Warehouse Management System WMS

							Financial Accounting – General Ledger Accounting (FI-GL)                                           1


 General Ledger Accounting (FI-GL)
Purpose
The central task of G/L accounting is to provide a comprehensive picture for external
accounting and accounts. Recording all business transactions (primary postings as well as
settlements from internal accounting) in a software system that is fully integrated with all the
other operational areas of a company ensures that the accounting data is always complete
and accurate.




Features
The SAP FI General Ledger has the following features:

       Free choice of level: corporate group or company
       Automatic and simultaneous posting of all sub-ledger items in the appropriate general
        ledger accounts (reconciliation accounts)
       Simultaneous updating of general ledger and cost accounting areas
       Real-time evaluation of and reporting on current accounting data, in the form of
        account displays, financial statements with different financial statement versions and
        additional analyses.

Essentially, the general ledger serves as a complete record of all business transactions. It is
the centralized, up-to-date reference for the rendering of accounts. Actual individual
transactions can be checked at any time in realtime processing by displaying the original
documents, line items, and transaction figures at various levels such as:

       Account information

       Journals
Financial Accounting – General Ledger Accounting (FI-GL)                                2

       Totals/transaction figures

       Balance sheet/profit and loss evaluations


Cost of Sales Accounting
Purpose

The profit and loss statement of an organization can be created according to two
different procedures:

   Period accounting

   Cost of sales accounting

Cost of sales accounting compares the sales revenue for a given accounting period
with the manufacturing costs of the deducted activity. The expenses are allocated to
the commercial functional areas (production, sales and distribution, administration,
and so on). Expenses and revenues that cannot be assigned to the functional areas are
reported in further profit and loss items, sorted according to expense and revenue
type.

With this type of grouping, cost of sales accounting identifies where costs originate in
a company. It identifies the economic reason for a particular expense.

Implementation Considerations

Before you can run cost of sales accounting, you have to make various settings in
Customizing. For more information, see Activating Cost of Sales Accounting.

You make these settings in Customizing for Financial Accounting, under Financial
Accounting Global Settings  Company Code  Cost of Sales Accounting.

Functional area
Definition

Account assignment characteristic that sorts operating expenses according to
functions, for example:

   Production

   Administration

   Sales

   Research and development
Financial Accounting – General Ledger Accounting (FI-GL)                                 3


Use

If you want to use cost of sales accounting, you have to use functional areas to sort
your operating expenses.

You define your functional areas in Customizing under Financial Accounting 
Financial Accounting Global Settings  Company code Cost of Sales Accounting
 Define Functional Area.

Integration

You can enter the functional area in the master data of various objects: During
posting, the system derives the functional area from the master data of the assigned
objects. For more information, see Functional Area in Master Data.


      Activating Cost of Sales Accounting
Purpose

You can activate cost of sales accounting in your system.

Process flow

To do this, you need to make various settings. You make these settings in
Customizing, under Financial Accounting  Financial Accounting Global Settings 
Company Code  Cost of Sales Accounting.

  1. Define your functional areas. To do this, choose Define Functional Area.
  2. Activate cost of sales accounting for preparation.To do this, choose Activate
Cost of Sales Accounting for Preparation.

The functional area field in the master data of the objects is ready for input.




The functional area is not yet derived for postings.

  3. Enter the functional area in the master data of the desired objects.

For more information, see Functional Area in Master Data.

  4. In addition, you can define a substitution for derivation of the functional area.
To do this, select the activities under Setting up Substitution for Cost of Sales
Accounting.
Financial Accounting – General Ledger Accounting (FI-GL)                                    4


You should only define a substitution if you have additional requirements for the
derivation of the functional area. Check beforehand whether if would suffice to enter
the functional area in the master data of the objects.

   5. Define a ledger for cost of sales accounting. To do this, choose Set up Ledger
for Cost of Sales Accounting.
   6. Activate cost of sales accounting for your company codes. To do this, choose
Activate Cost of Sales Accounting.

Result

You have activated cost of sales accounting. The system derives the functional area of
the postings. For more information, see Derivation of the Functional Area.

It is possible to create a profit and loss statement with cost of sales accounting. To do
this, see Creating Profit and Loss Statement with Cost of Sales Accounting.

Functional Area in Master Data
Use

You can enter the functional area in the master data of the following objects:

     G/L account

     Cost element

     Cost center

     Orders

        Order type
        Internal orders
        Sales order for make-to-order production and requirements class
        Maintenance, service, and QM order
        Production order, product cost controller, and cost object hierarchy

     WBS elements

        Project profile and project definition
        WBS element

     Networks

        Network type
        Network header
        Network activity
Financial Accounting – General Ledger Accounting (FI-GL)                                     5


During posting, the system derives the functional area from the master data of the
assigned objects. For more information, see Derivation of the Functional Area.

Prerequisites

In order to be able to enter the functional area in the master data of the specified
objects, the Functional area field in master data has to be ready for input. For this to
be the case, cost of sales accounting for your company codes must either be active for
preparation or active.

You make the settings in Customizing under Financial Accounting  Financial
Accounting Global Settings  Company Code  Cost of Sales Accounting 
Activate Cost of Sales Accounting for Preparation or Activate Cost of Sales
Accounting.



The master data of some objects is not company code dependent, rather it is assigned
to higher-level organizational units. In such cases, the functional area field is ready for
input in all company codes of a client, provided that cost of sales accounting is active
for preparation or active for at least one company code of the client.

In the following cases, the master data of an object is not company code-dependent:

                            Object                            Assigned organizational unit
             G/L account                                   Chart of accounts
             Cost element                                  Chart of accounts
             Cost center category                          Client
             Order type                                    Client



Features

You have the following options for entry of functional area in the master data of the
specified objects:

   Entry of functional area

You can enter the functional area provided that no postings exist for this object.

   Change functional area

You can change a functional area that has already been entered as long as no postings
exist.

Where postings already exist, it is no longer possible to change the functional area.
Financial Accounting – General Ledger Accounting (FI-GL)                                 6




Postings that have already been made cannot be changed automatically. The
functional area is derived only in the case of new postings.

Where it is absolutely necessary to change the functional area for existing postings,
you can find instructions on how to perform the change in Note 115840.

Functional Area in Internal Orders
Use

You can enter the functional area in the master data of internal orders:

Features

When you create an internal order, the system checks whether a functional area exists
in the order type or in the model order.

 If a value exists, the value is transferred as default value into the master data of
the internal order.

 If there is no value, the system checks whether a functional area exists for the
specified responsible cost center. If a value exists in the cost center, this value is
transferred as default value into the master data of the internal order.

SAP provides the user exit COOPA_01 in the standard system. You can use this to
check whether the functional area in the master data matches the functional area in the
order type. You can also define your own checks in this user exit.



To ensure the consistency of the functional area in the master data of internal orders
and the responsible cost center, you define the Functional Area field as output field.
In this way, you ensure that the functional area cannot be entered manually in the
internal order. In Customizing for Controlling, choose Internal Orders  Order
Master Data  Screen Layout  Select Fields.

Activities

Choose Controlling  Internal Orders  Master Data  Order  Create or Change.


      Deriving the Functional Area
Use
Financial Accounting – General Ledger Accounting (FI-GL)                                  7


In order that expenses can be sorted according to corporate functions, the system
derives the functional area for the following postings.

   Primary postings (postings in Financial Accounting) to a profit and loss account

   Secondary postings (allocations in Controlling)



The functional area is derived for both objects involved in the allocation.

No functional area is derived in the following cases:

   Postings to balance sheet accounts

   When creating statistical key figures in Controlling



The system derives the functional area after saving. The derived functional area is
thus first available in the document created and not on the entry screen.



Prerequisites

In order that the functional area can be derived when a posting is carried out, cost of
sales accounting has to be active for the company code in which the posting is carried
out.

Features

The system derives the functional area according to the following logic:

  1. The system derives the functional area from the master data of the assigned
objects.

If an object is assigned during a posting, the system checks whether a functional area
has been entered in the master record of the object. The system retains this functional
area provisionally.

  2. The system derives the functional area from the master record of the G/L
account or the cost element.

The system checks whether a functional area is entered in the master record of the
cost element or the P&L account. This functional area overwrites the functional area
derived from the assigned object.
Financial Accounting – General Ledger Accounting (FI-GL)                                   8


   3. The system derives the functional area via substitution for the component
Financial Accounting, Event 0005. If a functional area has already been defined, this
is overwritten with the functional area obtained via substitution.

Definition of a substitution is necessary:

          Where you are not able to enter a functional area in the master data of an
        object, for example business process or real estate objects.
          When you want to specify exceptions where derivation from the object
        should not occur.


   Reconciliation of Controlling and Financial
Accounting
Use

During allocations in Controlling, postings are created that do not affect Financial
Accounting. These postings do not update any G/L account transaction figures, rather
they are ordinary postings within Controlling.

If, however, an allocation in Controlling leads to a change in the functional area, a
shift occurs in the affected items in the profit and loss statement. The change of
functional area has therefore to be communicated back to Financial Accounting. This
reconciliation between Controlling and Financial Accounting is effected with so-
called reconciliation postings.

Prerequisites

To carry out reconciliation postings, you have to activate the Reconciliation Ledger
and define the adjustment accounts for the reconciliation postings. You can find the
necessary settings in Customizing under Controlling  Cost Element Accounting 
Reconciliation Posting.

Features

All allocations within Controlling are logged in the reconciliation ledger. If these
allocations contain relevant account assignment for Financial Accounting (company
code, business area, functional area, and so on), the difference between the functional
area balance in Financial Accounting and Controlling is entered here, along with other
data.

At period-end closing, you can carry out adjustment postings or reconciliation
postings for Financial Accounting. These postings are based on reconciliation ledger
documents and result in either debit or credit postings to the relevant functional areas
via automatic account determination.
Financial Accounting – General Ledger Accounting (FI-GL)                                 9


You can find more information on reconciliation postings in the SAP Library under
Accounting  Controlling  Cost and Revenue Element Accounting  Functions in
Cost and Revenue Element Accounting  Reconciliation Postings.

Activities

To carry out reconciliation postings, on the SAP Easy Access screen, choose
Accounting  Controlling  Cost Element Accounting  Actual Postings 
Reconciliation with FI. For more information, see Making Reconciliation Postings.

