orchestration folder.

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 2

Implementing

This folder includes the following folders:

Define Common Applications Configuration for Supply Chain Financial Orchestration. Includes all the
tasks that Financial Orchestration requires for common applications. You do not need to modify any of these
tasks.

Define Supply Chain Financial Orchestration. Allows you to customize Supply Chain Financial
Orchestration. You can expand this folder to view the tasks that you must perform to set up Financial
Orchestration.

8. Use the Define Supply Chain Financial Orchestration folder and the tasks that it contains to set up Financial
Orchestration.
It is recommended that you complete these tasks in the following sequence:

Manage Documentation and Accounting Rules

Manage Supply Chain Financial Orchestration Transfer Pricing Rules

Manage Supply Chain Financial Orchestration Manage Buy and Sell Terms

Manage Profit Center Business Unit Party Relationships

Manage Supply Chain Financial Orchestration Qualifiers

Manage Supply Chain Financial Orchestration Flows


It is recommended that you use this sequence because the configuration that you do in some tasks depends
on the work that you do in prior tasks. For example, you specify buy and sell terms when you create a financial
orchestration flow, so you must create the buy and sell terms before you create the financial orchestration flow.
For most configurations, you must complete each of these tasks. Whether or not you complete the following
task depends on your deployment requirements:
Manage Supply Chain Financial Orchestration System Options

Importing Business Unit, Customer, and Supplier


Data: Procedure
For Oracle 11g Release 9 (11.1.9) and Release 10 (11.1.10), you must import the data that Financial Orchestration uses to
create relationships between each business unit, customer, and supplier for intercompany invoices.
1. Export the Financials product offering:

Log into an environment that includes the Financials offerings.

In the Navigator, click Setup and Maintenance.

Click Manage Offerings and Functional Areas.

In the Search Results list, choose the Financials product offering, and then click Export.

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 2

Implementing

In the Export Offering dialog box, specify a file to export, and then click Export.
You must export your customizations so Financial Orchestration can use them when it processes order
information. For more information, see Exporting and Moving Customizations: Points to Consider.

2. Repeat step 1 for the Materials Management and Logistics product offering.
3. Repeat step 1 for the Supply Chain Financial Orchestration product offering.
4. Import the Financials product offering:

Log into the environment where you are setting up Financial Orchestration.

In the Navigator, click Setup and Maintenance.

Click Manage Offerings and Functional Areas.

In the Search Results list, click Import.

In the Import Offering dialog box, locate the file that you exported in step 1, and then click Import.

In the Search Results list, click Import.

5. Import the other product offerings:

Repeat step 4 for the Materials Management and Logistics product offering.

Repeat step 4 for the Supply Chain Financial Orchestration product offering.

6. Import each supplier and customer:

Create a file that includes information about your suppliers and customers.
Fusion Applications do not define suppliers and customers in the Functional Setup Manager, so you must
import them. You must create and upload a file that includes information about each supplier and customer.
This file must use a comma-separated value (CSV) format.

Import the file. For more information, see Importing Data from a File: Getting Started.

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 3

Manage Documentation and Accounting Rules

Manage Documentation and Accounting Rules

Documentation and Accounting Rules: Explained


You can create documentation and accounting rules that do the following work:
Specify whether or not an intercompany invoice is required.
Specify the type of currency and the conversion type to use during intercompany invoicing.
Specify whether or not to track profits as a separate cost in the inventory that the customer controls.
Specify the event that runs the rule. For example, you can specify to use the shipment transaction or the receipt
transaction to start the tasks that Financial Orchestration uses during an internal transfer of goods.

Accounting Rule Currency Options: Explained


You can use the Currency Option on the Manage Documentation and Accounting Rules page to specify the currency
that Financial Orchestration uses during an intercompany transaction. You can pick of the following values:
Selling Node. Use the same currency that the seller uses. For example, if the seller uses the US Dollar, and if the
buyer uses the Euro, then Financial Orchestration will use the US Dollar throughout the entire transaction, including in
the invoice data that it creates.
Buying Node. Use the same currency that the legal entity uses in their primary ledger. This legal entity resides in the
business unit.
Source document. Use the currency that the source document uses.

