fix: Update Rate as per Valuation Rate for Internal Transfers only if Setting is Enabled (#42050)

* fix: update rate for internal transfers only if settings enabled

* fix: better naming

* fix: create field for storing incoming rate in purchase doctypes

* fix: use qty instead of qty_in_stock_uom

* fix: add description, refactor for readablility

* test: test case to validate internal transfers at arm's length price

* fix: minor fix

* fix: deletion of code not required

---------

Co-authored-by: Smit Vora <smitvora203@gmail.com>

erpnext/accounts/doctype/purchase_invoice_item/purchase_invoice_item.json

@@ -57,6 +57,7 @@
   "base_net_rate",
   "base_net_amount",
   "valuation_rate",
+  "sales_incoming_rate",
   "item_tax_amount",
   "landed_cost_voucher_amount",
   "rm_supp_cost",
@@ -958,12 +959,22 @@
    "print_hide": 1,
    "read_only": 1,
    "search_index": 1
+  },
+  {
+   "description": "Valuation rate for the item as per Sales Invoice (Only for Internal Transfers)",
+   "fieldname": "sales_incoming_rate",
+   "fieldtype": "Currency",
+   "hidden": 1,
+   "label": "Sales Incoming Rate",
+   "no_copy": 1,
+   "options": "Company:company:default_currency",
+   "print_hide": 1
   }
  ],
  "idx": 1,
  "istable": 1,
  "links": [],
- "modified": "2024-06-14 11:57:07.171700",
+ "modified": "2024-07-19 12:12:42.449298",
  "modified_by": "Administrator",
  "module": "Accounts",
  "name": "Purchase Invoice Item",

erpnext/accounts/doctype/purchase_invoice_item/purchase_invoice_item.py

@@ -79,6 +79,7 @@ class PurchaseInvoiceItem(Document):
 		rejected_serial_no: DF.Text | None
 		rejected_warehouse: DF.Link | None
 		rm_supp_cost: DF.Currency
+		sales_incoming_rate: DF.Currency
 		sales_invoice_item: DF.Data | None
 		serial_and_batch_bundle: DF.Link | None
 		serial_no: DF.Text | None

erpnext/controllers/buying_controller.py

@@ -314,18 +314,22 @@ class BuyingController(SubcontractingController):
 						get_conversion_factor(item.item_code, item.uom).get("conversion_factor") or 1.0
 					)
 
+				net_rate = item.base_net_amount
+				if item.sales_incoming_rate:  # for internal transfer
+					net_rate = item.qty * item.sales_incoming_rate
+
 				qty_in_stock_uom = flt(item.qty * item.conversion_factor)
 				if self.get("is_old_subcontracting_flow"):
 					item.rm_supp_cost = self.get_supplied_items_cost(item.name, reset_outgoing_rate)
 					item.valuation_rate = (
-						item.base_net_amount
+						net_rate
 						+ item.item_tax_amount
 						+ item.rm_supp_cost
 						+ flt(item.landed_cost_voucher_amount)
 					) / qty_in_stock_uom
 				else:
 					item.valuation_rate = (
-						item.base_net_amount
+						net_rate
 						+ item.item_tax_amount
 						+ flt(item.landed_cost_voucher_amount)
 						+ flt(item.get("rate_difference_with_purchase_invoice"))
@@ -336,72 +340,88 @@ class BuyingController(SubcontractingController):
 		update_regional_item_valuation_rate(self)
 
 	def set_incoming_rate(self):
-		if self.doctype not in ("Purchase Receipt", "Purchase Invoice", "Purchase Order"):
+		"""
+		Override item rate with incoming rate for internal stock transfer
+		"""
+		if self.doctype not in ("Purchase Receipt", "Purchase Invoice"):
+			return
+
+		if not (self.doctype == "Purchase Receipt" or self.get("update_stock")):
+			return
+
+		if cint(self.get("is_return")):
+			# Get outgoing rate based on original item cost based on valuation method
 			return
 