After making the reconciliation postings, you can create a reconciled profit and loss
statement.

Creating a Profit and Loss Statement with Cost of
Sales Accounting
Use

You can create a profit and loss statement with cost of sales accounting. The profit
and loss statement is organized according to your functional areas.

You can create a profit and loss statement with cost of sales accounting using the G/L
account information system. The G/L account information system is based on the
Drilldown Reporting tool and uses the G/L transaction figures from your cost of sales
accounting ledger and your Financial Statement Versions. as data basis.



The SAP R/3 System provides you with further evaluation tools such as the Report
Writer. However, these tools do not support a financial statement version with
functional areas. Using these tools to create a profit and loss statement is therefore
more time consuming.

Prerequisites

Before you can create a profit and loss statement with cost of sales accounting you
must ensure the following:

 Your Financial Accounting has to be reconciled with Controlling. For more
information, see Reconciliation of Controlling and Financial Accounting.

 You need to have defined a Financial Statement Version. Here, you must assign
financial statement items to your functional areas. To do this, see Financial
Statement Versions with Functional Areas.

Features
Financial Accounting – General Ledger Accounting (FI-GL)                               10


In the standard system, SAP supplies two sample reports for creation of a profit and
loss statement with cost of sales accounting:

Description                                      Technical name
Balance Sheet Using Cost of Sales                0SAPBLNCE-01
Approach (German Trade Law)
Profit and Loss Statement Using Cost of          0SAPPRALO-01
Goods Sold (German Trade Law)



To go to the reports, from the SAP Easy Access screen, choose Accounting 
Financial Accounting  General Ledger  Information System  General Ledger
Reports  Balance Sheet/Profit and Loss Statement/Cash Flow  General 
Actual/Actual Comparisons.

Both reports are based on the Financial statement version INT supplied by SAP in the
standard system and portray actual key figures. The figures for the selected fiscal year
and the preceding fiscal year are compared, and the variance between the two fiscal
years is displayed.

You can use these sample reports as templates for your own reports. To adapt one of
these reports, you first have to copy the report you want, saving it in the customer
namespace under a new name. You can find settings that control copying, defining,
and editing of drilldown reports in Customizing for Financial Accounting under
General Ledger Accounting  Information System  Drilldown Reports (G/L
Accounts).

You can find more information on defining drilldown reports in the SAP Library
under Financials  Financial Accounting  General Ledger Accounting 
Information System.

 Parallel Accounting
Purpose

You have the option of depicting parallel accounting in your SAP system. This will
allow you to carry out valuations and closing operations for a company code
according to a local accounting principle and a second (parallel) accounting principle,
for example the group accounting principle.



You can depict more than two accounting principles in your SAP system. To
simplify the description, however, the scenarios in this documentation use just two
parallel accounting principles.
Financial Accounting – General Ledger Accounting (FI-GL)                             11


This is necessary, for example, for German subsidiaries of American groups. Here,
the German subsidiary must provide financial statements according to both the
German Commercial Code and the group accounting principle (such as US GAAP).

Implementation Considerations

Your SAP system provides you with various solution scenarios for depicting a parallel
valuation method:

   Depiction using additional accounts

   Depiction using an additional ledger

   Depiction using an additional company code

The Customizing settings from the various SAP application components that you need
to be able to depict a parallel valuation method are grouped together in a section of
the SAP Reference IMG. You can find this section in Customizing, under Financial
Accounting  Financial Accounting Global Settings  Company Code  Parallel
Valuation Methods.



For all solution scenarios, you must have consistently defined Customizing for the
application components you want to use.

Integration

Depiction of parallel valuation methods is supported by the following application
components:

   Financial Accounting (FI)

   Asset Accounting (FI-AA)

   Corporate Finance Management (CFM)

   Controlling (CO)



Not all application components support all solution scenarios for depicting parallel
valuation methods. Before deciding for a solution scenario, you should therefore
check which solution scenarios are supported by all application components that you
use or for which you want to depict parallel accounting.

 Depicting Parallel Accounting
Financial Accounting – General Ledger Accounting (FI-GL)                               12


Use

Your SAP system provides you with the following approaches for depicting parallel
accounting:

   Depiction using additional accounts

   Depiction using an additional ledger

   Depiction using an additional company code

Depiction Using Additional Accounts
Use

You can portray parallel accounting in your SAP System by creating additional
accounts. This means that you have different account areas:

 One joint account area for postings that are the same for both accounting
principles

 One area with specific accounts for each accounting principle. Each business
transaction that, dependent on the accounting principle, leads to a different posting, is
posted to the corresponding specific account area.

When you perform closing according to a specific accounting principle, the common
accounts and the specific accounts for this accounting principle are evaluated.

Account Areas for Portraying Parallel Accounting Using Additional Accounts




With this approach, all specific posting data per accounting principle are supported in
the general ledger. This makes it easier to reconcile with other SAP components or to
Financial Accounting – General Ledger Accounting (FI-GL)                              13


transfer to other SAP components. However, the disadvantage to this is that data from
different valuations is entered in one ledger.

    Recommendation

The following is the approach recommended by SAP for depicting parallel
accounting using additional accounts.

                All methods of parallel valuation in the SAP System (such as
                value adjustments or results analysis) support this approach.
                Standard reporting is available.

The approach is particularly suitable if:

                The number of valuation differences is limited in your accounting
                principles.
                You work with just one fiscal year variant
                Multiple valuation approaches in your general ledger do not pose a
                problem
                You can accept a large number of G/L accounts

Features

If this approach is suitable in your case, you should note the following points:

   Systematic Assignment of Account Numbers

Before you create the general ledger accounts for the specific account areas, you
should set up a concept for number assignment.

   Retained Earnings Account and Balance Carryforward

You can manage a separate retained earnings account for each accounting principle.
This means that, at a fiscal year change, you can carry forward the balances of the
profit and loss accounts from the specific account areas to the retained earnings
account specified. You only have to carry forward the balances once.

When you create the general ledger accounts for the specific account areas, make sure
that you assign a separate P&L statement account type for each account area. Then
assign a separate retained earnings account to each P&L statement account type.

   Financial Statement Versions

You can create a separate financial statement version for each accounting principle.
This means that when you create financial statements, you can select a separate
structure for each accounting principle.

   Complete Postings versus Difference Postings
Financial Accounting – General Ledger Accounting (FI-GL)                             14


You can perform parallel postings in the specific account areas either as complete
postings in both areas or as difference postings:

                In Asset Accounting (FI-AA), both difference postings and complete
                postings are supported.
                All other application components (FI, CO, CFM) support only
                complete postings.

Reporting

For reporting, you can use the following tools in this approach:

      Drilldown Reporting

      Report Painter/Report Writer

 To create financial statements, you can use the report     Financial Statements
(RFBILA00)

Activities

To create additional accounts, from the SAP Easy Access screen, choose Accounting
Financial Accounting  General Ledger  Master Data  G/L Account 
Individual Processing  Create.

 Depiction Using an Additional Ledger
Use

You can depict parallel accounting in your SAP system by storing posting data for the
various accounting principles in separate ledgers.

 The data for one accounting principle is stored in the general ledger. This is
known as the “leading” valuation view.

 For each additional (parallel) accounting principle, you create an additional ledger
in the Special Ledger component.

    Recommendation

SAP recommends that you implement this parallel ledger approach if the number of
general ledger accounts would be unmanageable for the scenario using additional
accounts. Before opting for this approach, you should check whether you are willing
to accept the deficiencies in direct accessing with this approach.

The advantages of this approach are:
Financial Accounting – General Ledger Accounting (FI-GL)                              15


                You do not have to create any additional G/L accounts.
                You manage a separate ledger for each accounting principle.
                You can use the standard reporting functions to create a financial
                statement.
                In some cases, the postings to the additional ledger are made as
                complete postings, whereas in other cases they are made as delta
                postings.
                With this approach, you can portray different fiscal year variants.

The approach is suitable if:

                The number of G/L accounts would be too large to depict parallel
                accounting using additional accounts
                Keeping a separate ledger per accounting principle offers
                advantages to you
                You do not have to post any line items from subsidiary ledgers
                You do not need to access FI data from SL reports
                The additional data volume created by the additional ledger does
                not represent a problem

Integration

You can make postings to the additional ledger from various SAP application
components.

   Financial Accounting (FI)

   Asset Accounting (FI-AA)

   Corporate Finance Management (CFM)

   Controlling (CO)



Only the valuation (accounting principle) stored in the general ledger is integrated
with Controlling. The additional ledger is not integrated with Controlling. This means
that postings that are only made to the additional ledger are not available for
Controlling.

As the line items in the additional ledger contain CO account assignments, you can
carry out simple Controlling transaction directly via the additional ledger. The tools in
application component Special Ledger are available to you for this purpose, such as
  allocation.

Features
Financial Accounting – General Ledger Accounting (FI-GL)                                  16


In order that the desired posting data is stored in your additional ledger, you need to
adhere to the following:

   Complete ledger

If your data volume is not too large, SAP recommends using your additional ledger as
the complete ledger. In this way, the postings without valuation differences are posted
to the general ledger and to the additional ledger.

   Complete Postings versus Difference Postings

Postings that differ depending on the accounting principle applied can be posted either
as a difference posting for the posting in the general ledger (as a delta posting) or as a
complete posting. Only the application component Asset Accounting (FI-AA)
supports delta postings.



SAP recommends implementing the delta method for postings from Asset Accounting
because, for complete postings, you have to subsequently filter out the valuations of
valuation area 01 from the additional ledger.

   Ledger selection

Postings made to the general ledger are updated automatically to the additional
ledger.To ensure that the additional ledger only contains data that is relevant for the
parallel accounting principle, you have to use a ledger selection to filter out data that
you only want to post to the general ledger.

Documents that automatically create valuation reports contain the account assignment
accounting principle. You can use this account assignment in your ledger selection to
define what is posted to the general ledger and what is posted to the additional ledger.
Manually posted documents do not contain this account assignment.



SAP recommends that you define a special document type for manual postings that
you only want to be made to the general ledger. You can then use this document type
in your ledger selection.