Accounting Rule Conversion Types: Explained


You can use Conversion Type on the Manage Documentation and Accounting Rules page to specify the exchange rate
that Financial Orchestration uses for calculations. For example, when it calculates the intercompany transfer price. For
more information about the conversion types that you can use, see Using Rate Types: Examples and What's the difference
between spot, corporate, user, and fixed rate types?

Accounting Rule Trade Distributions: Explained


You can use the Trade Distributions option on the Manage Documentation and Accounting Rules page to include a
trade distribution. Fusion Cost Management uses trade distributions when it does the cost accounting distributions for the
transactions that Financial Orchestration sends. These are the accounting distributions that Fusion Cost Management uses
for intercompany accrual, intercompany cost of goods sold, and so on. For more information, see Record Cost Accounting
FAQs.

Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 3

Manage Documentation and Accounting Rules

Track Profits in Inventory: Explained


Financial Orchestration comes predefined to track profits according to the items that your physical inventory contains.
For example, assume your physical inventory includes 1,000 pieces of product A, and that you realize a profit of $1.00 on
each of these pieces. In this example, Financial Orchestration calculates a profit of $1,000 for product A. To override this
behavior, you can remove the check mark from the Track profits in inventory option on the Create Documentation and
Accounting Rule page.

Intercompany Invoices in Financial Orchestration:


Explained
If you use the Intercompany invoice option on the Manage Documentation and Accounting Rules page to include
intercompany invoices, then Financial Orchestration creates the following intercompany invoices during the transaction:
Accounts payable invoice. A transaction that records the payable accounting when one business unit buys goods or
services from another business unit.
Accounts receivable invoice. A transaction that records the receivable accounting for the shipping business unit in an
intercompany flow. It records journal entries in accounts receivables for the seller, it records revenue, and it records
tax and freight charges. It adds journal entries to the inventory asset account and the cost of goods sold account for
the shipping warehouse.
If you specify to not include intercompany invoices, then Financial Orchestration does not create any intercompany
invoices during the transaction. An intercompany invoice is not mandatory. For example, an intracompany trade that
occurs between business units that belong to the same legal entity might not require an intercompany invoice. In this
situation, a trade distribution in cost accounting handles the accounting for the receivables and payable balances.
For more information, see Cost Accounting Process Flow: Explained.

Specifying Events That Apply Documentation and


Accounting Rules: Procedure
If you use the Create Documentation and Accounting Rule page, then Financial Orchestration automatically adds the
tasks that it uses to process the transaction for your rule, and then displays them in the View Tasks column of the Forward
Flow and Return Flow tabs on the Create Documentation and Accounting Rule page. You cannot modify these tasks,
but you can specify the event that applies them.
1. On the Create Documentation and Accounting Rule page, click one of the following tabs:

Forward Flow. Specifies the trigger to use when the seller sells a good or service to the buyer.

Return Flow. Specifies the trigger to use when the buyer returns a good or service to the seller.

2. In the Task Generating Event section, choose a task-generating event.


For example, to apply this rule when Financial Orchestration receives a purchase order from the buyer, you do the
following:

Click the Forward Flow tab.

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Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 3

Manage Documentation and Accounting Rules

In the Procurement dropdown list, choose PO Receipt.

For Release 9, Financial Orchestration does not support returns for an interorganization transfer.
You can specify multiple events for a single rule. For example, to apply this rule when Financial Orchestration receives a
purchase order from the buyer, or when it creates a shipment order, you do the following:
1. Click the Forward Flow tab.
2. In the Procurement dropdown list, choose PO Receipt.
3. In the Shipment dropdown list, choose SO Receipt.

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Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 4

Manage Supply Chain Financial Orchestration Transfer Pricing


Rules

Manage Supply Chain Financial Orchestration


Transfer Pricing Rules
Transfer Pricing Rules: Explained
A transfer pricing rule calculates the intercompany transfer price according to the information that is associated with an
intercompany transactionThe transfer pricing rules determine how to price an international transaction that occurs in a
multinational company so that each country receives the correct share of taxation. You can use a transfer pricing rule with
buy and sell terms. For more information, see Buy and Sell Terms: Explained.