 		if not self.is_internal_transfer():
 			return
 
+		allow_at_arms_length_price = frappe.get_cached_value(
+			"Stock Settings", None, "allow_internal_transfer_at_arms_length_price"
+		)
+		if allow_at_arms_length_price:
+			return
+
+		self.set_sales_incoming_rate_for_internal_transfer()
+
+		for d in self.get("items"):
+			d.discount_percentage = 0.0
+			d.discount_amount = 0.0
+			d.margin_rate_or_amount = 0.0
+
+			if d.rate == d.sales_incoming_rate:
+				continue
+
+			d.rate = d.sales_incoming_rate
+			frappe.msgprint(
+				_(
+					"Row {0}: Item rate has been updated as per valuation rate since its an internal stock transfer"
+				).format(d.idx),
+				alert=1,
+			)
+
+	def set_sales_incoming_rate_for_internal_transfer(self):
+		"""
+		Set incoming rate from the sales transaction against which the
+		purchase is made (internal transfer)
+		"""
 		ref_doctype_map = {
-			"Purchase Order": "Sales Order Item",
 			"Purchase Receipt": "Delivery Note Item",
 			"Purchase Invoice": "Sales Invoice Item",
 		}
 
 		ref_doctype = ref_doctype_map.get(self.doctype)
-		items = self.get("items")
+		for d in self.get("items"):
-		for d in items:
+			if not d.get(frappe.scrub(ref_doctype)):
-			if not cint(self.get("is_return")):
+				posting_time = self.get("posting_time")
-				# Get outgoing rate based on original item cost based on valuation method
+				if not posting_time:
+					posting_time = nowtime()
 
-				if not d.get(frappe.scrub(ref_doctype)):
+				outgoing_rate = get_incoming_rate(
-					posting_time = self.get("posting_time")
+					{
-					if not posting_time and self.doctype == "Purchase Order":
+						"item_code": d.item_code,
-						posting_time = nowtime()
+						"warehouse": d.get("from_warehouse"),
+						"posting_date": self.get("posting_date") or self.get("transaction_date"),
+						"posting_time": posting_time,
+						"qty": -1 * flt(d.get("stock_qty")),
+						"serial_and_batch_bundle": d.get("serial_and_batch_bundle"),
+						"company": self.company,
+						"voucher_type": self.doctype,
+						"voucher_no": self.name,
+						"allow_zero_valuation": d.get("allow_zero_valuation"),
+						"voucher_detail_no": d.name,
+					},
+					raise_error_if_no_rate=False,
+				)
 
-					outgoing_rate = get_incoming_rate(
+				d.sales_incoming_rate = flt(outgoing_rate * (d.conversion_factor or 1), d.precision("rate"))
-						{
+			else:
-							"item_code": d.item_code,
+				field = "incoming_rate" if self.get("is_internal_supplier") else "rate"
-							"warehouse": d.get("from_warehouse"),
+				d.sales_incoming_rate = flt(
-							"posting_date": self.get("posting_date") or self.get("transaction_date"),
+					frappe.db.get_value(ref_doctype, d.get(frappe.scrub(ref_doctype)), field)
-							"posting_time": posting_time,
+					* (d.conversion_factor or 1),
-							"qty": -1 * flt(d.get("stock_qty")),
+					d.precision("rate"),
-							"serial_and_batch_bundle": d.get("serial_and_batch_bundle"),
+				)
-							"company": self.company,
-							"voucher_type": self.doctype,
-							"voucher_no": self.name,
-							"allow_zero_valuation": d.get("allow_zero_valuation"),
-							"voucher_detail_no": d.name,
-						},
-						raise_error_if_no_rate=False,
-					)
-
-					rate = flt(outgoing_rate * (d.conversion_factor or 1), d.precision("rate"))
-				else:
-					field = (
-						"incoming_rate"
-						if self.get("is_internal_supplier") and not self.doctype == "Purchase Order"
-						else "rate"
-					)
-					rate = flt(
-						frappe.db.get_value(ref_doctype, d.get(frappe.scrub(ref_doctype)), field)
-						* (d.conversion_factor or 1),
-						d.precision("rate"),
-					)
-
-				if self.is_internal_transfer():
-					if self.doctype == "Purchase Receipt" or self.get("update_stock"):
-						if rate != d.rate:
-							d.rate = rate
-							frappe.msgprint(
-								_(
-									"Row {0}: Item rate has been updated as per valuation rate since its an internal stock transfer"
-								).format(d.idx),
-								alert=1,
-							)
-						d.discount_percentage = 0.0
-						d.discount_amount = 0.0
-						d.margin_rate_or_amount = 0.0
 