   Manual postings

You have to use the actual posting function in the special ledgers to make manual
postings that you only want to post to the additional ledger.

Reporting

For reporting, you can use the following tools in this approach:
Financial Accounting – General Ledger Accounting (FI-GL)                                17


      Drilldown

      Report Painter / Report Writer

 To create financial statements, you can use the report F/S for Special Purpose
Ledger (RFBILA00)

Activities

To depict parallel accounting using an additional ledger, you have to make various
settings in Customizing: For details on these settings, see Setting Up Depiction Using
Additional Ledgers.

Setting Up an Additional Ledger
You have to create the additional ledger in the application component Special Purpose
Ledger. To do so, call up Special Ledger Customizing and choose Basic Settings 
Master Data  Maintain Ledger.

Make the following settings for the additional ledger:

   Line item posting

Activate line item posting by setting the Store Line Items flag.

   Ledger selection

Define which processes you want to post to the additional ledger. To do so, choose
Ledger Selection. In particular, you must ensure that postings that are only relevant
for the general ledger are not posted on the additional ledger.

Normally, all processes that are posted to the general ledger are also posted to the
additional (special) ledger. You have to filter out the posting data that is only relevant
for your valuation view of the General Ledger.

For example, in your ledger selection, you can use the characteristic Accounting
Principle that is contained in the documents as an account assignment and is created
by automatic valuation reports, such as foreign currency valuation.



Documents that are not automatically created by valuation reports (such as
standardizing entries) are not contained in the account assignment accounting
principle. SAP recommends that you create a special document type for these
processes. You can then use this document type in your ledger selection and filter out
postings that do not contain the accounting principle account assignment.

   Data Transfer
     Financial Accounting – General Ledger Accounting (FI-GL)                               18


     When you have defined your additional ledger, you can transfer data that has already
     been posted to this ledger. To do so, choose call up the Special Purpose Ledger menu
     and choose Periodic Tasks Data Transfer. During data transfer, no entries are made
     in the retained earnings accounts. You can carry forward a balance on the basis of all
     data transferred.

     If the data volume would be too large for a complete data transfer, you can transfer
     data from a restricted period of time instead. To do so, transfer the data from the
     retained earnings accounts using the rollup tool in the special ledgers. Select the
     corresponding accounts for the rollup and enter 000 as the period.

     Defining and Assigning Accounting Principles

     You must make various settings for the accounting principle. You can find the
     settings in Customizing, under Financial Accounting  Financial Accounting Global
     Settings  Company Code  Parallel Accounting  Accounting Principles and
     Additional Ledgers.

                1. ...
1.          1. Define your parallel accounting principles. To do so, choose Define
         Accounting Principles.
2.          2. Assign the accounting principle whose values you want to post to the
         additional ledger to the additional ledger. To do so, choose Assign Accounting
         Principle to Ledger.
3.          3. Assign the additional ledger to the valuation methods from the various
         application components whose valuation data you want to post to the additional
         ledger.
           For Financial Accounting, you can find the setting under Assign
             Valuation Area to Additional Ledger
           For application components FI-AA and CO, you can find the settings in
             the Customizing menu relevant for each component
           For CFM, this assignment is not required, as this application component
             uses the accounting principle directly

      Depiction Using Additional Company Code
     Use

     You can portray parallel accounting in your SAP System by defining an additional
     company code. You use this to post valuation data for your parallel accounting
     principle to an additional company code.

     The additional company code approach is only supported by the application
     component Financial Accounting (FI) and Asset Accounting (FI-AA). It is not
     possible to post to an additional company code from any other application component.

         Recommendation
Financial Accounting – General Ledger Accounting (FI-GL)                                 19


SAP recommends that you use this approach if you do not mind posting valuation
differences manually or using Asset Accounting.

The advantages of this approach are:

                You do not have to create any additional G/L accounts.
                You can use the standard reporting functions to create a financial
                statement.

The approach is suitable if:

                The number of G/L accounts would be too large to depict parallel
                accounting using additional accounts
                Valuation differences only result from Asset Accounting,
                Financial Accounting or manual postings
                You can accept a large number of company codes
                No more than one name is required for each G/L account and
                language
                This approach is already implemented and you have no additional
                requirements (no further development is planned for this approach)

Features

You can post to an additional company code with the following valuation reports:

Application component                  Valuation report
                                       Valuation Adjustment
                                       Reclassification and Sorting of Receivables and
Financial Accounting (FI)
                                       Payables
                                       Foreign Currency Valuation
                                       Inventory Posting
Asset Accounting (FI-AA)               Depreciation Postings
                                       Gain/Loss from Asset Sale

In addition to the automatic postings created by the valuation reports, you can perform
manual postings to the additional company code.

Additional Company Code in Asset Accounting

If you define an additional company code for depicting parallel accounting, not the
following points for Asset Accounting:

 You need to define valuation areas in Asset Accounting where you depict the
parallel valuations for parallel accounting. You can specify that the postings for
additional valuation areas are written to the additional company code.
Financial Accounting – General Ledger Accounting (FI-GL)                                20


Asset Accounting cannot be active in the additional company code.

 The values from depreciation area 01 are generally transferred to the general
ledger. No accounting principles may be assigned to valuation area 01. The valuation
area is automatically assigned to the general ledger and therefore to the accounting
principle of the general ledger.

 You can define the additional valuation area, the postings for which were written
to the additional company code, either as a complete area or as a delta area. If you
manage the additional valuation area as a delta area, you can create the Asset
Accounting closing in a joint evaluation using the actual company code and the
additional company code.

Reporting

For reporting, you can use the following tools in this approach:

      Drilldown Reporting

      Report Painter/Report Writer

 To create financial statements, you can use the report     Financial Statements
(RFBILA00)

Parallel Accounting in the Application
Components
Use

If you want to create your financial statements according to two parallel accounting
principles, this means that you have to carry out different postings according to the
accounting principle for certain business transactions. This means that various
function and valuation reports in the individual SAP application components are
affected by depiction of parallel accounting.

The following SAP application components support depiction of parallel accounting
in their valuation reports and functions:

   Financial Accounting (FI)

   Asset Accounting (FI-AA)

   Corporate Finance Management (CFM)

   Controlling (CO)

 Parallel Accounting in Financial Accounting
Financial Accounting – General Ledger Accounting (FI-GL)                                21


Use

In Financial Accounting, the following functions or valuation reports are affected by
parallel accounting:

       Reclassification and Sorting of Receivables and Payables

       Value Adjustments

       Foreign Currency Valuation

   Accruals

   Provisions

Features

Reclassification and Sorting of Receivables and Payables

You can use the reclassification/sorting report to reclassify and sort your receivables
and payables according to sort methods that you define, such as for due date periods.

If you want to sort and reclassify the receivables and payables for different accounting
principles, you have made the following settings:

   You need to have defined a sort method for each valuation area.

   You need to have defined the account determination for each valuation area.

 To enable the execution of the postings resulting from the sorting and
reclassification for your parallel accounting principle, you have made the following
settings depending on the approach you have selected:

         Portrayal via additional accounts:
        You need to have created additional accounts for each accounting principle.
          Portrayal via additional ledger:
        You need to have assigned the parallel accounting principle to the additional
        ledger.
           Portrayal via additional company code

Execute the report separately for each accounting principle.

Valuation Adjustments

If you want to perform value adjustments for doubtful receivables, you have the
following options:

   You can post the value adjustments manually.
Financial Accounting – General Ledger Accounting (FI-GL)                                22


 You can post the value adjustments automatically using the flat-rate individual
value adjustment. To do this, you have to define rules in Customizing. In these rules,
you define when the system should adjust which receivables, and when the
corresponding provisions are to be posted.

If you want to perform value adjustment for different accounting principles, you need
to have made the following settings:

   You need to have defined the account determination for each valuation area.

 To enable the execution of the postings resulting from the value adjustment, you
need to have made the following settings:

         Portrayal via additional accounts:
        You need to have created additional accounts for each accounting principle.
          Portrayal via additional ledger:
        You need to have assigned the parallel accounting principle to the additional
        ledger.

Foreign Currency Valuation

Foreign currency valuation valuates open items posted that were posted in foreign
currency and the balances of G/L accounts or balance sheet accounts managed in
foreign currency. The report creates the postings that result from the valuation
automatically. For the postings, you need to have defined the account determination in
Customizing:

 For the valuation of open items, the postings are to expense/revenue accounts for
exchange rate differences and balance sheet adjustment accounts for receivables and
payables.

 For the valuation of foreign currency balances, the postings should be to balance
sheet adjustment accounts if you want to perform several valuations in parallel.

The following two approaches are available for foreign currency valuation:

   Classic Foreign Currency Valuation

Classic foreign currency valuation determines exchange rate differences relating to
the key date. These valuated exchange rate differences are stored as information in the
original document. During clearing, the exchange rate difference for the last valuation
is posted as realized exchange rate difference.

   Foreign Currency Valuation Using Valuation Area

You can perform the foreign currency valuation using the valuation area. The
exchange rate differences are determined by key date, posted, and then immediately
reversed. During clearing, the complete exchange rate difference is posted.
Financial Accounting – General Ledger Accounting (FI-GL)                             23




You have the option of combining both approaches. For this, SAP recommends using
classic foreign currency valuation for the leading valuation (that is, the valuation
approach used in General Ledger and in Controlling). Only classic foreign currency
valuation guarantees that cash discounts and exchange rate differences are posted to
Controlling. SAP recommends using a valuation area for the additional valuation
approach.

If you want to perform foreign currency valuation for different accounting principles,
it may be necessary for you to perform the report several times for different valuation
areas so that you can use a separate accounting approach for each valuation area.



With this procedure, it is not possible to split the exchange rate differences across
profit centers or business areas. You can use a default account assignment for the cost
element to assign the exchange rate differences to profit centers or business areas.

Accruals

In Financial Accounting, you can use various functions to post accruals:

       Recurring entries

You can make recurring entries in additional accounts or an additional company code.
You cannot use recurring entries for accruals postings in an additional ledger. You
need to perform the accrual postings separately for each accounting principle.

       Manual Accruals

You can use the Manual Accruals functions to post the accruals postings to additional
accounts or in an additional ledger. You only need to start one posting run; the
postings are made simultaneously for the different accounting principles.