Accounting Transfer Price: Explained


You can use the Accounting Transfer Price on the Manage Supply Chain Financial Orchestration Transfer Pricing
Rules page to specify the intercompany transfer price that Financial Orchestration uses for the transactions and documents
that it creates in a financial orchestration flow. You can choose one of the following options:
Transaction Cost Basis. Use the production cost that the seller incurs to produce the product.
Source Document Price Basis. Use the purchase cost that the seller incurs when it buys the product from an
external supplier. This price basis varies depending on the following Business Process Type that you set in the
Manage Supply Chain Financial Orchestration Flows task:

Procurement. Use the value that the line item of the purchase order contains.

Shipment. Use the selling price from the fulfillment line that Oracle Fusion Distributed Order Orchestration
specifies.

Internal Transfer. Not supported.

Transfer Pricing Markup Percentage: Explained


You can use the Markup Percentage on the Manage Supply Chain Financial Orchestration Transfer Pricing Rules
page to allow the seller to earn a profit or to incur a loss on an intercompany transaction. To determine the intercompany
transfer price, Financial Orchestration multiples the Markup Percentage with the value of the Accounting Transfer Price. For
example, if an item costs $1.00, and if you set Markup Percentage to 15, then Financial Orchestration sets the transaction
price for this item to $1.15.
You can also enter a negative value to incur a loss. For example, assume the Singapore Distribution Center must mark down
the items that it sells to retailers by 15%. So, if an item costs $1.00, and if you set Markup Percentage to -15, then Financial
Orchestration sets the intercompany transfer price for this item to $0.85.

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Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 5

Manage Supply Chain Financial Orchestration Buy and Sell


Terms

Manage Supply Chain Financial Orchestration


Buy and Sell Terms
Buy and Sell Terms: Explained
Buy and Sell terms are terms that you can use to specify the conditions that determine the nature of an agreement to use
during an intercompany transaction, such as the documentation and accounting rule to use, the transfer pricing rule to
use, and so on. Financial Orchestration gets some of the values that it displays for the Receivable Invoice Type field, the
Receivables Credit Memo Type field, and in the Default Buy Side Tax Determinants section and the Default Sell Side
Tax Determinants section of this page from the values that you specify when you set up receivables. For more information
about setting up receivables, see Oracle Financials Cloud Using Receivables, Payments, Cash, and Collections.

Incoterms: Explained
As an option, you can specify the Incoterm (International Commercial Terms) and Default Incoterm Location on the Manage
Supply Chain Financial Orchestration Manage Buy and Sell Terms page. Financial Orchestration uses these items as
part of the matter of record for the intercompany transaction. The incoterm and incoterm location that you choose does not
affect how Financial Orchestration handles the transaction or does calculations, but it does provide audit trail information.

Primary Financial Route: Explained


You typically use the Manage Supply Chain Financial Orchestration Flows page to create the primary route. You can
also click Add Primary Route on the Create Buy and Sell Term page to specify the primary route, and then choose the
business process type to use with the buy and sell terms that you specify. Financial Orchestration uses the route that you
specify for all intercompany transactions. In Release 9, Financial Orchestration does not support the inclusion of internal
financial intermediaries on the financial route. These internal intermediaries are organizations that reside in the company, such
as an organization that resides in Vision Corporation. Also in Release 9, Financial Orchestration supports only the primary
financial route. You cannot specify a secondary financial route.

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Chapter 6

Manage Supply Chain Financial Orchestration System Options

Manage Supply Chain Financial Orchestration


System Options
Financial Orchestration System Options: Explained
You can specify the following financial orchestration system options on the Manage Supply Chain Financial
Orchestration System Options page. Financial Orchestration uses them when it processes a financial orchestration flow:
Item Validation Organization. Specify the organization that Financial Orchestration uses to validate each item
according to the qualifiers that you create. For more information, see Financial Orchestration Qualifiers: Explained.
Service Item. Specify the service item number that various Financial Orchestration tasks use when the supply chain
flow handles a service item. Trade Distributions and Intercompany AR Invoice are example tasks.
Maximum Number of Records per Batch. Specify the number of records that Financial Orchestration gets when it
processes supply chain events. You can use this field to tune the performance of your server environment.

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Oracle Value Chain Execution Cloud

Implementing Supply Chain Financial Orchestration

Chapter 7

Manage Profit Center Business Unit Party Relationships

Manage Profit Center Business Unit Party


Relationships
Profit Center Business Units: Explained
A profit center business unit is a part of a company that you treat as a separate business. Your organization calculates the
profits and losses for this profit center separately from other parts of the organization.

