Author: Neeraj Agarwal is a Sr. Principal Product Manager at Anaplan.
Hello Anaplan Community!
If your organization transfers inventory between related entities at a markup — and that inventory is still sitting on the buyer’s shelves at period-end — you already know the challenges this creates for consolidation: the group hasn’t actually earned that markup yet, but without extra work it shows up in your consolidated numbers anyway. That’s exactly what Inventory Margin calculation in Anaplan Financial Consolidation and Reporting (FCR) is built to fix.
This feature calculates the unrealized margin sitting inside intercompany inventory transfers, so you can eliminate it automatically instead of chasing it down by entity, by product etc.
Let’s unpack how it works, why it matters, and how to set it up.
🗝️ The core concept
When one entity in a group sells inventory to another related entity, the internal sale often includes a margin above cost. From a legal-entity standpoint, that’s a normal sale. From a group standpoint, though, nothing has really happened yet — the inventory hasn’t left the group, and the “profit” on it is unrealized until the buyer eventually sells the goods to someone outside the group.
If the buyer entity still holds part or all of that inventory at period-end, the margin embedded in it needs to be eliminated from the consolidated results. Left unaddressed, this overstates consolidated inventory (carried at a marked-up value instead of at cost) and overstates consolidated profit (Cost of Goods Sold is understated for the group as a whole).
How inventory margin calculation fixes this
Rather than requiring a manual side calculation, Anaplan FCR derives the unrealized margin directly from data you’re already capturing:
- Seller enters the margin percentage charged on the transfer, by intercompany partner (buyer).
- Buyer enters the remaining inventory still held in their books, by intercompany partner (seller).
- The system multiplies the two together to compute the margin amount for each buyer/seller combination.
- This calculation can be done at product/product group level as well by capturing margin percentage and remaining inventory by product/product group.
- That margin amount then flows into standard consolidation rules as the elimination source — no separate process, no manual journal.
Configuration
Inventory Margin rules are set up in the Maintain module, under Maintain > Inventory Margin. Each rule tells the system where to read the margin percentage and inventory balances from, and where the resulting margin should post.
The form fields
Field | What it captures |
|---|
Margin Percentage Account & Movement (Source) | The seller entity’s account/movement, with buyer’s intercompany, to capture the margin percentage |
Inventory Account & Movement (Source) | The buyer entity’s account/movement, with seller’s intercompany, to capture the inventory still on hand |
Margin Account & Movement (Target) | Where the calculated margin amount is stored, for each buyer/seller pair |
Force Closing (Target) | TRUE additionally posts the margin amount to the closing balance when the Margin Movement isn’t already a closing movement; otherwise FALSE |
Post To (Target) | Whether the margin amount posts on the Buyer’s books (with the seller’s intercompany) or the Seller’s books (with the buyer’s intercompany) |
Running the calculation
You don’t need to trigger this separately if you don’t want to — Inventory Margin runs as part of the standard Run All process. If you’d rather run it on its own — for testing or a targeted refresh — it’s also available standalone via Global > Consolidation > Processes > Calculations > Run Inventory Margin.
Under the hood: Inventory margin logic
At calculation time, the engine:
- Reads the margin percentage the seller entered against the buyer’s intercompany.
- Reads the remaining inventory the buyer entered against the seller’s intercompany.
- Calculation multiplies the margin percentage and remaining inventory to get the margin amount for each buyer/seller pair. The amount is calculated in reporting currency.
- Posts the margin amount to the configured Margin Account/Movement — on the buyer’s or seller’s books, per the Post To setting.
- If Force Closing is TRUE, also posts the amount to the closing balance.
From there, the margin amount is just another source for standard consolidation rules — you use it to post the unrealized gain/loss elimination (typically debit Cost of Goods Sold, credit Inventory) the same way you’d configure any other elimination rule.
🙋 Common questions (FAQ)
Do I need to run a separate process for Inventory Margin?
No. As long as your rules are configured under Maintain > Consolidation > Inventory Margin, the calculation runs automatically as part of Run All. Please ensure Inventory Margin is activated as part of Maintain > Run All Procedures. Additionally, a standalone “Run Inventory Margin” option exists as well.
How do I enter margin percentage and remaining inventory amount?
Your choice. You can either create dedicated input form(s) for users to capture these details or can use the data import option to capture the source inventory margin percentage and remaining inventory.
Where does the margin amount actually post — buyer or seller?
Your choice. The Post To field on each rule lets you post the margin on the buyer’s books (with the seller’s intercompany) or the seller’s books (with the buyer’s intercompany), depending on how your team wants to trace it.
How does this actually eliminate the unrealized profit?
It doesn’t perform the elimination itself — it calculates the margin amount. You then use that amount as the source in a standard consolidation elimination rule, the same way you would for any other elimination.
Can I have more than one Inventory Margin rule?
Yes, you can create, delete, import, export, and refresh rules from the toolbar on the Inventory Margin form, one per buyer/seller/account combination you need to track.
Can I perform Inventory Margin at product/product group level?
Yes, you can enter the margin percentage and remaining inventory at product/product group level for the margin amount to be calculated accordingly.
Want to dig deeper? The full configuration guide is available on Anapedia, and other FCR blogs can be found here.
