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<ManualTopic ID="/baanerp/ti/onlinemanual/000415" xml:lang="en">
   <Header>
      <Title>Lower cost or market value</Title>
      <Keyword type="header" order="d1e2098832">
         <Level1>LCMV</Level1>
      </Keyword>
      <Keyword type="header" order="d1e2098835">
         <Level1>Lower cost or market value</Level1>
      </Keyword>
   </Header>
   <GeneralSection>
      <Paragraph>An inventory can be valued using several valuation
		methods:</Paragraph>
      <List>
         <ListItem>FIFO</ListItem>
         <ListItem>LIFO</ListItem>
         <ListItem>Lot control</ListItem>
         <ListItem>MAUC</ListItem>
         <ListItem>FTP</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 of the inventory <Emphasis>market</Emphasis> value
		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 inventory market value. So, at the
		  start of the next financial period, the inventory market value is
		  used.</ListItem>
      </List>
      <Note>
         <SectionTitle>Note</SectionTitle>
         <Paragraph>In <GUIRef href="/baanerp/ti" role="package">Manufacturing</GUIRef>, only <Link href="/baanerp/ti/glossary/glossary#000038" role="glossary">FTP</Link> valued end items are revalued. Other items must be
		  revalued in <GUIRef href="/baanerp/wh" role="package">Warehousing</GUIRef>.</Paragraph>
      </Note>
   </GeneralSection>
   <GeneralSection>
      <SectionTitle>Lower cost or market value in Manufacturing</SectionTitle>
      <Paragraph>In LN, you
		can use market prices to valuate inventory for standard items as well as for
		customized items. Market prices can be entered in the <GUIRef href="/baanerp/wh/ina/whina1118m000" role="session">Market Prices (whina1118m000)</GUIRef> session.</Paragraph>
      <Paragraph>In <GUIRef href="/baanerp/ti" role="package">Manufacturing</GUIRef>, carry out the following
		steps:</Paragraph>
      <ProcedureList>
         <ListItem>Open the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000" role="session">Calculate Cost and Valuation Prices (ticpr2210m000)</GUIRef> session. For customized items in PCS,
		  open the <GUIRef href="/baanerp/ti/pcs/tipcs3250m000" role="session">Calculate Cost Prices by Project (tipcs3250m000)</GUIRef> session.</ListItem>
         <ListItem>Select the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000#price.lcmv.based" role="manual">Prices Based on Lower Cost or Market Value</GUIRef> check box
		  on the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000#ticpr2210.13" role="groupbox">Market Price</GUIRef> tab.</ListItem>
         <ListItem>Click <GUIRef href="/baanerp/ti/cpr/ticpr2210m000#continue.process" role="command">Calculate</GUIRef>.</ListItem>
      </ProcedureList>
      <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>
      <Note>
         <SectionTitle>Note</SectionTitle>
         <Paragraph>If the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000#actualize.copr" role="manual">Actualize Standard Cost and Valuation Prices</GUIRef> check
		  box in the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000" role="session">Calculate Cost and Valuation Prices (ticpr2210m000)</GUIRef> session is selected, valuation prices are updated. You can view the valuation
		  prices via the <GUIRef href="/baanerp/ti/cpr/ticpr3501m000" role="session">Item - Standard Costing Data (ticpr3501m000)</GUIRef> session. In this session, item
		  costing data with several effective dates are listed. Select the item for which
		  you want to view the valuation price, and click <GUIRef href="/baanerp/ti/cpr/ticpr3501m000#standard.valuation.price" role="command">Valuation Prices</GUIRef> from the <Link href="/baanerp/tc/glossary/glossary#specific" role="glossary">appropriate</Link> menu.</Paragraph>
         <Paragraph>If the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000#actualize.copr" role="manual">Actualize Standard Cost and Valuation Prices</GUIRef> check
		  box in the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000" role="session">Calculate Cost and Valuation Prices (ticpr2210m000)</GUIRef> session is cleared, valuation prices are <Emphasis>not</Emphasis> updated.