Intercompany Buyer Profile: Explained


You can specify the intercompany buyer profile in the Profit Center BU Profiles section of the Create Profit Center
BU to Party Relationship page. You must specify it for a profit center business unit that acts as a buyer in a buy and sell
relationship. You can use the following sections:
Setup for Buyer's Payables Invoice and Purchase Order. You can use the following dropdown lists to specify
the business units that provide the procurement and payables invoicing for the profit center business unit. Financial
Orchestration uses these business units when it calculates trade distributions and costing transactions, so you must
specify them even if you do not require Financial Orchestration to create an intercompany invoice for the buy and sell
relationship:

Procurement Business Unit. Specify the business unit that provides procurement services and that stores
the supplier site data that Financial Orchestration uses to create the intercompany payables invoice.

Bill to Business Unit. Specify the business unit that Financial Orchestration must use to get the attributes that
it uses to create the receipt accounting in the Fusion Cost Management application.

Customer Locations for Seller's Receivables Invoice and Sales Order. You can use the following dropdown
lists:

Seller's Customer Address Set. Choose an address set. The address set that you choose includes the billto locations that you can specify for the buyer. If your organization does not require an intercompany invoice,
then you do not need to specify an address set or bill-to location.

Bill to Location. Choose a location that identifies the profit center business unit that Financial Orchestration
must use as the buyer. Financial Orchestration uses this bill-to location to create the intercompany receivables
invoice that it sends to the selling business unit. Note that the Manage Legal Entity Supplier Customer
Association task from Advance Global Intercompany System (AGIS) of the Financials product offering provides
the customer and supplier record for the legal entity.

If you modify any values for the intercompany buyer profile, then Financial Orchestration does not do any of the validations
for the buy and sell terms that you specify, or for the financial routing that you specify. For more information, see Buy and Sell
Terms: Explained and Primary Financial Routes: Explained.

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Chapter 7

Manage Profit Center Business Unit Party Relationships

Intercompany Seller Profile Explained: Explained


You can specify the intercompany seller profile in the Profit Center BU Profiles section of the Create Profit Center
BU to Party Relationship page. You must specify it for a profit center business unit that acts as a seller in a buy and sell
relationship. You can use the following sections:
Business Unit for Seller's Receivables Invoice. In the Receivables Business Unit dropdown list, choose the
profit center business unit where Financial Orchestration sends the receivables invoice.
Supplier Site for Buyer's Payables Invoice and Purchase Order. You can use the following dropdown lists:

Buyer's Procurement Business Unit. Choose the profit center business unit that acts as the seller in the buy
and sell relationship.

Buyer's Bill to Business Unit. Choose the business unit where Financial Orchestration sends the bill.

Supplier Site. Choose the supplier site that Financial Orchestration uses to create the intercompany payables
invoice.

What happens if I modify the supplier or customer for


the legal entity?
If you define an intercompany seller profile , and then at some later point you modify this profile, then Financial Orchestration
displays an error message that describes that you updated the supplier profile and that you must also update the seller
profile with new supplier information. To fix this error, you must use the Profit Center BU Profiles section of the Edit Profit
Center BU to Party Relationship page to modify the seller profile. If you do this modification, then this page displays
the name of the supplier that you modified in the Supplier field. You must also do similar work if you modify the buyer. For
example, if you modify the intercompany buyer profile, then you must also modify this profile with the new buyer information.

When can I delete an intercompany buyer or seller


profile?
You can delete:
- The intercompany buyer profile only if the profit center business unit is not a buying business unit in any of the buy and sell
terms, or in any financial route.
- The intercompany seller profile only if the profit center business unit is not a selling business unit in any of the buy and sell
terms, or in any financial route.

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Chapter 8

Manage Supply Chain Financial Orchestration Qualifiers

Manage Supply Chain Financial Orchestration


Qualifiers
Financial Orchestration Qualifiers: Explained
A financial orchestration qualifier is a rule that specifies when to run one of the financial orchestration flow that you create
in the Manage Supply Chain Financial Orchestration Flows task. If you do not create any qualifier, then Financial
Orchestration runs the financial flow for all the transactions that it receives.

