Dynamics Community Forum Thread Details

Discrepancy between Actual Cost and Adjustment in Landed Cost

Hi,

I have a question regarding the Landed cost module.

Background:
I invoiced a Landed cost for a Voyage, and the costs were apportioned to each item. When checking the results, I noticed a discrepancy between the "Adjustment" in Inventory Transactions and the "Actual Cost" in Cost Inquiry for several items.

Purchase Currency: USD
Landed Cost Currency: JPY (Invoiced in JPY)
Reporting Currency: JPY (Checking Adjustment and Actual Cost in JPY)

The Issue:
According to my manual calculations, the Actual Cost values are correct and match my expectations. However, the Adjustment values recorded in the transactions do not match the expected adjustment amounts, with variances of several dozen yen per item.

Adjustment

Actual Cost

Questions:

Why would the "Actual Cost" be correct while the "Adjustment" shows an unexpected value?

I would appreciate any insights into the internal logic of how these two values are synchronized.

Best Regards,

Categories:

Dynamics 365 Finance

Hi KK-12030320-0

1) Issue
In the Landed Cost module in D365 Finance, a discrepancy is observed between:

- "Adjustment" values in Inventory Transactions
- "Actual Cost" values in Cost Inquiry

Scenario:
- Purchase currency: USD
- Landed cost invoice currency: JPY
- Reporting currency: JPY

Observation:
- The "Actual Cost" values in the Cost Inquiry match expected manual calculations
- The "Adjustment" values in Inventory Transactions differ slightly (by several yen per line)

Example from screenshots:
- Total Adjustment: 8,296 JPY
- Total Actual Cost: 8,051 JPY

2) Reason
The difference is expected behavior due to how D365 processes landed costs and currency conversion.

Key mechanics:

A) Different calculation layers
- "Actual Cost" (Cost Inquiry):
- Represents the apportioned landed cost values per item
- Calculated at the voyage costing level
- Based on allocation rules (quantity, weight, value, etc.)
- Stored with higher precision before rounding

- "Adjustment" (Inventory Transactions):
- Represents the financial posting impact to inventory
- Generated during inventory cost update
- Subject to:
- Inventory transaction rounding
- Cost distribution rounding at line level
- Currency conversion rounding rules

B) Currency conversion effects
- Purchase is in USD, landed cost invoice is in JPY
- System performs:
1. Allocation of costs (possibly in source currency or accounting currency context)
2. Conversion into inventory value currency
3. Posting into ledger currency

During this process:
- Exchange rate precision and rounding differ between:
- Cost calculation engine
- Inventory transaction posting engine

C) Rounding differences
Most important driver of your issue:

- Cost Inquiry:
- Shows calculated values before or with minimal rounding
- Often aggregated at inquiry level

- Inventory Transactions:
- Rounds per transaction line
- Rounds per financial posting
- Uses currency rounding rules (e.g., JPY = no decimals)

Result:
Small per-line rounding differences accumulate across multiple lines
→ Leads to total variance (e.g., 8,296 vs. 8,051 JPY)

D) Costing engine vs. reporting engine
- Cost Inquiry = costing engine perspective
- Inventory Transactions = financial posting perspective

These are intentionally not always identical due to:
- Posting rules
- Rounding
- Timing of calculations

3) Resolution
Expected behavior
This difference is standard in D365 when:
- Multiple currencies are involved
- Landed costs are allocated across multiple lines
- Currency like JPY (no decimals) is used

---

Validation steps
To confirm the root cause:

- Check exchange rates used during:
- Purchase posting
- Landed cost invoice posting

- Review:
Inventory management > Setup > Currency > Rounding rules

- Compare:
- Per-line cost allocation (Cost Inquiry)
- Per-line inventory adjustment postings

You will typically find rounding differences per line

---

Mitigation options
Option 1: Accept small variances (recommended)
- Considered normal system behavior
- Differences are usually immaterial

Option 2: Reduce variance
- Minimize number of allocation splits
- Use allocation methods with fewer fractional distributions

Option 3: Customization (advanced)
- Adjust rounding logic or allocation behavior
- Not recommended unless required for strict compliance

---

Important clarification
- The "Actual Cost" being correct indicates the allocation logic is working properly
- The "Adjustment" reflects accounting reality after rounding

The system does not attempt to force both values to match exactly

---

Summary
The discrepancy between "Actual Cost" and "Adjustment" is caused by:

- Currency conversion differences
- Line-level rounding in inventory postings
- Separation of costing vs. financial posting logic

This is expected standard behavior in D365 Finance, especially in multi-currency scenarios involving JPY.

For a more detailed answer, please provide more information.

Rg,

Alexander

*Due to the complex and different possibilities of deploying Dynamics 365 I highly recommend not to setup the application without some expert/partner or support. (For more information contact me under anassl@inno-solutions.info or visit www.inno-solutions.de)

*The Information comes directly from the manufacturer or provider and are validated (not guaranteed) up to date of creation of the posting.

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