 	def validate_for_subcontracting(self):
 		if self.is_subcontracted and self.get("is_old_subcontracting_flow"):
@@ -566,11 +586,9 @@ class BuyingController(SubcontractingController):
 						if d.from_warehouse:
 							sle.dependant_sle_voucher_detail_no = d.name
 					else:
-						val_rate_db_precision = 6 if cint(self.precision("valuation_rate", d)) <= 6 else 9
-						incoming_rate = flt(d.valuation_rate, val_rate_db_precision)
 						sle.update(
 							{
-								"incoming_rate": incoming_rate,
+								"incoming_rate": d.valuation_rate,
 								"recalculate_rate": 1
 								if (self.is_subcontracted and (d.bom or d.get("fg_item"))) or d.from_warehouse
 								else 0,

erpnext/controllers/selling_controller.py

@@ -432,6 +432,9 @@ class SellingController(StockController):
 		if self.doctype not in ("Delivery Note", "Sales Invoice"):
 			return
 
+		allow_at_arms_length_price = frappe.get_cached_value(
+			"Stock Settings", None, "allow_internal_transfer_at_arms_length_price"
+		)
 		items = self.get("items") + (self.get("packed_items") or [])
 		for d in items:
 			if not frappe.get_cached_value("Item", d.item_code, "is_stock_item"):
@@ -478,6 +481,9 @@ class SellingController(StockController):
 							if d.incoming_rate != incoming_rate:
 								d.incoming_rate = incoming_rate
 						else:
+							if allow_at_arms_length_price:
+								continue
+
 							rate = flt(
 								flt(d.incoming_rate, d.precision("incoming_rate")) * d.conversion_factor,
 								d.precision("rate"),

erpnext/controllers/tests/test_accounts_controller.py

@@ -5,7 +5,7 @@
 import frappe
 from frappe import qb
 from frappe.query_builder.functions import Sum
-from frappe.tests.utils import FrappeTestCase
+from frappe.tests.utils import FrappeTestCase, change_settings
 from frappe.utils import add_days, getdate, nowdate
 
 from erpnext.accounts.doctype.payment_entry.payment_entry import get_payment_entry
@@ -13,6 +13,7 @@ from erpnext.accounts.doctype.payment_entry.test_payment_entry import create_pay
 from erpnext.accounts.doctype.purchase_invoice.test_purchase_invoice import make_purchase_invoice
 from erpnext.accounts.doctype.sales_invoice.test_sales_invoice import create_sales_invoice
 from erpnext.accounts.party import get_party_account
+from erpnext.buying.doctype.purchase_order.test_purchase_order import prepare_data_for_internal_transfer
 from erpnext.stock.doctype.item.test_item import create_item
 
 
@@ -804,6 +805,41 @@ class TestAccountsController(FrappeTestCase):
 		self.assertEqual(exc_je_for_si, [])
 		self.assertEqual(exc_je_for_pe, [])
 