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Manage Supply Chain Financial Orchestration Flows

Manage Supply Chain Financial Orchestration


Flows
Financial Orchestration Flows: Explained
You can use a financial orchestration flow to do the following:
Manage the internal trade relationships that exist between two entities, where these entities might reside in the same
organization but in widely dispersed physical locations, including in different countries.
Define the trade relationship that exists between two entities, including business rules, internal controls, regulatory
compliances, and other terms and conditions. These controls allow you to run, monitor, and evaluate the
transactions that occur in the trade relationships that exist between two entities.
Orchestrate supply chain events that occur as the result of a transaction that is associated with a financial
orchestration flow, including events that this flow receives from an external source system.
Start tasks in an external system that is part of the financial orchestration flow.
Create a series of financial movements of goods that can provide equitable distribution of the product margin to the
countries and tax jurisdictions that are involved in a transaction.
Set a date that indicates when to start using a financial orchestration flow. This dating allows you to configure
Financial Orchestration so that it creates transactions that are associated with a source document that occur before
the date when the modified financial orchestration flow goes into effect. Financial Orchestration can also associate
transactions with this flow when your source system creates the source document after this date.

Setting Priorities for Financial Orchestration Flows:


Explained
You can set the Priority of a financial orchestration flow to specify which flow to use when more than one flow is available for
two primary trade partners. The lower the number you use, the higher the priority. For example, if you set the Priority to 1
for Flow A, and 2 for Flow B, then Financial Orchestration will use Flow A. In a more detailed example, assume the following
situation exists:
Financial
Orchestration
Flow

Priority

Shipping
Business Unit

Selling Business
Unit

Qualifier Rule

10

BU A

BU B

Category =
Category B

20

BU A

BU B

Category =
Category A

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Financial
Orchestration
Flow

Priority

Shipping
Business Unit

Selling Business
Unit

Qualifier Rule

30

BU A

BU B

None. Applicable
to all documents.

The following table summarizes how to set up the priority for each financial orchestration flow in this example.
Source Document

Financial
Orchestration Flow

Priority

Result

DOO fulfillment line 1

Flow 1

Priority for Flow 1 is 10.


Priority for Flow 3 is 30.

Financial Orchestration
assigns Flow 1 the
highest priority.

DOO fulfillment line 2

Flow 2

Priority for Flow 2 is 20.


Priority for and Flow 3 is
30.

Financial Orchestration
assigns Flow 2 the
highest priority.

DOO fulfillment line 3

Flow 3

Only Flow 3 is assigned.

Financial Orchestration
does not use the Priority.

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10

Chapter 10

Creating Financial Orchestration Flows

Creating Financial Orchestration Flows

Creating Financial Orchestration Flows: Worked


Example
This example demonstrates how to create a financial orchestration flow for Vision Corporation, which is a multinational
company that makes and sells computerized toys. It describes how to create this flow between Vision Operations, which
is the selling business unit located in the United States, the Vision Distribution Center, which is the shipping business unit
located in Singapore, and the Schatze Toy Company, which is a retailer with locations in Germany. The following diagram

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illustrates the financial orchestration flow for this example, and demonstrates how this flow separates the physical flow of
goods for this transaction from the financial flow for this transaction:

Note the following items for this example:


Item

Description

Flow type

Shipment

Selling business unit

Vision Operations

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Item

Description

Customer

Schatze Toy Company

Shipping business unit

Vision Distribution Center

Qualifier

All asset items

Sales order currency

USD (United States Dollar)

Sales order price

$100.00 USD

Intercompany transfer price

Equal to the sales order price

Intercompany trade currency

USD

Intercompany invoice

Required

Track profit in inventory

Yes

Summary of the Tasks


Create a financial orchestration flow:
1. Creating documentation and accounting rules
2. Creating transfer pricing rules
3. Creating buy and sell terms
4. Creating profit center business unit party relationships
5. Creating financial orchestration qualifiers
6. Creating financial orchestration flows
7. Testing your custom financial orchestration flow
8. Setting financial orchestration system options
9. Testing your custom financial orchestration flow

Creating Documentation and Accounting Rules


Vision Operations is the seller. It uses the same currency that Vision Corporation uses, and it uses the standard currency
rate that Vision Corporation uses. Vision Operations uses trade distributions, tracks profits in inventory, and requires an
intercompany invoice. It must capture this transaction only for a shipment event, and not for a procurement or intercompany