You can assign to each accounting principle a separate accrual method in which you
specify whether accruals are to be linear or declining balance, for example.

   Manual postings

If you perform parallel accounting using an additional ledger, you can make accruals
postings using manual postings.

          You use the G/L posting function in General Ledger Accounting for
        accrual postings to the General Ledger.
          You use the actual posting function in the Special Purpose Ledger for
        accrual postings to the additional ledger.

Provisions
Financial Accounting – General Ledger Accounting (FI-GL)                                24


To post provisions, you have the following options in Financial Accounting:

 For materials or services that you have already received, you create provisions if
the invoice is posted in a different period to the goods receipt or the service. You
generally have to post these provisions manually.

 You can post provisions for doubtful receivables automatically using the flat-rate
individual value adjustment.

 You can determine and post provisions for probable losses and uncovered costs
for long-term orders and products using the results analysis function in Controlling.

 Parallel Accounting in Asset Accounting
Use

In Asset Accounting, you depict parallel accounting using the depreciation (valuation)
area. This means that you have to define a depreciation area for each of your
accounting principles.



In Asset Accounting depreciation area 01 is the depreciation area whose results are
taken over generally to the general ledger. You cannot post the results of depreciation
area 01 to an additional ledger or to an additional company code.

To depict parallel accounting in Asset Accounting, you can use all three approaches:
additional accounts, an additional ledger, or an additional company code.



If you implement the approach using an additional company code, SAP recommends
having the company code as delta company code. This means only the valuation
differences for the leading valuation area are posted. You can perform closing for the
additional accounting principle by evaluating both company codes together.

You can perform all postings in Asset Accounting as delta postings, including manual
postings. The valuation methods in Financial Accounting, on the other hand, do not
support delta postings.

Features

In Asset Accounting, accounting principles differ from one another mainly in the
following points:

   Calculation of depreciations

   Activation of assets created in-house
Financial Accounting – General Ledger Accounting (FI-GL)                              25


For each depreciation are – that is, for each accounting principle – you define specific
depreciation rules, useful life and so on. The depreciations are then calculated and
posted in parallel for each depreciation area using the depreciation rules that you have
defined. Depending on the approach you have chosen, the postings are made to either
additional accounts, to an additional ledger or to an additional company code.

Activation of assets created in-house

To activate assets produced in-house, you can use Investment Management (IM).
Here, when settling investment measures by depreciation area, you can define the
percentage to be activated and the part to be shown in the non-operating expenses.

You can use the preliminary settlement to settle cost items that are not to be activated,
for example cost centers. You cannot settle these preliminary values to the asset/asset
under construction. They are displayed for each depreciation area in the costs.



From the point of view of Controlling, one accrued depreciation area must be
completely settled. For Controlling, this means that all values remaining after
preliminary settlement are always completely activated.

Parallel Accounting in Corporate Finance
Management
Use

In Corporate Finance Management, you depict parallel accounting using the valuation
(depreciation) area. This means that you have to define a valuation area for each of
your accounting principles.

The results of the valuations are posted separately by valuation area. For each
valuation area, you can decide whether you want the postings to be made to the
general ledger or to an additional ledger.

Features

Each valuation area provides you with various classifications that you can use to
depict the various valuation rules in the individual accounting principles.

   Financial assets

You can divide your financial assets into various valuation classes.

   Structure of stocks

You can set the structure of your stocks using characteristics (terms used for
differentiation purposes).
Financial Accounting – General Ledger Accounting (FI-GL)                              26


   Financial products

For certain financial products, you can activate single position management (lot
accounting) with various consumption sequence procedures.

You control valuation of your stock using position management procedures that you
can assign to stocks depending on the valuation area, valuation class and other
characteristics. In the position management procedure, the legally binding valuation
approach is defined for valuating a stock (such as lowest value principle or key date
valuation).

 Parallel Accounting in Controlling
Use

In Controlling (CO), you normally store the valuation approach of the general ledger
or an alternative cost-accounting valuation approach. Displaying multiple valuation
approaches according to various accounting principles is a classic requirement of
Controlling. However, as values can flow from Controlling to Financial Accounting,
you can also carry out valuations according to various accounting principles in
Controlling.

Features

You have the following options for depicting parallel accounting in Controlling:

Depiction Using Additional Accounts

If you depict parallel accounting using additional accounts, you need to decide which
accounting principle is relevant for Controlling. You will need to create cost elements
and revenue elements for the relevant accounting principle.



Transferring values from parallel accounting principles into parallel accounts in
Controlling can result in a considerable additional expense particularly for CO
internal allocations.

The actual price calculation is not possible where postings are made to parallel
accounts.

Depiction Using Reconcilliation Ledger

Allocations within Controlling frequently lead to shifts between business areas and
functional areas. Information about these shifts flows via the reconciliation ledger into
Financial Accounting where it is tracked. This information is required in Financial
Accounting for segment reporting or to reflect cost of sales accounting. You can
transfer the clearing entries to an additional ledger besides the general ledger.
Financial Accounting – General Ledger Accounting (FI-GL)                                   27


Results Analysis

Different accounting principles have different requirements with regard to how costs,
revenues and provisions are dealt with and reported (for example, percentage of
completion versus completed contract method). To support you in this, the results
analysis provides flexible valuation methods. These methods are reflected in parallel
in different results analysis versions.

You must define at least one results analysis version for each accounting principle.
You can assign one accounting principle to each results analysis version. You can
post the results of the results analysis version to additional accounts or an additional
ledger.

If you want to post the outcome of the results analysis version to a parallel ledger, you
need to have assigned the addition ledger to the accounting principle of this results
analysis version. See Setting Up Depiction Using an Additional Ledger.

 Parallel Accounting in Materials Management
Use

The material valuation is performed in the SAP system during the price control period
for the corresponding material. Key date-related revaluations are generally applied for
the balance sheet valuation of materials. Furthermore, the requirements made by the
various accounting principles are also fulfilled.

Features

The following processes in material valuation have to be adjusted to reflect parallel
accounting.

   Price Determination

The individual valuation methods fix a price in the material master record as an upper
limit. The system compares the material price determined by the valuation method
with the current material price. The minimum is created and updated in the material
master record as a new result. The additional fields in the material master record are
used here (tax-based price or commercial price).

The results updated in the material master record are available for other valuation
methods.

   Revaluation

The system determines the difference between the current stock value and the stock
value resulting from the valuation with one of the price fields in the material master
record. You can post this revaluation difference manually to additional accounts or an
additional ledger.
Financial Accounting – General Ledger Accounting (FI-GL)                               28


   Material Valuation Methods

You can use various valuation methods for the balance sheet valuation. You can
combine the valuation methods:

          Lowest Value Principle Using Market Prices
        The system determines the lowest price for a material. For example, it
        evaluates the prices from purchase orders or scheduling agreements. The
        lowest value principle is used for parts or raw materials.
          Loss-Free Valuation
        Materials that your company sells may have to be devalued if the material
        price would probably not be obtained on sale of the material. You can use a
        customer enhancement to do this. In this enhancement, you can define how the
        sales prices are to be determined.
          LIFO valuation
        The LIFO valuation (last in, first out) valuates stocks with the oldest possible
        values. It assumes that the last materials received are consumed first and
        therefore leads to a devaluation of stocks in the case of increasing prices.
           FIFO valuation
        The FIFO valuation (first in, first out) is based on the assumption that the
        materials received first are consumed first. The calculation of the stock value
        is based on the last materials received.
           Percentage Range-of-Coverage Devaluation
        In the case of lowest value principle based on range-of-coverage, the price of a
        material is devalued based on a large range-of-coverage. The range-of-
        coverage of a material results from the relationship of the stock to
        consumption.
          Percentage Devaluation by Movement Rate
        The movement rate of a material is determined based on receipts or issues of a
        material and the average material balance. Materials with a low movement rate
        are devalued.

   Inventory Costing

Inventory costing is used for a balance sheet valuation of self-constructed products in
standard cost accounting. The material valuation during the period is usually based on
cost accounting views using the results of a standard cost estimate. A key date-related
inventory costing is created for the balance sheet valuation.

Inventory costing is based on the planned quantity flows that can be revalued. For the
incoming materials, you can access different price fields in the material master record.
Separate inventory costings are created for the different accounting principles. The
results of inventory costing are updated in the material master record. You can use
these results as basis for a stock revaluation.

   Alternative Valuation Run
Financial Accounting – General Ledger Accounting (FI-GL)                                     29


If you use actual costing, you can also use the alternative valuation run as the
valuation method for the balance sheet valuation of your self-constructed products.

In actual costing, the material valuation during the period is based on a period price in
the material ledger. Key date-related alternative valuation runs are created for the
balance sheet valuation. The basis for the alternative valuation runs are the actual
quantity flows that can be revalued. The alternative valuation run determines the
difference between the current valuation of the materials and the valuation of the
alternative valuation run. The difference is posted to an adjustment account as a delta,
and is reversed in the closing posting for the material ledger in the next period. You
can transfer the results of alternative valuation runs to Financial Accounting.

You can perform different alternative valuation runs for parallel accounting. You can
post the results of the alternative valuation runs to additional accounts or additional
ledgers.

 Material Price Change (MM-IV-MP)
Purpose
Material Valuation is part of Materials Management (MM). This includes the following
application areas:

       Purchasing
       Inventory Management
       Logistics Invoice Verification

Material Valuation determines or records the stock value of a material. The stock value is
calculated using the formula:

Stock value = stock quantity x material price

Thus, if the stock quantity or the material price changes, the stock value changes.

Implementation Considerations
Material Valuation is not an independent application area, since most Material Valuation
functions take place automatically in the SAP System. Depending on how a company is
structured, tasks that have to be carried out manually belong to either Inventory Management
or Invoice Verification.

Integration
Material Valuation represents a link between Materials Management (MM) and Financial
Accounting (FI), since it updates the G/L accounts in Financial Accounting.