+	@change_settings("Stock Settings", {"allow_internal_transfer_at_arms_length_price": 1})
+	def test_16_internal_transfer_at_arms_length_price(self):
+		from erpnext.stock.doctype.warehouse.test_warehouse import create_warehouse
+
+		prepare_data_for_internal_transfer()
+		company = "_Test Company with perpetual inventory"
+		target_warehouse = create_warehouse("_Test Internal Warehouse New 1", company=company)
+		warehouse = create_warehouse("_Test Internal Warehouse New 2", company=company)
+		arms_length_price = 40
+
+		si = create_sales_invoice(
+			company=company,
+			customer="_Test Internal Customer 2",
+			debit_to="Debtors - TCP1",
+			target_warehouse=target_warehouse,
+			warehouse=warehouse,
+			income_account="Sales - TCP1",
+			expense_account="Cost of Goods Sold - TCP1",
+			cost_center="Main - TCP1",
+			update_stock=True,
+			do_not_save=True,
+			do_not_submit=True,
+		)
+
+		si.items[0].rate = arms_length_price
+		si.save()
+		# rate should not reset to incoming rate
+		self.assertEqual(si.items[0].rate, arms_length_price)
+
+		frappe.db.set_single_value("Stock Settings", "allow_internal_transfer_at_arms_length_price", 0)
+		si.items[0].rate = arms_length_price
+		si.save()
+		# rate should reset to incoming rate
+		self.assertEqual(si.items[0].rate, 100)
+
 	def test_20_journal_against_sales_invoice(self):
 		# Invoice in Foreign Currency
 		si = self.create_sales_invoice(qty=1, conversion_rate=80, rate=1)

erpnext/stock/doctype/purchase_receipt_item/purchase_receipt_item.json

@@ -67,6 +67,7 @@
   "base_net_rate",
   "base_net_amount",
   "valuation_rate",
+  "sales_incoming_rate",
   "item_tax_amount",
   "rm_supp_cost",
   "landed_cost_voucher_amount",
@@ -1124,12 +1125,22 @@
    "fieldtype": "Check",
    "label": "Return Qty from Rejected Warehouse",
    "read_only": 1
+  },
+  {
+   "description": "Valuation rate for the item as per Sales Invoice (Only for Internal Transfers)",
+   "fieldname": "sales_incoming_rate",
+   "fieldtype": "Currency",
+   "hidden": 1,
+   "label": "Sales Incoming Rate",
+   "no_copy": 1,
+   "options": "Company:company:default_currency",
+   "print_hide": 1
   }
  ],
  "idx": 1,
  "istable": 1,
  "links": [],
- "modified": "2024-05-28 09:48:24.448815",
+ "modified": "2024-07-19 12:14:21.521466",
  "modified_by": "Administrator",
  "module": "Stock",
  "name": "Purchase Receipt Item",

erpnext/stock/doctype/purchase_receipt_item/purchase_receipt_item.py

@@ -88,6 +88,7 @@ class PurchaseReceiptItem(Document):
 		return_qty_from_rejected_warehouse: DF.Check
 		returned_qty: DF.Float
 		rm_supp_cost: DF.Currency
+		sales_incoming_rate: DF.Currency
 		sales_order: DF.Link | None
 		sales_order_item: DF.Data | None
 		sample_quantity: DF.Int

erpnext/stock/doctype/stock_settings/stock_settings.json

@@ -32,6 +32,7 @@
   "allow_negative_stock",
   "show_barcode_field",
   "clean_description_html",
+  "allow_internal_transfer_at_arms_length_price",
   "quality_inspection_settings_section",
   "action_if_quality_inspection_is_not_submitted",
   "column_break_23",
@@ -440,6 +441,13 @@
    "fieldtype": "Check",
    "label": "Do Not Update Serial / Batch on Creation of Auto Bundle"
   },
+  {
+   "default": "0",
+   "description": "If enabled, the item rate won't adjust to the valuation rate during internal transfers, but accounting will still use the valuation rate.",
+   "fieldname": "allow_internal_transfer_at_arms_length_price",
+   "fieldtype": "Check",
+   "label": "Allow Internal Transfers at Arm's Length Price"
+  },
   {
    "default": "0",
    "depends_on": "eval:doc.valuation_method === \"Moving Average\"",

erpnext/stock/doctype/stock_settings/stock_settings.py

@@ -27,6 +27,7 @@ class StockSettings(Document):
 		action_if_quality_inspection_is_rejected: DF.Literal["Stop", "Warn"]
 		allow_from_dn: DF.Check
 		allow_from_pr: DF.Check
+		allow_internal_transfer_at_arms_length_price: DF.Check
 		allow_negative_stock: DF.Check
 		allow_partial_reservation: DF.Check
 		allow_to_edit_stock_uom_qty_for_purchase: DF.Check