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transfer. It must handle returns in the same way that it handles shipments, so make sure you set the forward flow and the
return flow to use the same events. To create the documentation and accounting rules, do the following work:
1. In the Navigator, click Setup and Maintenance.
2. In the Task list, expand the Supply Chain Financial Orchestration folder, and then expand the Define Supply
Chain Financial Orchestration folder.
3. Click Go To Task next to Manage Supply Chain Financial Orchestration Documentation and Accounting
Rules.
4. On the Manage Documentation and Accounting Rules page, Click Actions, and then click Create.
5. On the Create Documentation and Accounting Rule page, set the following values.
Field

Value

Name

Vision Operations Documentation and Accounting


Rule

Currency Option

Source document

Conversion Type

Corporate

Trade Distributions

Contains a check mark

Track Profits In Inventory

Contains a check mark

Intercompany Invoices

Contains a check mark

Effective Start Date

Use today's date

6. In the Forward Flow tab, set Shipment to SO Shipment.


This is a shipment flow, so you do not set a value for Procurement or for Internal Transfer. Financial
Orchestration uses these fields for other types of flows. For more information, see Types of Financial Orchestration
Flows: Explained.
7. Click the Return Flow tab, and then set Shipment to SO Shipment.
8. Click Save and Close.

Creating Transfer Pricing Rules


Vision Operations must use the production cost that it incurs to produce computerized toys as the transfer pricing rule, and
it requires a 15% markup on this cost so that it can realize a profit when it sells products to internal buyers. To create the
intercompany transfer price, do the following work:
1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply Chain
Financial Orchestration Transfer Pricing Rules.
2. On the Manage Transfer Pricing Rules page, click Actions, and then click Create.
3. On the Create Transfer Pricing Rule dialog box, set the following values.

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Field

Value

Name

Vision Operations Transfer Pricing Rule

Accounting Transfer Price

Source Document Price Basis. For more


information, see Transfer Pricing Cost Basis:
Explained.

Effective Start Date

Use today's date.

Markup Percentage

15

4. Click Save and Close, and then click Done.

Creating Buy and Sell Terms


Vision Distribution Center is the seller and Vision Operations is the buyer. Vision Distribution Center requires an intercompany
invoice that is payable immediately. To create the buy and sell terms, do the following work:
1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply Chain
Financial Orchestration Buy and Sell Terms.
2. On the Manage Buy and Sell Terms page, click Actions, and then click Create.
3. On the Create Buy and Sell Term page, set the following values. Leave all other fields at their default values. Do
not modify values in the tax determinants sections.
Field

Value

Name

Vision Buy and Sell Term

Selling Legal Entity

Vision Distribution Center

Selling Business Unit

Vision Distribution Center

Transfer Pricing Rule

Vision Operations Transfer Pricing Rule

Documentation and Account Rule

Vision Operations Documentation and Accounting


Rule

Receivables Invoice Type

Intercompany

Payment Terms

Immediate

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Field

Value

Incoterm

Leave empty

Buying Legal Entity

Vision Operations

Buying Business Unit

Vision Operations

Default Incoterm Location

Leave empty

4. Click Save and Close, and then click Done.

Creating Profit Center Business Unit Party Relationships


To create the party relationship for the profit center business unit, do the following work:
1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Profit Center
Business Unit Party Relationships.
2. On the Manage Profit Center BU to Party Relationships page, click Actions, and then click Create.
3. On the Create Profit Center BU to Party Relationships page, set the following values. Leave all other fields at
their default value.
Field

Value

Profit Center Business Unit

Vision Operations

Default Trade Organization

V1

Ship-to Location

Leave empty

4. In the Profit Center BU Profiles section, edit the Intercompany seller profile. Set the following values. Leave all
other fields at their default value, and then click OK.
Field

Value

Customer Address Set

Vision Distribution Center SET

Receivables Business Unit

Vision Distribution Center

Buyer's Procurement Business Unit

Vision Operations

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Field

Value

Buyer's Bill to Business Unit

Vision Operations

5. In the Profit Center BU Profiles section, edit the Intercompany buyer profile:
Set the Business Unit to Vision Operations.