Features
Material Valuation serves the following purposes:

       Adjusting material prices to market prices
       Performing revaluations
Financial Accounting – General Ledger Accounting (FI-GL)                                     30

       Executing balance sheet valuation

See also:

Control of Material Valuation

Valuation Structure

Changes in Material Valuation

Price Control

  Balance Sheet Valuation (MM-IM-VP)


 Control of Material Valuation
Use
Material Valuation is basically controlled by two factors:

       System settings
       Material master record

Features

System Settings

By customizing the SAP System, you adapt Material Valuation to the requirements of your
company. Below are some of the questions you answer when you configure the system:

       At which level are materials valuated?
       Which types of goods movements are relevant for valuation?
       Which accounts must be posted to during a transaction?

Material Master Record

As a rule, a material master record is created for every material. The information contained in
this record includes valuation data for the material. When maintaining the material master
record, you must decide the following:

       Whether a particular material should be valuated at all
       Whether different sub-stocks of a material should be valuated differently
       Whether the stock of a material should be valuated at a constant price (standard
        price) or whether the price should change in accordance with the delivered price
        (moving average price)
       Which G/L account the stock value of a material should be managed in

The stock quantity and value of a material and the material price are also recorded in the
material master record.


 Valuation Structure
Financial Accounting – General Ledger Accounting (FI-GL)                                        31

Data on a material is valuated using the following structure:

       Valuation area
       Valuation class
       Valuation category
       Valuation type
       Material type
       Movement type

Valuation Area
Organizational level at which material valuation is carried out. You can define a valuation area
as follows:

       Valuation area = company code

        All stocks of a particular material in this company code are valuated together.

       Valuation area = one plant

        The stocks of a particular material in this individual plant are valuated together.
        Stocks in other plants are not included in this valuation area.

You define in Customizing the level at which valuation should take place.

Valuation Class
You group together different materials with similar properties into valuation classes so that
you do not have to manage a separate stock account for every material.




The following table contains examples of possible valuation classes:


Valuation class                                   Description

3001                                              Colors

3002                                              Paints

3030                                              Operating supplies

3100                                              Trading goods


Which valuation class a material can be assigned to depends on the material type. You can
define the following assignments in Customizing:

       All materials with the same material type are assigned to just one valuation class.
       Different materials with the same material type are assigned to different valuation
        classes.
       Materials with different material types are assigned to a single valuation class.
Financial Accounting – General Ledger Accounting (FI-GL)                                          32

A material is assigned to a valuation class in the material master record. The system checks
whether the material type allows the material to be assigned to the valuation class specified.

The system refers to the valuation class of a material to determine which stock account to
post to when a posting is made for this material.

Valuation Category
Criterion according to which split valuation is carried out:

       Procurement

        You can valuate a material differently depending on whether it is manufactured in-
        house or procured externally.

       Origin

        You can valuate a material differently depending on where it comes from (such as
        home or abroad).

       Status

        You can valuate a material differently depending on its status (such as new, used,
        repaired).

You define the valuation categories in Customizing. A material is assigned a valuation
category in the material master record.

Valuation Type
The valuation type specifies the individual characteristic of the valuation category, such as
internal or external, in the case of Procurement. Within the valuation category Origin, you can
define the different countries as the valuation types. You define valuation types in
Customizing. You first determine all the valid valuation types for a valuation category.

You define in the material master record which valuation types are allowed for a particular
material. For every material subject to split valuation, you must enter all the valuation types
allowed in the material master record.

Material Type
You assign every material to a material type when you create it. Examples of material types in
the standard system include raw materials, operating supplies and finished products.

The material type controls the properties of a material and which data must be maintained for
the material. The following control features are important for valuation:

       Is the material managed by quantity?
       Is the material managed by value?
       Which price control type may be used for the material?
       Which valuation class can the material be assigned to?

The system administrator can create or change material types in Customizing.
Financial Accounting – General Ledger Accounting (FI-GL)                                       33


Movement Type
For every material movement, there is a movement type in the SAP System. The movement
type controls the properties of the movement, for example, which entries you must make
when entering a material movement, and which updates are carried out when the movement
is posted. The following control features are important for valuation:

       Does the material movement cause the quantity to be updated?
       Does the material movement cause the value to be updated?
       Does the material movement lead to postings in Accounting?
       Is the material movement relevant for LIFO/FIFO valuation?

The system administrator can create or change movement types in Customizing.


 Changes in Material Valuation
Use
There are two types of changes in Material Valuation:

       Automatic changes
       Manual changes

Features

Automatic Changes

Changes in Material Valuation due to goods receipts and invoice receipts are carried out
automatically when the relevant transaction is posted.

The extent to which the stock value changes depends on the sequence in which the goods
receipts and invoice receipts are posted. The SAP System allows for both possibilities:

       When goods are received before the invoice, the stipulations in the purchase order
        are used as the basis for posting.
       When the invoice is received before the goods, the details on the invoice are used as
        the basis for posting.

Manual Changes

You can change the valuation manually. The following changes are possible:

       Revaluation of a material due to:

            o   A price change

                If the material price no longer corresponds to the current market price, you
                can adjust it by making a price change.

            o   A material debit or credit

                If the stock value of a material is to be increased or decreased, you can make
                a direct credit or debit posting for this material.
Financial Accounting – General Ledger Accounting (FI-GL)                                          34

       Posting of physical inventory differences

        If a physical inventory reveals differences in quantity between the physical stocks and
        the book inventory, you must correct the book inventory balance manually, that is, the
        physical inventory differences must be posted. Adjusting the stock quantity leads to a
        change in the value of the stock.

See also:

Value Changes in Inventory Management

Value Changes in Logistics Invoice Verification




Value Changes From Cash Discounts


Price Control
Use
In the SAP System, there are two types of price control:

       Standard price
       Moving average price

These two types of price control differ in how they handle price variances resulting from
goods receipts or invoice receipts.

Integration
You determine the price control that should be used for a material when you create the
material and enter the accounting data for it. You enter one of the following indicators in the
Price control field to determine how the price is controlled:

       S

        for standard price control

       V

        for moving average price control

Features

Standard Price

Valuation using a standard price has the following features:

       All inventory postings are carried out at the standard price
       Variances are posted to price difference accounts
       Variances are updated
       Price changes can be monitored
Financial Accounting – General Ledger Accounting (FI-GL)                                       35

If a material is assigned a standard price (S), the value of the material is always calculated at
this price. If goods movements or invoice receipts contain a price that differs from the
standard price, the differences are posted to a price difference account. The variance is not
taken into account in valuation.

For more information, see     Standard Price: Value Calculation.

Moving Average Price

Valuation using a moving average price results in the following:

       Goods receipts are posted at the goods receipt value.
       The price in the material master is adjusted to the delivered price.
       Price differences occur only in exceptional circumstances.
       Manual price changes are usually unnecessary. However, they are possible.

If a material is assigned a moving average price (MAP), the price is automatically adjusted in
the material master record when price variances occur. If goods movements or invoice
receipts are posted using a price that differs from the moving average price, the differences
are posted to the stock account; as a result, the moving average price and the value of the
stock change.




                 The moving average price displayed in the material master record is rounded
                 off. For valuation calculations, the system always uses the exact price (stock
                 value / stock quantity).

For more information, see     Moving Average Price: Value Calculation.

See also:

Changing the Type of Price Control


 Standard Price: Value Calculation
When a material is valuated at a standard price, the system calculates the value of goods
movements in the following way:




For more information and examples of postings and value calculations for materials subject to
valuation at a standard price, see:
Financial Accounting – General Ledger Accounting (FI-GL)                                     36

       Postings at Goods Receipt and Invoice Receipt
    

           Postings in the case of a price variance for material with standard price

    

           Postings in the case of price and quantity variances for material with standard price

    

           Postings in the case of a purchase order price quantity variance

    

           Postings in the case of a credit memo for material with standard price


 Moving Average Price: Value Calculation
When a material is subject to moving average price control, the system calculates values for
goods movements in the following way:




For more information and examples of postings and value calculations for materials subject to
moving average price control, see:

       Postings at Goods Receipt and Invoice Receipt
    

           Postings in the case of a price variance for material with moving average price with
        stock coverage

    

           Postings in the case of a price variance for material with moving average price
        without stock coverage

    

           Postings in the case of price and quantity variances for material with standard price
Financial Accounting – General Ledger Accounting (FI-GL)                                      37

    

           Postings in the case of a purchase order price quantity variance

    

           Postings in the case of a credit memo for material with moving average price

    

        Postings for GR/IR Clearing Account Maintenance

    

        Value change due to cash discount: Gross Goods Receipt – Gross Invoice Receipt

    

        Value change due to cash discount: Gross Goods Receipt – Net Invoice Receipt

    

        Value change due to cash discount: Net Goods Receipt – Gross Invoice Receipt


 Changing the Type of Price Control
Under certain conditions, you can change the type of price control:

       From standard price to moving average price

        You can make this change at any time. The moving average price (which until now
        has been updated for informational purposes only) replaces the standard price and is
        used for valuation from now on.

       From moving average price to standard price

        You cannot make this change in the following two cases:

            o   If the material master record is set up as a valuation header record for a
                material subject to split valuation For more information, see   Split Valuation.
            o   If the standard price comes from costing and is not equal to the moving
                average price

        If the change is possible, the moving average price becomes the standard price,
        which is then used for valuation.

You change the type of price control by overwriting the price control indicator in the material
master record with the new indicator.

Changing the type of price control for a material does not change the value of the material
stock, since in both cases the current price becomes the new price. This is shown in the
following graphic:

Changing the Type of Price Control
Financial Accounting – General Ledger Accounting (FI-GL)                                   38




Postings at Goods Receipt and Invoice
Receipt
In the SAP System, goods receipts and invoice receipts are offset to a clearing account (the
GR/IR clearing account).

A Simple Example of a Goods Receipt Posting and an Invoice Receipt Posting




When you receive goods, the system credits the value of the goods (goods receipt quantity x
net order price) to the stock account and posts the offsetting entry to the GR/IR clearing
account. The GR/IR clearing account is cleared when the invoice is posted to the vendor
account.


 Value Changes in Inventory Management
Financial Accounting – General Ledger Accounting (FI-GL)                                        39


Use
Most goods movements in Inventory Management lead to changes in stock quantity and
therefore in stock value: In the case of goods receipts, the stock value increases and in the
case of goods issues, the stock value is reduced.

Features
For materials valuated at a moving average price, the material price can also change in the
case of goods receipts for purchase orders. This is the case if the purchase order price differs
from the material price.

