Depreciation of Net Sales Value

One method to calculate the actual (market) value of inventory in M3 Cost Accounting is to compute the net sales value. This is considered the future net realizable value of the goods in inventory.

To compute the net sales value, it is necessary to calculate future depreciation (write down) of the goods in inventory. Generally, the write down applies to inventory that has remained in stock for a long time or runs the risk of doing so.

Depreciation is calculated by forecasting future demand based on historical usage.

In ‘Settings - Inventory Valuation’ (CAS025), the historical usage is grouped into buckets, or time periods, with each group containing one or more buckets. Depreciation of the net sales value is specified in percent for each bucket and demand type.

Depreciation for each bucket is calculated as:

• (Quantity per bucket) x (Unit price) x (Percentage per bucket)

Depending on the search path, the unit price is retrieved from:

• The specified price list
• The basic item data
• Selected acquisition cost method.

The values obtained are used to calculate the net sales value after depreciation for the corresponding future bucket in ’Inventory Value. Open’ (CAS180).

The method is not suitable for item groups with seasonal turnover.