In the Customer Locations for Seller's Receivables Invoice and Sales Order section, add the following
locations, and then click OK.
Seller's Customer Address Set

Bill to Location

Vision Operations Set

9685

Vision Germany SET

CDRM_112

Vision Distribution Center SET

CDRM_116

Buyer's Bill to Business Unit

Vision Operations

6. On the Create Profit Center BU to Party Relationships page, click Save and Close.

Creating Financial Orchestration Qualifiers


You must create the financial orchestration qualifiers that configure Financial Orchestration to run the financial orchestration
flow for Vision Operations only when the Vision Distribution Center ships an asset item. To create these qualifiers, do the
following work:
1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply Chain
Financial Orchestration Qualifiers.
2. On the Manage Financial Orchestration Qualifiers page, click Actions, and then click Create.
3. On the Create Financial Orchestration Qualifier page, set the following values. Leave all other fields at their
default value.
Field

Value

Name

Vision Operations Qualifiers

Description

Asset Item = "Yes" AND Ship from organization =


"D1"

Business Process Type

Procurement

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4. Click Actions, Add Before, and then set the following values.
Field

Value

Parameter

Asset Item

Operator

Equals

Value

Yes

5. Click Actions, Add Before, and then set the following values.
Field

Value

Parameter

Ship from Organization

Operator

Equals

Value

D1 D1 identifies the Vision Distribution Center.

6. Click Save and Close.

Creating Financial Orchestration Flows


You must create a financial orchestration flow. To create this flow, do the following work:
1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply Chain
Financial Orchestration Qualifiers.
2. On the Create Financial Orchestration Qualifier page, set the following values. Leave all other fields at their
default value.
Field

Value

Name

Vision Operations Financial Orchestration Flow

Business Process Type

Shipment

Priority

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Field

Value

Effective Start Date

Use the default value.

Effective End Date

Choose a date that occurs sometime in the future.

3. On the Create Financial Orchestration Flow page, in the Primary Routes section, click Actions, click Add
Row, and then set the following values. Leave all other fields at their default value.
Field

Value

Shipping Business Unit

Vision Distribution Center

Shipping Legal Entity

Vision Distribution Center

Selling Business Unit

Vision Operations

Selling Legal Entity

Vision Operations

4. On the Create Financial Orchestration Flow page, in the Primary Routes section, click Actions, click Add
Row, and then set the following values. Leave all other fields at their default value.
Field

Value

Selling Business Unit

Vision Distribution Center

Selling Legal Entity

Vision Distribution Center

Buying Business Unit

Vision Operations

Buying Legal Entity

Vision Operations

Buy and Sell Term

Vision Buy and Sell Term

Selling Trade Organization

Leave empty.

Buying Trade Organization

Vision Operations

5. Click Save.

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Setting Financial Orchestration System Options


You must set the Financial Orchestration system options. To create these options, do the following work:
1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply Chain
Financial Orchestration Qualifiers.
2. On the Manage Financial Orchestration Qualifiers page, click Actions, and then click Create.
Field

Value

Item Validation Organization

V1

Service Item

RR_RP_Item24

Maximum Number of Records per Batch

100

3. Click Save and Close.

Testing Your Custom Financial Orchestration Flow


Perform the following steps to make sure your custom financial orchestration flow works correctly:
1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply Chain
Financial Orchestration Qualifiers.

Log into your order capture system, and then use it to create a sales order that will start the financial
orchestration flow that you configured in this example.

Make sure the order includes an asset that the Vision Distribution Center must ship to the Schatze Toy
Company. The following values are examples that will start this flow. Your order capture system might use
different fields:
Field

Value

Business Unit

Vision Operations

Ship to Customer

Schatze Toy Company

Warehouse

D1

Source Order ID

Vision12345

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2. On the Manage Financial Orchestration Qualifiers page, click Actions, and then click Create.

Log into your Fusion application.

Notice the value that the Orchestration Order field displays, such as 181094.

Navigate to the Financial Orchestration work area, and then the Monitor Financial Orchestration
Execution page.

Issue a query that locates the order. For example, in the Sales Order field, enter the Orchestration Order
number that you noticed in step 2, such as 181094.

Verify that the Search Results section contains the following values.

Navigate to the Manage Fulfillment Lines page.


Query the Customer field for Schatze Toy Company and the Warehouse field for D1.
In the General tab, make sure a fulfillment line exists that includes a value of Vision12345 in the Source Order
field, and notice that the Status field displays a value of Awaiting Shipping.