Planned Delivery Costs for a purchase order are also included in valuation when goods are
received. When the goods receipt is posted, provisions are created for planned delivery costs;
thus the material is immediately valuated at the expected price. A subsequent debit/credit
when the invoice is received is only necessary if there are variances between the stipulations
of the order and the invoice.

It is also possible to post the net value of goods received. In this way, cash discounts that
have been agreed upon are taken into account in valuation at this point. This means that
when a goods receipt is posted for a material with moving average price control, the value of
the order minus the cash discount is debited.

Material price changes can also occur during the following transactions in Inventory
Management:

       Delivery Free of Charge
       Transfer Posting
       Goods Receipt Without a Purchase Order
       Initial Entry of Inventory Data
       Goods Issue
       Goods Receipt Reversal

See also:

Standard Price: Value Calculation

Moving Average Price: Value Calculation


 Goods Receipt for a Purchase Order
Use
Usually, a goods receipt for a purchase order is valuated. How the material is valuated
depends on the value calculation used and the postings carried out.

Features
A distinction is made between two ways in which the value of the goods receipt can be
calculated:

       Goods Receipt Before Invoice Receipt
Financial Accounting – General Ledger Accounting (FI-GL)                                          40

           Generally, you receive the invoice after the goods. Consequently, the value of the
           delivery is not known at the time of goods receipt. In this case, the value calculation is
           based on the purchase order. The value of the goods receipt is calculated based on
           the quantity received and the net order price.




Value Calculation: Goods Receipt Before Invoice Receipt


Purchase order:                                    100 pieces of material A at $10/piece

Goods receipt:                                     70 pieces

The value of the goods receipt is calculated       70 pieces x $10/piece = $700
as follows:




          Invoice Receipt Before Goods Receipt

           If an invoice has been posted for a purchase order before the goods are received, the
           value of the delivery is known at the time of goods receipt. In this case, the value
           calculation is based on the invoice. The value of the goods receipt is calculated
           based on the quantity received and the invoice price. If the invoice was for only part
           of the quantity, only the actual quantity invoiced is valuated at the invoice price at
           goods receipt. The remaining quantity is valuated at the purchase order price.




Value Calculation: Invoice Receipt Before Goods Receipt


Purchase order:                                    100 pieces of material A at $10

Invoice:                                           50 pieces at $12/piece = $600

Goods receipt:                                     70 pieces

The value of the goods receipt is calculated       50 pieces x $12/piece + 20 pieces x $10/piece
as follows:
                                                   = $800




See also:

Postings: Goods Receipt for a Purchase Order

Planned Delivery Costs


 Goods Receipt Without Price Variance
Financial Accounting – General Ledger Accounting (FI-GL)                                     41




Since the purchase order price is the same as the moving average price, the ratio of total
value to total quantity remains unchanged when the goods receipt is posted:

5000/1000 = 2000/400 = (5000 + 2000)/(1000 + 400) = 5.00


 Goods Receipt with Price Variance
Financial Accounting – General Ledger Accounting (FI-GL)                                      42




Since the purchase order price is higher than the moving average price in the material master
record, the ratio of total value to total quantity increases when the goods receipt is posted:

$7280/1400 pieces = $5.20/piece > $5.00/piece

If the purchase order price is lower than the moving average price, the moving average price
is reduced when the goods receipt is posted.


 Planned Delivery Costs
Use
In the SAP System, you can enter planned delivery costs in a purchase order. In the standard
system, there are the following types of delivery costs:

       Freight costs
       Customs charges
       Miscellaneous costs

You can define additional types of delivery costs in Customizing.

Features
If a goods receipt is posted for a purchase order with planned delivery costs, the delivery
costs amount planned for the quantity received is posted to a clearing account (there is a
Financial Accounting – General Ledger Accounting (FI-GL)                                         43

separate clearing account for each type of delivery costs). The offsetting entry is posted to
either the stock account or a price difference account, depending on the type of price control
defined for the material.

The corresponding clearing account is cleared when the goods invoice or a separate invoice
is posted in Invoice Verification.




                Postings: Planned Delivery Costs




See also:

Planned and Unplanned Delivery Costs in Invoice Verification


 Goods Receipt Without a Purchase Order
Use
If you post a goods receipt without a purchase order, the goods receipt is valuated on the
basis of the valid price in the material master record. Thus, the price in the material master
record is not changed by the transaction; the stock quantity and the stock value increase
proportionally.

A goods receipt without a purchase order is posted to the stock account; the offsetting entry is
made to a "stock change" account.


 Delivery Free of Charge
Use
Financial Accounting – General Ledger Accounting (FI-GL)                                          44

If a delivery free of charge is posted for a material, for example as a rebate in kind, a goods
receipt is posted for this material, but no invoice receipt. The account postings at goods
receipt depend on the price control defined for the material.

Features

Standard Price

When a delivery free of charge is posted, the stock of the material increases by the quantity of
goods received.

For a material valuated at a standard price, the total value of the material must increase in
relation. Therefore, the stock account is credited with the value of the delivered quantity x
standard price. The offsetting entry is made to the "Income from price differences" account.

Moving Average Price

For a material valuated at a moving average price, no accounts are credited or debited when
the delivery free of charge is posted, since there is no change in value. The total stock
quantity of the material increases in the material master record, while the total value remains
unchanged. Thus, the moving average price decreases.




                Value Change in the Case of a Delivery Free of Charge for a Material
                Subject to Moving Average Price Control
Financial Accounting – General Ledger Accounting (FI-GL)                                       45


 Transfer Posting
Definition
There are various types of transfer postings. A material document is created for every transfer
posting. An accounting document is only created for transfer postings that lead to a change in
value. These are:

       Transfer Posting: From Plant to Plant
       Transfer Posting: From Consignment to Company-Owned Stock
       Transfer Posting: From Material to Material
       Transfer Posting: From Valuation Type to Valuation Type


 Transfer Posting: From Plant to Plant
Use
There are two ways to make a transfer posting from plant to plant:

       In Two Steps

        First you post the stock withdrawal in the issuing plant. Later you post the receipt into
        stock at the receiving plant. In the time between the two postings, the material is
        placed in "stock in transfer" at the receiving plant. Two material documents are
        created.

       In One Step

        You post the stock withdrawal in the issuing plant and the receipt into stock at the
        receiving plant simultaneously. One material document is created.

Features
The value of the stock transfer is posted upon withdrawal of the material. The material master
records change as follows:

       In the issuing plant, the stock is reduced by the quantity transferred, and the value is
        reduced accordingly:

        Transfer posting value = transfer posting quantity x price in issuing plant

       In the receiving plant, the stock is increased by the quantity transferred, and the
        value is increased in accordance with the price control defined for the material.

If the price in the receiving plant differs from that in the issuing plant, the transfer posting
results in price differences. These differences are posted to the stock account (in the case of
price control V) or to an "Expense/income from stock transfer" account (in the case of price
control S), depending on the type of price control defined in the receiving plant.




                Value Change: Transfer Postings from Plant to Plant
Financial Accounting – General Ledger Accounting (FI-GL)                                    46




                The value of the transfer posting is calculated based on the price in the
                issuing plant: 50 pieces x $10/piece = $500. Consequently, the total value is
                reduced by $500 in the issuing plant and increased by $500 in the receiving
                plant.

                The transfer posting leads to the creation of an accounting document. If the
                plants involved belong to different company codes, an accounting document
                is created for each company code. In this case, the offsetting entry is made to
                the company code clearing account.


Transfer Posting: From Consignment to
Company-Owned Stock
Use
Consignment goods are goods that are stored at your company site but belong to a vendor.
The vendor makes the goods available to you but does not invoice them right away. The
goods are invoiced at a previously agreed-upon consignment price once you have withdrawn
them from storage.

Features
Consignment stock is not subject to valuation in your company. When you transfer
consignment stock to company-owned stock, the quantity transferred is valuated as follows:
Financial Accounting – General Ledger Accounting (FI-GL)                                         47

Transfer posting value = quantity transferred x consignment price

The transfer posting value is posted to the material's stock account and the offsetting entry is
made to the "Payables from consignment stores" account. This account is cleared by Invoice
Verification when the consignment withdrawal is settled.

If the consignment price differs from the material price, the transfer posting leads to price
differences. Depending on the type of price control, these differences are posted to the stock
account (price control V) or to an "Expense/income from consignment withdrawal" account
(price control S).


 Transfer Posting: From Material to Material
Use
If you manage similar materials under different material numbers, you may occasionally need
to transfer the stock of one material to another material.

Features
The material master records change due to the transfer posting as follows:

       The stock of the issuing material is reduced by the quantity transferred, and the
        value is reduced accordingly:

        Value = quantity x price of the issuing material

       The stock of the receiving material is increased by the quantity transferred. The
        increase in value depends on the type of price control:

        If the price of the receiving material differs from that of the issuing material, the
        transfer posting results in price differences. These differences are posted to the stock
        account (in the case of price control V) or to an "Expense/income from stock transfer"
        account (in the case of price control S), depending on the price control defined for the
        receiving material.


Transfer Posting: From Valuation Type to
Valuation Type
Use
In the case of materials subject to split valuation, you can transfer stock from one valuation
type to another.

Features
The material master records change due to the transfer posting from one valuation type to
another as follows:

       The stock of the issuing valuation type is reduced by the quantity transferred, and
        the value is reduced accordingly:
Financial Accounting – General Ledger Accounting (FI-GL)                                          48

        Value = quantity x price of the issuing valuation type

       The stock of the receiving valuation type is increased by the quantity transferred.
        The increase in value depends on the type of price control defined.

        If the price of the receiving valuation type differs from that of the issuing valuation
        type, the transfer posting results in price differences. These differences are posted to
        the stock account (in the case of price control V) or to an "Expense/income from stock
        transfer" account (in the case of price control S), depending on the type of price
        control defined for the receiving valuation type.




                 If you post a transfer from a valuation type subject to price control S to a
                 valuation type subject to price control V, the valuation header record does not
                 change. However, If you post a transfer from a valuation type subject to price
                 control V to a valuation type subject to price control S, the valuation header
                 record changes when price differences occur. Because the price differences
                 are posted to a price difference account, the value of the total stock managed
                 in the valuation header record changes.


