Topic overview

This article describes how inventory valuations are executed in the system and how the Calculate inventory values application is structured. In the Inventory valuation article, you will find additional information on the supported valuation methods and the effects of the calculations. You will also learn which processes can lead to revaluation of the item inventories and how they affect other processes and applications.

For instructions on working with the Calculate inventory values application, see the article Procedures: Calculate inventory values.

Definitions of terms

Inventory valuation
Inventory valuation is an ongoing calculation of the corresponding value for item inventory available in the warehouse. The value is expressed in monetary units (local currencies of a company). All inventory postings that cause
changes to the quantity or value of inventoried items are documented in various valuation processes. In the course of generating the inventory postings using the inventory management server, the inventory and its valuation is updated on the basis of the floating average price method. The full sequence of dated inventory valuations, such as FIFO (first in/first out) or LIFO (last in/first out), can only be identified after the posting period has been closed.

Inventory owner
The inventory owner is the legal possessor of the specified warehouse inventory. The inventory owner is used for many inventory management processes, for example, inventory counts and inventory valuation. For certain business processes, it may be necessary to specify the inventory owner in order to determine whose inventory is used or considered in a process.

Warehouse inventory management
Warehouse inventory management is an ongoing recording of the current warehouse inventory. The inventory  management server updates these values after every inventory posting with a quantity transaction. Warehouse inventory
management is done at the lowest structural level of the warehouse and item or identifier. If the item has several parallel inventory units, then quantities are maintained for each unit. Inventory quantities can have different properties, such as subdivision into different quality statuses.

Posting periods
Posting periods are time limits or time periods within a fiscal year. All postings, such as inventory postings, must be  assigned to a posting period.

FIFO
The FIFO (First In, First Out) assessment process is a consumption-based process and a fiscal valuation method (according to taxation law). FIFO stands for the assumption that the inventories put away first will also be withdrawn first. The calculation of the inventory value is therefore based on the receipts received last.

Moving average price (MAP)
The moving average price valuation method is one form of weighted average price valuation. It is in the group of valuation simplification methods and is a valuation method for inventory recognized in trade law. The moving average
price is defined as the value of inventory divided by the quantity. At every inventory posting of a receipt, it is recalculated and remains valid until the next receipt. It is used for valuation of issues.

LIFO
The LIFO (Last In, First Out) assessment process is a consumption-based process and a fiscal valuation method (according to taxation law). LIFO stands for the assumption that the last inventories acquired will be consumed first. The calculation of the inventory value is therefore based on the receipts received first.

Application description

With the Calculate inventory values application, you can calculate the inventory values of your inventoried inventory items for one or more posting periods. Various methods can be applied, e.g., LIFO or FIFO, and, depending on the settings in the Customizing application, either on the level of company and item or on the level of company, item and warehouse.

If possible, you should calculate the inventory values in the background and outside of normal operating hours in order to avoid an adverse effect on the response times for other users. With the [Calculate inventory values] action, you can create a scheduled batch job that will recalculate the inventory values of the current posting period at night. For a detailed description on how to set up batch jobs, see the Operating guidelines.

The Calculate inventory values application consists of only one work pane.

Work pane

The fields are described in detail below.

Up to posting period – in this field, you define up to which posting period the inventory values should be calculated.
If the posting period has already closed, the calculation is ultimately executed for the alternative valuation method and the inventory values cannot be thereafter recalculated. However, if the selected posting period is still open, the  calculation can be repeated as often as possible.

Optional valuation methods – choose one or more alternative valuation methods as the basis for calculation of warehouse inventories. The valuation methods selected in the Valuation column in Financials (the Customizing application) are available. The following valuation methods are possible as the maximum:

• FIFO
• LIFO
• Annual LIFO: Weighted average prices and values
• Annual LIFO: Weighted average prices
• Annual LIFO: Values

For the alternative Annual LIFO valuation method, either the prices only or the values only, or both the prices and values are calculated. This procedure allows for high flexibility in terms of structure of the Annual LIFO, because the average prices are first calculated, checked and corrected, if applicable, and then the actual Annual LIFO values are calculated in a separate call-up.
For calculation of the average price divided into periods, the posting date of the inventory postings is decisive and not the time of processing by the inventory management server (as it is the case with the ongoing moving average price). Back-dated inventory postings can therefore lead to different average prices than would be the case with strictly
chronologically created inventory postings.

Application-related action: [Calculate inventory values]

With the [Calculate inventory values] action, the selected valuation methods are calculated up to the selected posting period. Calculations may take a long time to execute. For this reason, we recommend calculating the inventory values in background mode.

Preconditions

• Make sure that all inventory postings and any corrections have already been entered before a prior period-end closing.
• The inventory values are always calculated without gaps. This means that the calculation is also carried out for all previous posting periods of a financial year that are either open or for which a final calculation of the inventory values has not yet been carried out.
• The calculation of the set consumption-based processes (FIFO, LIFO, annual LIFO) must be carried out at least once per financial year in the course of the financial year-end closing for each alternative valuation method. In this case, one call is sufficient for the last period of the completed financial year.

Calculations/effects

A description of the calculations and effects for each valuation method can be found in the Inventory valuation article.

Customizing

Among the settings for the Financials framework in the Customizing application, the following fields in the Valuation function are relevant for the Calculate inventory values application.

Valuation level – in this field, you define the valuation level that is to apply to the inventory valuation. The following options are selectable:

• Item
• Item/warehouse

The selected valuation level controls the level, i.e. the level of detail, at which the inventory is to be valued. All material transactions that lead to changes in the quantity or value of inventory-managed items are documented for the selected valuation method at the valuation level set in each case. Further information can be found in the Customizing: Financials article.

Business entities

For the Calculate inventory values application, the following business entity is relevant, which you use, for example, to

• assign authorizations,
• set up activity definitions or
• import or export data.

Perioden-Bestandswerte pro Bewertungsverfahren

Period inventory values per valuation method: com.cisag.app.inventory.obj.InventoryValuePeriodSummary

The business entity is part of the following business entity group:

Inventory voucher data: com.cisag.app.inventory.OrderData

Authorizations

Authorizations can be assigned using the authorization roles as well as by assigning an organization. The authorization concept can be found in the technical artcile Authorizations.

Special capabilities

There are no special capabilities for the Calculate inventory values application.

Organization assignments

Organizational structures are used to control which data is visible, usable or editable. To do this, the Content-related authorizations function must be activated in the Customizing application.

If the Content-related authorizations function is activated in the Customizing application, the Calculate inventory values application is only displayed to a person if they have been assigned an organization in the partner master data that is included in at least one of the following organizational structures:

• (Active OLTP) Client
• Financials

Special features

There are no special features for the Calculate inventory values application.

Authorizations for business partners

The Calculate inventory values application is not released for business partners.