Navigate to the Edit Shipment page, notice the value that the Shipment field displays, and then verify that the
value in the Shipment Status field is Closed.
3. Verify that the customer received the goods:

Field

Value

Source Order Type

Orchestration order

Source Order

Contains the Orchestration Order number that you


noticed in step 2, such as 181094.

From Primary Business Unit

Vision Distribution Center

To Primary Business Unit

Vision Operations

Sales Order

Vision12345

Verify that the first record in the Financial Route Details tab contains the following values.
Field

Value

Type

Financial Route

Buy and Sell Term

Vision Buy and Sell Term

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Field

Value

Selling Business Unit

Vision Distribution Center

Selling Legal Entity

Vision Distribution Center

Buying Business Unit

Vision Operations

Buying Legal Entity

Vision Operations

Verify that the second record in the Financial Route Details tab contains the following values.
Field

Value

Type

Customer ownership change

Status

Contains a green checkmark.

4. Click Save and Close.

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Glossary

Glossary
buy and sell term
Term that you can use to specify the conditions that determine the nature of an agreement to use during an intercompany
transfer, such as the documentation and accounting rule to use, the transfer pricing rule to use, and so on.
documentation and accounting rule
A type of rule that determines how Financial Orchestration creates intercompany invoicing, uses financial routes, and uses
different routes in reply to the different supply chain events that might occur during a transaction.
financial orchestration flow
A flow of information that defines a trade relationship between two different entities. It tracks and stores data that involves
financial instruments, such as accounts receivables, accounts payable, billing, and so on. This flow is different from the
physical flow that goods and services travel because it can include intermediary steps that the physical route does not
include. Internal organizations might perform these intermediary steps, such as wholesalers, distributors, agents, or retailers.
financial orchestration qualifier
A rule that specifies when to run one of the financial orchestration flows that you create in the Manage Supply Chain Financial
Orchestration Flows task. If you do not create any qualifier, then Financial Orchestration runs the flow for all transactions that
it receives
financial orchestration system option
A type of option that affects all financial orchestration flows.
intercompany buyer profile
A type of profile that specifies information about the buyer that Financial Orchestration uses to create the intercompany
invoice.
intercompany invoice
A type of invoice that Financial Orchestration creates when a seller provides a product or service to a buyer, and this buyer
resides in the same organization as the seller but in a different legal entity. It captures accounting and tax information about
an intercompany transaction.
intercompany seller profile
A type of profile that specifies information about the seller that Financial Orchestration uses to create the intercompany
invoice.
intercompany transaction
A type of transaction that occurs between a seller and a buyer, where the seller provides a product or service to the buyer,
and the buyer resides in the same organization as the seller but in a different legal entity. For example, one division of a
business might sell goods to another division that resides in the same business, or a parent company might sell goods to a
foreign subsidiary. An intercompany transaction typically includes a transaction of financial information.

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Glossary

intercompany transfer price


A type of price that Financial Orchestration uses during an intercompany transaction. The transfer price determines how
Financial Orchestration allocates profits and losses among different parts of an enterprise when these parts use different tax
systems. Financial Orchestration uses the transfer price for accounting and taxation purposes.
service item
A type of item that provides a service. A purchase order that does not include an inventory entry in any of the purchase order
line items is an example of a service item.
source document
The document that Financial Orchestration uses as the input to the transaction. A fulfillment line from an order in Distributed
Order Orchestration is an example of a source document. A line in a purchase order in Procurement is another example of a
source document.
task-generating event
A type of event that results in the title transfer from seller to buyer for goods, or for the fulfillment of services from seller
to buyer for services. This event creates tasks that Financial Orchestration uses to perform accounting activities, such as
updating the intercompany accounts receivable account, or to create financial documents, such as creating the accounts
payable invoice.
trade distribution
The path through which goods and services travel from the seller to the buyer, and the path that the payment for these goods
and services travel from the buyer to the seller. A trade distribution can be short, such as a transaction between the seller and
the buyer, or it can be long, such as a transaction that includes the seller and the buyer, and that also includes wholesalers,
distributors, agents, and retailers.
transfer pricing rule
A type of rule that calculates the intercompany transfer price according to the information that is associated with an
intercompany transaction. The transfer pricing rules determine how to price an international transaction that occurs in a
multinational company so that each country receives the correct share of taxation. You can use a transfer pricing rule with
buy and sell terms.

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