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<ManualTopic ID="/baanerp/wh/onlinemanual/000004" xml:lang="en">
	<Header>
		<Title xmlns:ssa="http://www.ssaglobal.com" xmlns:HTML="http://www.w3.org/TR/REC-html40">Inventory valuation</Title>
		<Keyword><Level1>valuation</Level1>
			<Level2>inventory</Level2>
		</Keyword>
		<Keyword><Level1>valuation</Level1>
			<Level2>methods</Level2>
		</Keyword>
		<Keyword><Level1>inventory</Level1>
			<Level2>valuation</Level2>
		</Keyword>
	</Header>
	<GeneralSection><List><ListIntro>Inventory can be valued using several valuation methods:</ListIntro>
			<ListItem><Link href="/baanerp/wh/glossary/glossary#000319" role="glossary">Fixed Transfer Price (FTP)</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/wh/glossary/glossary#000351" role="glossary">Mov. Aver. Unit Cost (MAUC)</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/wh/glossary/glossary#000340" role="glossary">First In First Out (FIFO)</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/wh/glossary/glossary#000341" role="glossary">Last In First Out (LIFO)</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/wh/glossary/glossary#000402" role="glossary">Lot Price (Lot)</Link>
			</ListItem>
		</List>
		<Paragraph>Valuation methods result into a certain inventory value in the ledger. However, the market value of the inventory can sometimes be lower than the inventory value in the ledger, for example, when item prices decrease, or when the items are almost at the end of their life cycle. Consequently, the value in the ledger does not always represent the real value of the inventory anymore.</Paragraph>
		<Paragraph>The International Financial Reporting Standards (IFRS) require in some cases reporting the <Emphasis>market</Emphasis> value of the inventory.instead of an inventory value determined by the original purchase prices. The market value can provide you with a better insight into the real value of the inventory. Reporting inventory value based on market prices instead of (higher) purchase prices is also referred to as <Link href="/baanerp/wh/glossary/glossary#000436" role="glossary">lower cost or market value (LCMV)</Link>.</Paragraph>
		<Paragraph>You can choose whether or not to <Emphasis>revaluate</Emphasis> the inventory value to the market value. So, there are two possibilities:</Paragraph>
		<List><ListItemHead>Reporting inventory value <Emphasis>without</Emphasis> revaluation</ListItemHead>
			<ListItem>The inventory value is determined using market prices. However, this inventory market valuation is only temporary. At the start of the next financial period, the original inventory value (based on purchase prices) is used.</ListItem>
			<ListItemHead>Reporting inventory value <Emphasis>with</Emphasis> revaluation</ListItemHead>
			<ListItem>The inventory value is determined using market prices. After that, the inventory is revalued with the market value. So, at the start of the next financial period, the market value is used as the new inventory value.</ListItem>
		</List>
	</GeneralSection>
	<GeneralSection><SectionTitle>Market prices in <GUIRef href="/baanerp/wh" role="package">Warehouse Management</GUIRef></SectionTitle>
		<Paragraph>In SSA® ERP LN, you can use market prices to valuate inventory for purchased items as well as for manufactured items. Market prices can be entered in the <GUIRef href="/baanerp/wh/ina/whina1118m000" role="session">Market Prices (whina1118m000)</GUIRef> session.</Paragraph>
		<List><ListIntro>Market prices, which are either approved purchase prices or manually entered prices, are used in the following sessions:</ListIntro>
			<ListItemHead><GUIRef href="/baanerp/wh/ina/whina1210m000" role="session">Perform Inventory Valuation (whina1210m000)</GUIRef>
			</ListItemHead>
			<ListItem>If, on the <GUIRef href="/baanerp/wh/ina/whina1210m000#whinas1210.12" role="groupbox">Difference</GUIRef> tab, under <GUIRef href="/baanerp/wh/ina/whina1210m000#comp.inv.val.with" role="groupbox">Compare Inventory Value With</GUIRef>, either of the following options is selected: <List><ListItem><GUIRef href="/baanerp/wh/domains/ina.valb#market.incl.sur" role="enum">Market Price (including surcharges)</GUIRef>
					</ListItem>
					<ListItem><GUIRef href="/baanerp/wh/domains/ina.valb#market.excl.sur" role="enum">Market Price (excluding surcharges)</GUIRef>
					</ListItem>
				</List>
			</ListItem>
			<ListItemHead><GUIRef href="/baanerp/wh/ina/whina1232m000" role="session">Change Valuation Method (whina1232m000)</GUIRef>
			</ListItemHead>
			<ListItem>If, after changing the valuation method, the inventory value must be equal to the market price.</ListItem>
			<ListItemHead><GUIRef href="/baanerp/wh/ina/whina1230m000" role="session">Actual Costs Correction (whina1230m000)</GUIRef>
			</ListItemHead>
			<ListItem>If the valuation method is <GUIRef href="/baanerp/wh/domains/ina.valm#fifo" role="enum">First In First Out (FIFO)</GUIRef>, <GUIRef href="/baanerp/wh/domains/ina.valm#lifo" role="enum">Last In First Out (LIFO)</GUIRef>, <GUIRef href="/baanerp/wh/domains/ina.valm#lot" role="enum">Lot Price (Lot)</GUIRef> or <GUIRef href="/baanerp/wh/domains/ina.valm#mauc" role="enum">Mov. Aver. Unit Cost (MAUC)</GUIRef>, and the inventory value must be equal to the lowest of the current inventory value and the market price.</ListItem>
			<ListItemHead><GUIRef href="/baanerp/ti/cpr/ticpr2210m000" role="session">Calculate Cost and Valuation Prices (ticpr2210m000)</GUIRef>
			</ListItemHead>
			<ListItem>If the valuation method is <GUIRef href="/baanerp/wh/domains/ina.valm#ftp" role="enum">Fixed Transfer Price (FTP)</GUIRef>, and the new FTP (and inventory value) must be equal to the lowest of the current FTP and the market price.</ListItem>
		</List>
		<Paragraph>If an item's market price that is entered in the <GUIRef href="/baanerp/wh/ina/whina1118m000" role="session">Market Prices (whina1118m000)</GUIRef> is lower than the item's original purchase price, the market price is used to calculate the valuation price.</Paragraph>
	</GeneralSection>
	<ExampleSection><SectionTitle>Example FTP valuation method</SectionTitle>
		<Paragraph>The value of the inventory is obtained by multiplying the inventory by the cost price of the items. Each workday the inventory will be changed by transactions, and the cost price is valid for a specific period. To calculate the value of the inventory from a particular date in the past, multiply the inventory and the cost price on that date.</Paragraph>
	</ExampleSection>
	<Note><SectionTitle>Note</SectionTitle>
		<Paragraph>Use the <GUIRef href="/baanerp/wh/ina/whina1210m000" role="session">Perform Inventory Valuation (whina1210m000)</GUIRef> session to perform the calculations in one run. The calculations are performed based on the used valuation methods.</Paragraph>
	</Note>
	<RelatedTopics><SectionTitle>Related topics</SectionTitle>
		<RelTopic><Link href="/baanerp/wh/onlinemanual/000001" role="manual">Inventory Analysis</Link>
		</RelTopic>
	</RelatedTopics>
</ManualTopic>