 Initial Entry of Inventory Data
Use
You enter initial inventory data when you transfer stocks (for example, from an existing
system) into the SAP System. This procedure is first performed at the beginning of the
production phase with the SAP System. In addition, it is possible to enter initial inventory data
when the SAP System is active, both for new materials and for materials for which stocks
already exist.

Prerequisites
If you want to enter initial inventory data for a new material, you must create a material master
record for this material.

Features
The valuation of the stocks to be entered depends on two factors:

       The price and type of price control defined in the accounting data of the material
        master record
       If you enter a value for the quantity entered

Material with Standard Price

For a material valuated at a standard price, the initial entry of inventory data is valuated on
the basis of the standard price. If you enter an alternative value during the initial entry of
inventory data, the system posts the difference to a price difference account.




                 Initial Entry of Inventory Data: Material with Standard Price
Financial Accounting – General Ledger Accounting (FI-GL)                                      49


Material with Moving Average Price

For a material valuated at a moving average price, the initial entry of inventory data is
valuated as follows:

       If you enter a value when entering initial data, the quantity entered is valuated at this
        price. If the quotient of the value and the quantity of the initial data differs from the
        moving average price, the moving average price changes when initial data is entered.
       If you do not enter a value when entering initial data, the quantity entered is valuated
        at the moving average price. In this case, the moving average price does not change.




                 Initial Entry of Inventory Data: Material with MAP


Initial Entry of Inventory Data: Material with
Standard Price




Initial Entry of Inventory Data: Material with
MAP
Financial Accounting – General Ledger Accounting (FI-GL)                                         50




 Goods Issue
For both materials valuated at a standard price and materials valuated at a moving average
price, goods issues are always valuated at the current price. Consequently, a goods issue
reduces the total value and the total quantity in relation to the price, and the price remains
unchanged.




                Goods issues do not change the moving average price that is recorded for
                informational purposes for materials with standard price control.


 Goods Receipt Reversal
Use

Goods-Receipt-Based Invoice Verification
Financial Accounting – General Ledger Accounting (FI-GL)                                        51

In the case of goods-receipt-based invoice verification, the system can assign the reversal of
a goods receipt to the original document, thus the postings are generally reversed.

No Goods-Receipt-Based Invoice Verification

If goods-receipt-based invoice verification has not been defined and several goods receipts
have been posted with different order prices, the system posts the reversal of the goods
receipt with the average receipt value of the goods receipts, that is, the postings are not
necessarily reversed. This type of valuation is used when posting in the following functions:

       Reversing delivery costs and negative delivery costs, such as rebate accruals
       Reversing goods receipts for returns items
       Reversing goods receipts for subcontracting orders that are valuated
        differently. The return delivery is valuated at the average value of the original
        postings.
       Reversing goods receipts with different values in the local currency. The order
        price has not changed, but various exchange rates between the local currency and
        the foreign currency are used for the goods receipts. The system valuates the return
        delivery with the average receipt value in local currency.

The examples below show that when you reverse goods receipts, different postings can take
place to those made at goods receipt.




Postings Made when Reversing a Goods Receipt After Goods Receipts That Are
Valuated Differently




First Goods Receipt
Financial Accounting – General Ledger Accounting (FI-GL)                                   52

The stock account is posted with the receipt value based on the purchase order price.




The offsetting entry is posted to the GR/IR clearing account.

Value Calculation

The stock and value in the material master record increase in proportion to the goods receipt
quantity. The material price does not change.


    After the document is posted, the price in the purchase order is changed.

Second Goods Receipt

The stock account is posted with the receipt value based on the changed purchase order
price.




The offsetting entry is posted to the GR/IR clearing account.

Value Calculation

The purchase order price is different to the moving average price: The stock and value in the
material master record do not increase in proportion to the goods receipt quantity, thus the
moving average price changes.

Goods Receipt Reversal

The stock account is credited with the average receipt value.




The offsetting entry is posted to the GR/IR clearing account.

Value Calculation

The return delivery is posted based on the moving average price: The value and stock are
reduced in proportion to the goods receipt quantity. The moving average price does not
change.

Invoice
Financial Accounting – General Ledger Accounting (FI-GL)                                    53

The GR/IR clearing account is cleared with the average receipt value. The offsetting entry is
posted based on the invoice price on the vendor account. The difference between the GR/IR
clearing account and the vendor account is posted to the stock account if there is sufficient
stock coverage.

Value Calculation

The invoice price is different to the average receipt value: When the invoice is posted, the
system corrects the value in the material master record, the stock level remains the same, so
the price in the material master record changes.

See also:

Goods Receipt Reversal After Goods Receipt and Invoice Receipt

Goods Receipt Reversal with Purchase Order Price Quantity Variance


 Goods Receipt Reversal After Goods Receipt
and Invoice Receipt




Goods Receipt

The stock account is posted with the receipt value based on the purchase order price.




The offsetting entry is posted to the GR/IR clearing account.
Financial Accounting – General Ledger Accounting (FI-GL)                                       54

Value Calculation

The stock and value in the material master record increase in proportion to the goods receipt
quantity. The material price does not change.

Invoice

The GR/IR clearing account is cleared on the basis of the purchase order price:




The posting for the offsetting entry is based on the invoice price on the vendor account.

For a material with a moving average price, the difference between the GR/IR clearing
account and the vendor account is posted to the stock account if there is sufficient stock
coverage.

Value Calculation

The invoice price is different to the purchase order price: When the invoice is posted, the
system corrects the value in the material master record, the stock level is unchanged, thus
the moving average price in the material master record changes.

Goods Receipt Reversal

The GR/IR clearing account is cleared on the basis of the invoice price. The offsetting entry is
posted to the stock account.

Value Calculation

The stock and value in the material master record are reduced in proportion to the goods
receipt quantity reversed, so the moving average price does not change.


Goods Receipt Reversal with PO Price Quantity
Variance
In the purchase order, a purchase order price unit (OPUn) different to the purchase order unit
(OUn) has been defined.

A variance in purchase order price quantity at goods receipt applies in the following cases:

       Goods Receipt Before Invoice Receipt

        The ratio (goods receipt quantity in purchase order price units) : (goods receipt
        quantity in purchase order units) is different to the ratio (ordered quantity in purchase
        order price units) : (ordered quantity in purchase order units).

       Invoice Receipt After Goods Receipt
Financial Accounting – General Ledger Accounting (FI-GL)                                        55

        The ratio (goods receipt quantity in purchase order price units) : (goods receipt
        quantity in purchase order units) is different to the ratio (invoice quantity in purchase
        order price units) : (invoice quantity in purchase order units).

The system posts goods receipts and return deliveries with a different purchase order price
unit as follows:

Example 1:
Postings and Extract from Material Master Record for a Material with Moving Average
Price




Invoice

The invoice is posted before the goods receipt, so the posting to the GR/IR clearing account
is based on the invoice price.




The offsetting entry is posted to the vendor account.

Value Calculation

The value, stock, and material price in the material master record do not change.

First Goods Receipt
Financial Accounting – General Ledger Accounting (FI-GL)                                         56

The invoice was posted before the goods receipt, so the GR/IR clearing account is cleared as
follows:




The offsetting entry is posted to the stock account for a material with a moving average price
with sufficient stock coverage.

Second Goods Receipt

The invoice was posted before the goods receipt, so the GR/IR clearing account is cleared as
follows:




Value Calculation

The stock and value in the material master record do not change in proportion to the goods
receipt, so the moving average price changes as well.

Return Delivery

At the time of the return delivery, the stock account is reduced by the goods receipt reversal
quantity based on the invoice price.




The offsetting entry is posted to the GR/IR clearing account.

Value Calculation

The stock and value in the material master record are not reduced in proportion to the goods
receipt, so the moving average price changes as well.

Example 2:
The following example shows a special case:

If the goods receipt quantity in purchase order units is the same as the invoice quantity and
the goods receipt quantity in purchase order price units is greater than the invoice quantity,
the following account movements take place:
Financial Accounting – General Ledger Accounting (FI-GL)                                       57




See also:

  Order Price Quantity Variances


Value Changes in Logistics Invoice
Verification
Use
When you post an invoice, the stock quantity of a material remains unchanged; thus, a
change in stock value can only occur if the material price changes. If a material has a moving
average price, this occurs if the purchase order price and the invoice price differ. When this is
the case, the material received could not have been valuated at the actual delivered price
when the goods receipt was posted. Valuation must therefore be adjusted to the actual
delivered price of the material when the invoice is posted.

Invoices for Delivery costs cause a change in valuation if they are entered as unplanned
delivery costs. Planned delivery costs cause a change only if they differ from the amount
posted at goods receipt.

Cash discount granted in an invoice is taken into account in valuation only if an invoice is
posted at net value. If a goods receipt is posted at net value, a change in value only occurs if
the amount of cash discount granted in the invoice is different to that specified in the
purchase order.

See also:

Invoices for Purchase Orders

Subsequent Debits/Credits
Financial Accounting – General Ledger Accounting (FI-GL)                                            58

Credit Memos

GR/IR Clearing Account Maintenance

Standard Price: Value Calculation

Moving Average Price: Value Calculation


Invoices for Purchase Orders
Use
Invoice Verification generally happens at the end of the material procurement process: The
vendor presents an invoice for a delivery made on the basis of a purchase order.

Features
In the SAP System, the goods receipt and invoice receipt are managed using a GR/IR
clearing account. Either the goods receipt or the invoice receipt for a purchase order can be
entered first. When a goods receipt is entered before an invoice, the posting of the invoice
clears the GR/IR clearing account. When an invoice is entered before a goods receipt, the
posting of the goods receipt clears the GR/IR clearing account. If there are price differences
between the purchase order and the invoice, the account movements vary depending on the
sequence of goods receipt and invoice receipt.

       Invoice Receipt Before Goods Receipt

        If the invoice receipt is posted before the goods receipt, the invoice price becomes
        the basis for the posting. The goods receipt that follows is posted with the value
        posted at invoice receipt.

       Goods Receipt Before Invoice Receipt

        Goods are generally received before the invoice. In this case, the goods receipt is
        posted at the net order price. If the invoice price differs from the net order price, the
        value posted at goods receipt must be corrected when the invoice is posted.

