Inventory Period Close and Reconciliation in Oracle Applications (E-Business Suite Release 12) – Discrete
manufacturing Organization with Average Costing
Purpose: The purpose of this article is to explain the Inventory period closure and reconciliation process in an easy step-by-step
fashion in Oracle Applications (E-Business Suite Release 12). The document describes the pre-requisites, sequence of activities to be
performed, important diagnostics and reconciliation procedure towards Inventory Period Closure for a Discrete Manufacturing
Organization in Average Costing environment.
Note: Inventory Period Closure needs to be performed for each Inventory Organization and once a period has been closed in Oracle
inventory, it cannot be reopened.
Pre-requisites: Following prerequisite(s) should be ensured before proceeding ahead with Inventory Period Closure.
A.
Payables and Purchasing periods are closed

Purchasing period closure is required to ensure that all PO transactions (PO Receipt, Return to Vendor, Receipt
adjustment etc.) are processed for the current period

Payables period closure is required to ensure that all Purchase invoices are entered and accounted for current period.
This will record all Invoice Price variances (IPV) and Exchange Rate Variances (ERV) which might be required to update
inventory valuation.
Note: Purchasing Period Closure should be done subsequent to Payables closure if "Accrue Expense Items" setup parameter
is set to "Period End" (Navigation: Purchasing Superuser -> Setup -> Organization -> Purchasing Options)
B.
Ensure all transactions have been entered for Inventory Organization
i.
All Inventory transactions (issue, receipt, transfer and adjustment) have been entered and there are no transactions which
are yet to be entered in Oracle
ii.
There are no records in Transaction interface tables which are yet to be processed.
 MTL_TRANSACTIONS_INTERFACE (Material Transactions)
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
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
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



