| # Inventory valuation Inventory can be valued using several valuation methods: Fixed Transfer Price (FTP) Mov. Aver. Unit Cost (MAUC) First In First Out (FIFO) Last In First Out (LIFO) Lot Price (Lot) Valuation methods result in a particular 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. The International Financial Reporting Standards (IFRS) require in some cases reporting the market 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 lower cost or market value (LCMV). You can choose whether or not to revaluate the inventory value to the market value. Therefore, the following options are available: Reporting inventory value without revaluation 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. Reporting inventory value with revaluation 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. Market prices in Warehousing In 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 Market Prices (whina1118m000) session. Market prices, which are either approved purchase prices or manually entered prices, are used in the following sessions: Perform Inventory Valuation (whina1210m000) If, on the Difference tab, under Compare Inventory Value With, either of the following options is selected: Market Price (including surcharges) Market Price (excluding surcharges) Change Valuation Method (whina1232m000) If, after changing the valuation method, the inventory value must be equal to the market price. Actual Costs Correction (whina1230m000) If the valuation method is First In First Out (FIFO), Last In First Out (LIFO), Lot Price (Lot), Serial Price (Serial), or Mov. Aver. Unit Cost (MAUC), and the inventory value must be equal to the lowest of the current inventory value and the market price. Calculate Cost and Valuation Prices (ticpr2210m000) If the valuation method is Fixed Transfer Price (FTP), and the new FTP (and inventory value) must be equal to the lowest of the current FTP and the market price. If an item's market price that is entered in the Market Prices (whina1118m000) session is lower than the item's original purchase price, the market price is used to calculate the valuation price. Example FTP valuation method 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. Note Use the Perform Inventory Valuation (whina1210m000) session to perform the calculations in one run. The calculations are performed based on the used valuation methods. Related topics Inventory Analysis |