Scenario – The item costing method is FIFO and the system is causing GL changes and the direct cause cannot be pinpointed.
In the Item Fulfillment transactions, the system changes the GL impact due to a change in the costs. There are various reasons for the cause of the change.
With our current costing engine, costing for transactions that include FIFO or LIFO item(s) is handled in the same way as serialized or lot-numbered items. Upon the save of a transaction, two things take place:
- The average cost is used when the transaction is saved.
- The costing program runs and recalculates the correct FIFO or LIFO cost.
Sometimes, the costing system takes some time to update the GL Impact on Item Fulfillment to reflect the correct cost based on the Costing Method. The Inventory valuation report is used in those cases to verify whether any revaluation is currently in progress.
Cost of Sale adjustments are usually generated by the system in order to recognize the actual Cost of Sales if the item is sold underwater (selling the item even when we don’t have the item in stock). When the negative inventory occurs, the system records an estimated value for the selling transaction (since the current on hand is 0, upon selling/inventory decrease, the item has no actual cost to be recognized), thus when we create a positive adjustment and enter the correct value, the system generates this COST OF SALES ADJUSTMENT to correct the total value of the inventory.
The system prioritizes the Item Receipt over the fulfillment or selling transaction if the Item Receipt is backdated to the same day as the fulfillment. It’s important to highlight that altering the date triggers a recalculation of costs. The closure of financial periods cannot proceed until this recalculation is completed to prevent any costing discrepancies. The duration required for these necessary cost recalculations varies based on the extent of data influenced by the date change for each item. If a transaction was modified early in an item’s transaction history, or if multiple items were involved, the recalculations might be time-consuming. In such instances, the recalculation process must analyze all subsequent transactions for that item to determine any required costing adjustments.
To summarize:
- Specifically, due to the FIFO costing method employed, any alteration in the transaction date affects all associated transactions for that item, impacting the quantity and subsequently recalculating the cost. For instance, changing the date of a quantity-impacting transaction from May to March triggers an automatic recalculation, reflecting the corresponding change in the GL account.
- Please note that in the FIFO costing method, the system initially calculates the average cost before posting the accurate FIFO cost.
- CSV imports of inventory-impacting transactions in the NetSuite account prompt the system to recalculate the cost in the GL impact and make necessary adjustments.
- It’s crucial to note that the FIFO cost calculation and the accompanying GL changes are automated background processes in NetSuite. To delve deeper into the intricacies of these background processes and calculations, initiating a NetSuite Case ticket is strongly recommended.