MTL_TRANSACTIONS_LOT_INTERFACE (If Lots are used)
MTL_SERIAL_NUMBERS_INTERFACE (If Serial Nos. are used)
MTL_RESERVATIONS_INTERFACE (Material Reservations)
RCV_TRANSACTIONS_INTERFACE (PO Receiving transactions)
WIP_JOB_SCHEDULE_INTERFACE (Discrete Jobs )
WIP_JOB_DTLS_INTERFACE (Discrete Job Details)
WIP_MOVE_TXN_INTERFACE, WIP_SERIAL_MOVE_INTERFACE (WIP Move transactions interface)
WIP_SERIAL_MOVE_INTERFACE (If Serial Nos. are used)
WIP_TIME_ENTRY_INTERFACE (WIP Resource Transaction Interface)
MTL_TXN_COST_DET_INTERFACE (In case of Average Cost Update transactions)
iii.
Invoice Price Variance (IPV) transfer to inventory (If required): Transfer recorded IPV for current Inventory Organization
through "Transfer Invoice Variance" program (Navigation: Cost Management  Item Costs  Average Cost Update 
Transfer Invoice Variance). IPV can be transferred for specific items or all items. The programs looks for IPV recorded against
each item within the date range for current inventory organization and then posts an "average cost update" transaction to
Transaction open interface. Inventory IPV account should be selected as adjustment account against which cost adjustment
would be carried out.
iv.
Exchange Rate Variance (ERV) transfer to inventory (If required): "Transfer Invoice Variance" process explained above is not
applicable to ERV. There is an enhancement request logged with Oracle towards the same which is under development.
"Average Cost Update" transaction would need to be carried out manually to load ERV to inventory valuation.
v.
Average Cost Update transactions (if required): Perform "Average Cost Adjustment" transaction (Navigation: Cost
Management  Item Costs  Average Cost Update  Update Costs) if average unit cost needs to be altered due to any
reason.
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vi.
Job Closure of completed WIP Jobs: Discrete Job closure records WIP Variances in WIP Value summary and ensures that no
transactions can be carried out for completed jobs. Any difference between Job's "Cost incurred" and "Costs Relieved" value
is posted to WIP variance in WIP Accounting Class (Navigation: Work in Process Discrete  Close Discrete Jobs)
vii.
Project Cost Transfers have been processed: There should be no transactions for which Project Cost Collection has not taken
place. The best way to ensure this is to review material transactions (Navigation: Cost Management  View Transactions 
Material Transactions). There should be no transactions with "Transferred to Projects" status as "No" or "Error". This
parameter is one of the filter criterions in Find Material Transactions form.
viii.
Ensure that COGS Recognition events have been processed for all shipped out orders: Three programs must be run to ensure
that all COGS recognition events are generated for shipped out sales orders in a period:
 Record Order Management Transactions: This process records all sales order transaction activity (shipments / RMA
returns) in Oracle Order Management
 Collect revenue recognition Information: This process determines the percentage of recognized or earned revenue
related to invoiced sales order shipment lines in Oracle Receivables
 Generate COGS Recognition Events: This process generates COGS Recognition events for new sales order
shipments/returns and changes in the percentage of earned revenue. COGS Recognition events credits/debits
Deferred COGS/COGS accounts in order to maintain the ratio of deferred COGS to actual COGS in same proportion as
unearned revenue to earned revenue.
Note: These three requests are run at Ledger level. It is recommended to create a Request Set of these requests and scheduled
on daily basis to keep COGS Account value accurate.
Run "COGS Revenue Matching Report" to review that COGS Recognition events have been generated for all shipped out
orders i.e. Ratio of deferred COGS to actual COGS is same as the ratio of unearned revenue to earned revenue recognition.
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ix.
C.
"Create Accounting Program for Cost Management" must be run: It is recommended to schedule "Create Accounting"
program on daily basis to keep GL account value in sync with sub-ledger values. Though this program should be run once
before period closure to ensure all accounting entries are passed onto GL (in case some transaction were recorded after last
run). For more information on Create Accounting program and Accounting flow refer Oracle Note 755943.1
Period Close Diagnostics
Perform period close diagnostics to identify if there are some transactions which might prevent inventory period closure.
Diagnostics can be performed in two ways:
i.
Review Pending transactions against current period in Inventory Accounting Periods form. (Navigation: Cost Management 
Accounting Close Cycle  Inventory Accounting Periods). The form shows the no. of transactions under "Resolution required"
and "Resolution recommended" heads. Transactions under "Resolution required" category are the transactions which should
be resolved before period can be closed. Transactions under "Resolution recommended" category are the transactions which
are recommended to be resolved before period closure but in would not prevent the period closure; these transactions are
processed in next accounting period subsequent to current period closure. This form also shows unprocessed shipping
transactions.
ii.
Run "Period Close Pending Transactions Report". This Report can be run for "Resolution required", "Resolution
recommended" or both categories.
Error Resolution will depend on the nature of error. There are several documents available on Oracle Metalink describing
error resolutions for some common errors. For others, Oracle SR might be required for resolution.
x.
Note: It is recommended to perform the period close diagnostics frequently (e.g. weekly) to identify errors at an early stage
and hence ensuring smooth period closure. This activity is performed at inventory organization level. For more information
on Reviewing and fixing period close diagnostic errors refer Oracle Note 603657.1
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D. Reconcile Inventory balances
i.
Run "Period Close Reconciliation Report" in simulation mode: this report displays the differences between accounted
value and inventory value as discrepancy. Accounted value is calculated using previous adjusted summarization data
and distribution information from MTA (MTL_TRANSACTION_ACCOUNTS) table. On-hand value is calculated using
current values from MOQ (MTL_ONHAND_QUANTITIES) and MMT (MTL_MATERIAL_TRANSACTIONS) tables.
Discrepancy is reported as difference between the two. For more information on "Period Close Reconciliation" report
and resolving discrepancies refer Oracle Note 295182.1
ii.
INV-GL Reconciliation
Inventory valuation reconciliation is a critical step to ensure that balance of valuation accounts (Navigation: Inventory
Management -> Setup -> Organizations -> Parameters) is representing the accurate inventory value. There should be
no difference between Inventory values (Inventory Value reports from sub-ledger and accounted value in Valuation
Accounts in General Ledger). Following table can be used as reference for this reconciliation activity.
Index
A
B
Report
All Inventories Value
Report - By Cost Group
Inventory Stock Value
In-transit Inventory Value
"Account Analysis Report"
in General Ledger
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Inventory Organization(s)
ORGA
ORGB
200000
20000
100000
10000
C
D
E
F
G
H
I
J
K
Material Account
Outside Processing Account
Material Overhead Account
Overhead Account
Resource Account
Total Inventory Value
(C+D+E+F+G)
In-transit Inventory
Account
Inventory Value
Discrepancy (H-A)
In-transit Value
Discrepancy (I-B)
140000
30000
10000
0
20000
70000
15000
5000
0
10000
200000
100000
10000
10000
0
0
0
0
Note(s)
1. If Inventory Organization is not reflected in one of the account segments, then report total from General Ledger should
be matched with sum total of Inventory value reports for all organizations associated with the Ledger.
2. In-transit value is shown as part of Inventory Organization's inventory value based on FOB (Free on Board) point defined
for inter-org transfer (Navigation: Inventory Management -> Setup -> Organizations ->Shipping Networks). In-transit
inventory is owned by either the shipping organization, FOB receipt, or the receiving organization, FOB shipment.
3. WIP (Work in Process) Value Reconciliation: If discrete manufacturing is used,
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WIP reconciliation can also be done in a similar fashion as Inventory. "WIP value Report" shows the details of cost
incurred and relieved to WIP accounting classes at inventory org level and balances should be compared with account
analysis report at GL as was done in case of Inventory reconciliation.
iii.
Resolving INV-GL Reconciliation discrepancies (if any)
Oracle Note 1447211.1 explains and provides diagnostic scripts for easy identification of errors/issues leading to
mismatch between GL and INV values. Following is a quick summary of steps to be performed for identification of
reconciliation issues:

Check back-dated transactions: Back dated transactions can lead to discrepancies between GL and sub-ledger
values.

Check mismatch in quantities between MMT and MOQ tables

Check mismatch in cost details between MMT and CQL tables

No Negative ledger Id's exist at the Legal Entity level

Run "Sub-ledger Period Close Exception Report" for journal source as "Cost Management": This report lists
all accounting events and journal entries that fail period close validation for GL. The report displays all
error/unprocessed/un-transferred records and can also be run at journal category level. If records exist in this
report Run "Transfer Journal Entries to GL - Cost Management" to ensure that all pending journal entries are
transferred to GL, then run the report again and review.
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
E.
If differences still persist, Run "Recon_diag.sql" script (Refer Oracle Note. Script generates two outputs,
"INV_SLA_RECON.TXT" and "SLA_GL_RECON.TXT" to provide the detailed information about mismatch
between INV-SLA-GL.
Close Accounting Period
Once GL and INV sub-ledger values match, close Inventory Period (Navigation: Inventory Management  Accounting Close
Cycle Inventory Accounting Periods  Change Status  "Closed").
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