		  However, you can view the valuation prices via the <GUIRef href="/baanerp/ti/cpr/ticpr2501m000" role="session">Item - Costing Data (ticpr2501m000)</GUIRef> session. Select the item for which you want to view
		  the valuation price, and click <GUIRef href="/baanerp/ti/cpr/ticpr3501m000#standard.valuation.price" role="command">Valuation Prices</GUIRef> from the <Link href="/baanerp/tc/glossary/glossary#specific" role="glossary">appropriate</Link> menu.</Paragraph>
         <Paragraph>For customized items in PCS, you must use the <GUIRef href="/baanerp/ti/pcs/tipcs3250m000#act.calc" role="manual">Perform Actual Cost Price Calculation</GUIRef> check box in the <GUIRef href="/baanerp/ti/pcs/tipcs3250m000" role="session">Calculate Cost Prices by Project (tipcs3250m000)</GUIRef> session to determine whether
		  valuation prices for customized items are updated. You can view the valuation
		  prices in the <GUIRef href="/baanerp/ti/cpr/ticpr3501m000" role="session">Item - Standard Costing Data (ticpr3501m000)</GUIRef> (if the check box is
		  selected), or in the <GUIRef href="/baanerp/ti/cpr/ticpr2501m000" role="session">Item - Costing Data (ticpr2501m000)</GUIRef> session (if the check box is cleared).</Paragraph>
      </Note>
      <GeneralSection>
         <SectionTitle>Revaluate inventory value</SectionTitle>
         <Paragraph>The effective date of the valuation price is not always the
		  current date. The effective date can also be a date in the past. If the <GUIRef href="/baanerp/ti/cpr/ticpr0100m000#ticpr000.bvpa" role="manual">Backdate Valuation Price Allowed</GUIRef> check box in the <GUIRef href="/baanerp/ti/cpr/ticpr0100m000" role="session">Cost Price Calculation Parameters (ticpr0100m000)</GUIRef> session is selected, you can
		  choose one of the following options for a date in the past:</Paragraph>
         <List>
            <ListItem>
               <GUIRef href="/baanerp/tc/domains/rvdt#last.prev.peri" role="option">Last Date of Previous Period</GUIRef>, so that the last date of the
			 previous financial period is automatically determined as the valuation price's
			 effective date.</ListItem>
            <ListItem>
               <GUIRef href="/baanerp/tc/domains/rvdt#specific.date" role="option">Specific Date</GUIRef>, after which you can enter the desired
			 effective date for the valuation price or cost price.</ListItem>
         </List>
         <Paragraph>If you select the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000#actualize.copr" role="manual">Actualize Standard Cost and Valuation Prices</GUIRef> check
		  box (for customized items the <GUIRef href="/baanerp/ti/pcs/tipcs3250m000#act.calc" role="manual">Perform Actual Cost Price Calculation</GUIRef>), the inventory value and the cost price
		  are updated. However, if you also select the <GUIRef href="/baanerp/tc/domains/rvdt#last.prev.peri" role="option">Last Date of Previous Period</GUIRef> option and the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000#reverse.to.orig" role="manual">Reverse to original inventory value at start of current period</GUIRef> check box on the <GUIRef href="/baanerp/ti/cpr/ticpr2210m000#ticpr2210.13" role="groupbox">Market Price</GUIRef> tab, the inventory's <Emphasis>market</Emphasis> value is calculated for the last date of the
		  previous financial period, but the <Emphasis>original</Emphasis> inventory
		  value based on the purchase price is taken at the start date of the current
		  period. Consequently, the result of the revaluation is not used at the start of
		  the next financial period anymore.</Paragraph>
      </GeneralSection>
   </GeneralSection>
   <Note>
      <SectionTitle>Note</SectionTitle>
      <Paragraph>The possibility to use market prices instead of purchase prices
		to valuate inventory is applicable for purchased items. In case of manufactured
		items, it is only applicable for the purchased items in the manufactured item's
		BOM. The market price is retrieved from <GUIRef href="/baanerp/wh" role="package">Warehousing</GUIRef>.</Paragraph>
   </Note>
</ManualTopic>