Enable Inventory Valuation

This procedure is used to set the parameters for inventory valuation variances when calculating financial inventory valuation.

Before you start

Inventory valuation must be configured in 'Settings – Cost Accounting' (CAS900) in these fields:

If you plan to use demand types for forecasting and adjustment of net sales values in 'Inventory Value. Open' (CAS180), you must select these in the '275 Demand types for inventory valuation' fields in (CAS900/G). They are automatically linked to the period buckets in (CAS025/F) (see below). The demand used for the forecast is then totaled from the demand types per period. Select from these demand types:

Follow these steps

  1. Start 'Settings - Inventory Valuation' (CAS025/B).

  2. Create a combination of division, facility, item group, and, if necessary, item number. Press Enter.

  3. On the E-panel, select whether detailed lot information should be printed on the proposal for lot-controlled items.

  4. If applicable, specify a percentage of the inventory value considered as obsolete.

  5. Select the inventory system for calculating the acquisition cost and how the net sales value is to be retrieved. If applicable, specify a price list and a price share.

  6. Select the method for retrieving the replacement cost. If the replacement cost is to be equal to a specific costing type and subtotal, specify the costing type and subtotal. Press Enter.

  7. On the F-panel, specify the period ranges and percentages for depreciation of the net sales value. Press Enter.

Parameters to set

Program ID/panel Field The field indicates...
(CAS025/E) Lot number detailed

…whether detailed lot number information per item/warehouse and lot number should be printed on the inventory valuation proposal for lot-controlled items.

If this check box is not selected, only information per item/warehouse is printed. This means that the proposal is generated faster.

(CAS025/E) Obsolete percentage of inventory value …the percent of the inventory value considered as obsolete during inventory valuation.
Acquisition cost
(CAS025/E) Acquisition cost method

…which inventory system to be used for calculating the acquisition cost of the inventory.

The acquisition cost is calculated for all three available inventory systems (FIFO, LIFO, and average). The value from the system you have selected is compared to the net sales value and the replacement cost. The lowest of these three values is then selected automatically as the inventory value.

Note:  LIFO values are only calculated and displayed if the 'Calculate LIFO values in inventory valuation' check box is selected in (CAS900).

These are the valid alternatives:

1 = FIFO; 2 = LIFO; 3 = Average.

Actual value: Net sales method
(CAS025/E) Search path – net sales value

…the sequence in which the net sales value is searched.

These are the valid alternatives:

1 = From the price list

2 = From the item's basic data

3 = From preferred acquisition cost method.

Example: "21" means that the price is first searched for in the item file. If there is no value there, the search continues in the specified price list.

(CAS025/E) Price list – inventory valuation

…how the net sales value for inventory valuation is determined. The item's inventory value is then calculated as the product of the net sales value and price share.

The price list specified must be expressed in local currency without a customer number.

(CAS025/E) Price share – inventory valuation …the percent of the price from the price list or item file used when calculating inventory value.
Actual value: Replacement cost method
(CAS025/E) Search path – replacement cost

… how the replacement cost is defined, with or without applying a purchase costing model.

These are the valid alternatives:

1 = Purchase price from the agreement file

2 = Purchase price from the item master file

3 = Average cost

4 = Price on the latest invoice in the purchasing statistics that is recorded on the inventory valuation date

5 = The lowest of alternatives 3 and 4 (lowest of average cost and price on latest invoice). If one of these values is 0, the other value is selected.

6 = Replacement cost is to be set equal to a specific costing type and subtotal (defined below). This alternative should be used for items without a purchase price.

Note: If alternative 1, 2, 3, 4, or 5 is selected, the purchase costing model connected to the item is automatically applied. If alternative 6 is selected, a purchase costing model is not used.

Example: "21" means: First search for the price in the item master file and if no value is found there, continue the search in the agreement file. If a price then is found in this file, it is automatically adjusted by the connected purchase costing model (for example, 10% overhead is added for freight charges).

(CAS025/E) Costing type

…one of up to nine types of product costing. Costing rates and markups are specified for each costing type and date.

Example: Costing type 1 is current product costing (regularly recalculated). Costing type 2 is simulated product costing, and costing type 3 is product costing using standard costs.

(CAS025/E) Subtotal number …the subtotal of the product costing. Valid values are 1 to 9.
Buckets for depreciation of net sales value
(CAS025/E) Buckets 1–5, From/To period

…the start/end period in a bucket from which depreciation of the net sales value is calculated.

Depreciation is taken for products that either have been in stock or can be in stock for a long time. The value is calculated by forecasting future needs based on historic consumption.

Historic consumption is grouped in buckets, or time zones. Each bucket can contain one or several periods. Depreciation is set as a percentage for each bucket and demand type. The demand types used in the calculation are defined in 'Settings – Cost Accounting'(CAS900).

Depreciation for a bucket is calculated as follows: (quantity per bucket) x (unit price) x (percentage per bucket).

The unit price is retrieved from the price list specified, the item' basic data, or is calculated by dividing the acquisition cost with the quantity, depending on the search path.

The values retrieved are used to estimate the net sales value after depreciation for a corresponding future bucket in (CAS180). This periodization is retrieved from the period type specified for Material & Production Management (MPM) in 'Company. Connect Division' (MNS100/F), and not from the financial system.

Example: If a periodization of 12 months is used for the financial system but 52 weeks is used for MPM, start period 2 in this case refers to week 2, not month 2.

(CAS025/F) Percentage depreciation (per bucket) … the percentage depreciation used when forecasting future net sales value.
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