Cost Cutoff Date

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Parameters>Costing Tab.
What is the Cost Cutoff Date?
When the cost processors are run, users specify the cost cutoff date option and the cutoff
date for all cost organization books that are being processed. The cost cutoff date is the last
day on which the cost processor will process transactions for an accounting period.

What is the cost cutoff date option?

You can set the cutoff date option to User-Defined or Auto. The User-Defined option
requires you to specify the cutoff date; while the Auto option saves you the effort of
redefining the cutoff date which is automatically moved forward by the cost processor.
Under the Auto option, the cost processor moves the cutoff date forward up to the last date
of the earliest open cost period, and then it stops until the period is closed. After the period
is closed, the cost processor advances the cutoff date into the next open period, and so on.
However if a transaction is successfully preprocessed after the cutoff date, then the cutoff
date for that cost organization book moves forward to the date of the last successfully
preprocessed transaction; this could happen, for example, if the cutoff date option was
originally set to User-Defined and subsequently changed to Auto.

What are backdated transactions?

One of the purposes of the cost cutoff date is to allow backdating of transactions. For
example, if you set the cost cutoff date to October 31, you can still process October
transactions that were entered in November for the period ending October 31 by backdating
them to October 31 or earlier. However, when the cost cutoff date advances forward to a
date past October 31, the transactions can no longer be backdated to October 31 or earlier,
and they are processed with the forward date. If you set a cost cutoff date at October 31,
the cost processor will queue up but not process any transactions with a date after October
31. If you subsequently need to backdate transactions to a date before October 31, you can
process these transactions before any transactions with dates of November 1 and beyond.
You can also backdate transactions to any date after October 31, with the assurance that
these transactions will be processed in the correct order when the cost cutoff date moves
forward.

What is the costing date of transactions?

The costing date of transactions is normally the same as the transaction date, except for
backdated transactions. If there are any previously costed transactions (that is, the cost
processor has processed transactions whose date is earlier than the date of the backdated
transactions), then the costing date of the backdated transactions is set as the cost
processor run date.
Note: The cost cutoff date only affects the accounted date of the transaction. It does not
affect the inventory transaction date, or the inventory quantity reported for a given date.
Backdating of Transactions: Examples:

By setting the cost cutoff date for a cost accounting period, you can manage which
transactions are processed in that period, including backdated transactions. The following
examples illustrate how the cost processor sets the accounted date for backdated
transactions. Assume that the current date is November 2, the cost cutoff date is October
31, and the following costed and uncosted transactions are in process:

Below, the inventory transaction is backdated to position A. The transaction will be costed
with accounting date B before the transactions 2 and 3 are processed.

Below, the inventory transaction is backdated to position C. The transaction will be costed
with accounting date C after the transactions 2 and 3 are processed.

Below, the inventory transaction is backdated to position D. The transaction will be costed
with accounting date D after the cost cutoff is moved past October 31.

How to use Cost Cutoff Date?

This functionality was developed to allow businesses the option of changing labor rates and
overhead rates at the beginning of the accounting period while transactions in the next
period wait for these new costs to be completed. This will allow period close, cost
updates, and rate changes to occur without impacting or interrupting business operations.
When using the Cost Cutoff Date, all cost processing for the new accounting period is
stopped for that organization. This allows the accountants the opportunity to close the
previous period. Once the new costs are set, then the costing is started for the new period.
This occurs by changing the cost cutoff date to a date in the future.
If this field is left blank, then the old cost processing will occur. If the field is populated, then
no processing of costs will occur from that date onwards. The cost cutoff date will use
midnight as the start of the period and also inventory quantities are recorded at midnight.
With this new functionality.
This option is much useful with the Organization that a Standard Costing as their costing
method.
The Standard Cost Update can now run in one organization while other organizations are
still costing transactions. Standard Cost Workers are launched based on organization, so
this improves the speed of costing transactions. To use this Feature: For standard costing

organizations if the start of the new costs is to be January 1 2012, that is the date that is
entered. New standard costs can then be established prior to January 2012, in December
2011 for example. These costs will not impact the December costing activities as they will
not be active until Jan 1 2012. No transactions that occur after the start of the day January
1, 2012 are costed.
This will allow the accountants to complete the costing for the December transactions, close
the period, and run the reports for review. A standard cost update can be performed using
the new cost type for January 2012. This will update the cost of the costed items up to the
end of the day (midnight) December 31, 2011. The reports can then be re-run with the
same quantity and newly updated costs. Still NO January 2012transactions will be costed.
This is true whether it takes a few days in the next period or a few weeks to finish the
costing of the previous period. The uncosted transactions will remain in the
MTL_MATERIAL_TRANSACTIONS with costed_flag = N waiting for a cost worker to
process them. The Cost Manager will spawn no cost worker until the Cutoff Date is
changed. To cost the January 2012 transactions once December 2011 is properly closed,
the Cost Cutoff Date is changed. This can be changed to the start of the next period or next
quarter or next year---whenever the rates need to be changed next. Once changed the cost
processing begins for the transactions that have been waiting. For standard costs the
processing of the transactions is immediate.
For Average, FIFO, and LIFO costing the process takes longer because of the need to
process the transactions sequentially to keep the costs accurate. For Average, FIFO, LIFO
cost organizations , Rate Cost Types are created and the old rates are copied to that new
cost type. This rate will not be used for cost processing until the Cost Cutoff Date is
changed. The cost type and the cutoff date need to be changed to allow the new costs to
be used and the transactions can be processed for the new period. For Shipping
transactions, the costs also use the cutoff date. The shipment in the new period will be
uncosted. If another organization receives the shipment, the receipt will also be uncosted.
This is due to the fact that the receiving transaction requires the accounting distribution from
the sending organization. In standard costing, once the cutoff date is changed, the
shipments are costed immediately. In Average FIFO LIFO costing, the first uncosted
transactions will cause an error. Once the cost cutoff date is changed and the errored
transaction reset, the transaction will be costed first for the shipment and then for the
receipt. All subsequent transactions will then be processed as well.
Important Note: If this functionality is not required or desired, the Cost Cutoff Date field
must be BLANK. If there is a date entered in that field, no costing will occur on transactions
for that organization from that date onwards..