In either case, the invoice receipt is posted at the value of the invoice (invoiced quantity x
invoice price). The account movements depend on the price control defined for the material:

       Standard Price

        For a material valuated at a standard price, the price difference is posted to an
        income or expense account.

       Moving Average Price (MAP)

        For a material valuated at a moving average price, the price difference is posted to
        the stock account, provided there is sufficient stock coverage for the quantity
        invoiced. If sufficient stock coverage is not available, only the amount for the available
        quantity is posted to the stock account; the remaining amount is posted to a revenue
        or expense account.
Financial Accounting – General Ledger Accounting (FI-GL)                                          59


                 Postings in the case of a price variance for     Material with Standard Price

                 Postings in the case of a price variance for     Material with Moving Average
                 Price with Stock Coverage

                 Postings in the case of a price variance for     Material with Moving Average
                 Price Without Stock Coverage

                 Postings in the case of price and quantity variances for      Material with
                 Standard Price

                 Postings in the case of price and quantity variances for      Material with
                 Moving Average Price with Stock Coverage


 Subsequent Debits/Credits
Use
If a transaction has already been invoiced and additional costs are invoiced later, a
subsequent debit is necessary. In this case, you can debit the material with the additional
costs.

It is also possible to credit the material if costs already posted are reduced at a later date.

Features
When entering a subsequent debit/credit, you must specify the quantity for which the costs
are to be posted. If stock coverage does not exist for this quantity, only the portion for the
available stock is posted to the stock account. The rest is posted to a price difference
account.

When a material is valuated at a standard price, the subsequent debit/credit is posted to a
price difference account. This way, the posting does not cause a change in value in the
material master record.




                 Postings and Extract from the Material Master Record for a Material
                 Valuated at a Moving Average Price (MAP) in the Case of a Subsequent
                 Debit/Credit
Financial Accounting – General Ledger Accounting (FI-GL)                                      60




 Credit Memo
Definition
The term credit memo always refers to a credit memo from the vendor. Therefore, posting a
credit memo always leads to a debit posting on the vendor account.

Use
As in the case of invoices, credit memos refer to purchase orders or goods receipts. They are
used to correct the purchase order history if the quantity invoiced was too high, for example, if
an invoice was too high or if part of the quantity was returned.

When you post a credit memo, the total quantity in the purchase order history is reduced by
the credit memo quantity.




                If you do not want the total quantity invoiced to be reduced, you must post the
                credit memo as a subsequent credit.

See also:

Posting Credit Memos

Postings for Credit Memos


 Delivery Costs
Use
Financial Accounting – General Ledger Accounting (FI-GL)                                       61

In the SAP System, delivery costs can be:

       Planned
       Unplanned

Planned Delivery Costs

Planned delivery costs are entered in the purchase order. At goods receipt, a provision is
posted to a freight or customs clearing account. This account is cleared when the invoice is
posted.

If there are no price differences between the delivery costs planned in the purchase order and
the delivery costs specified in the invoice, the material master record does not change when
the invoice is posted.

If there are price differences, these are dealt with in exactly the same manner as price
variances for ordered materials.

Unplanned Delivery Costs

Unplanned delivery costs are delivery costs that were not specified in the purchase order and
are only entered when you enter the invoice. They are posted in exactly the same manner as
subsequent debits/credits.

For a material subject to moving average price control, unplanned delivery costs are posted to
the stock account, provided that there is sufficient stock coverage. For a material subject to
standard price control, unplanned delivery costs are posted to a price difference account.


 GR/IR Clearing Account Maintenance
Use
If there is a quantity variance between the goods receipt and the invoice for a purchase order,
this results in a balance on the GR/IR clearing account. The system expects an additional
goods receipt or an additional invoice to clear this balance. If this is not done, you must clear
the GR/IR clearing account manually.

Features
For a material subject to moving average price control, the offsetting entry for clearing the
GR/IR clearing account is posted to the stock account (provided that there is sufficient stock
coverage for the quantity difference):

       If there is a delivery surplus on the GR/IR clearing account, the material was debited
        with too high a value when the goods receipt was posted. When the GR/IR clearing
        account is cleared, the material is credited accordingly.
       If there is an invoice surplus on the GR/IR clearing account, the material was debited
        with too low a value when the goods receipt was posted. When the GR/IR clearing
        account is cleared, the material is debited accordingly.
Financial Accounting – General Ledger Accounting (FI-GL)                                      62




                If there is insufficient stock coverage for this quantity, only the portion
                corresponding to the available stock is posted to the stock account. The rest
                is posted to a price difference account.

                For a material subject to standard price control, the offsetting entry to clear
                the GR/IR clearing account is made to a price difference account. Thus, there
                are no value changes in the material master record.


 Value Changes from Cash Discounts
Use
When creating a purchase order, the buyer can enter cash discount terms that have been
agreed with the vendor. These cash discount terms appear as default values in Invoice
Verification and can be changed if the terms have changed.

There are two ways to post cash discount amounts:

       Gross Posting

        In the case of gross posting, the cash discount amount is not taken into account at
        goods receipt or invoice receipt. The cash discount amount is not posted until the
        payment program is run, and then it is posted to a non-operating income account
        instead of to the stock account in question.

       Net Posting

        In the case of net posting, the cash discount amount is credited directly to the stock
        account. However, this procedure affects the stock account only if the material is
        valuated at a moving average price. If the material is valuated at a standard price, the
        cash discount is posted as a type of price variance. You can use net posting for
Financial Accounting – General Ledger Accounting (FI-GL)                                      63

        goods receipts and in Invoice Verification. If you post the goods receipt net, it is best
        to post the invoice net; otherwise, the net posting at goods receipt would be canceled.

The document type determines which procedure is to be used:

       For goods receipt, the document type is determined in Customizing. As a result,
        either all goods receipts are posted gross or all goods receipts are posted net.
       In Invoice Verification, you can decide for each document whether you want to post
        the invoice gross or net. Note, however, that this choice only makes sense if the
        goods receipt was posted gross.

See also:

Gross Goods Receipt – Gross Invoice Receipt

Gross Goods Receipt – Net Invoice Receipt

Net Goods Receipt – Net Invoice Receipt


Gross Goods Receipt – Gross Invoice Receipt
Postings and Extract from the Material Master Record When Posting the Goods Receipt
and the Invoice Receipt Gross




Since both the goods receipt and the invoice receipt are posted gross, cash discounts are not
taken into account in Materials Management. For this reason, the moving average price of the
material does not change.

The cash discount amount is only posted to a non-operating revenue account at the payment
run.
Financial Accounting – General Ledger Accounting (FI-GL)                                     64


 Gross Goods Receipt – Net Invoice Receipt
Postings and Extract from the Material Master Record When Posting the Goods Receipt
Gross and the Invoice Receipt Net




The cash discount amount is taken into account when the invoice is posted. Since the goods
receipt was posted gross, net posting of the invoice receipt leads to a correction of the stock
value and, therefore, of the moving average price. The offsetting entry is made to a cash
discount clearing account, which is cleared at payment.


 Net Goods Receipt – Net Invoice Receipt
Postings and Extract from the Material Master Record When Posting the Goods Receipt
and the Invoice Receipt Net
Financial Accounting – General Ledger Accounting (FI-GL)                                         65




The cash discount amount is taken into account during goods receipt. The amount posted is
the value of goods delivered reduced by 5% (that is, by $6).

The posting of the invoice does not lead to a change in value in the material master record.




                 If the invoice were posted gross, the system would post the $6 to the stock
                 account instead of the cash discount clearing account. Consequently, the
                 effect of the net posting at goods receipt would be canceled.


 Split Valuation
Use
For certain materials, it is necessary to valuate the various stocks in a particular valuation
area separately. Reasons for this include:

       Different origins of the material

       Different grades of quality for the material

       Different statuses for the material

       Differentiation between in-house production and external procurement

       Differentiation between different deliveries

Features
Financial Accounting – General Ledger Accounting (FI-GL)                                          66

If a material is subject to split valuation, the material is managed as several partial stocks,
each partial stock is valuated separately.

Each transaction that is relevant for valuation, be it a goods receipt, goods issue, invoice
receipt or physical inventory, is carried out at the level of the partial stock. When you process
one of these transactions, you must always specify which partial stock is involved. This
means that only the partial stock in question is affected by a change in value, the other partial
stocks remain unaffected.

Alongside the partial stocks, the total stock is also updated. The calculation of the value of the
total stock results from the total of the stock values and stock quantities of the partial stocks.

You define whether the material is subject to split valuation on the accounting view of the
material master record. There are two fields for this:

       The valuation category specifies which criterion should be used as the basis for
        differentiating between the various partial stocks.
       The valuation type specifies an individual characteristic of a partial stock.

See also:

Valuation Category

Valuation Type

Creating Material Subject to Split Valuation

Stocks Subject to Split Valuation


Valuation Category
Use
The valuation category specifies which criterion should be used as the basis for differentiating
between the various partial stocks.

The standard system contains several default valuation categories, for example:

       B

        for procurement type

        The stock is divided up according to whether the material is manufactured in-house or
        procured externally.

       H

        for origin

        The stock is divided up according to where it was delivered from.

Prerequisites
Financial Accounting – General Ledger Accounting (FI-GL)                                        67

The system administrator can set up additional valuation categories in Customizing. For each
valuation category you must define which valuation areas it is valid in.

Features
Every material subject to split valuation is assigned to a valuation category in the material
master record. The material can then be managed using the valuation types defined for this
valuation category.

The valuation category X is a special case: no valuation types are predefined for this
category. At goods receipt, a batch is created for the material entered. This also serves as its
valuation type. This makes it possible to valuate every goods receipt separately, for example,
by using the order number as the valuation type.

In the case of partial deliveries for a purchase order, you can only valuate each partial
delivery separately if goods-receipt-based Invoice Verification has been defined in the
purchase order (the field GR based IV must be selected on the order item screen). If goods-
receipt-based Invoice Verification has not been defined, the valuation type that you enter for
the first partial delivery is binding for the following partial deliveries.


Valuation Type
Use
There are valuation types for each valuation category, which specify which individual
characteristics exist for that valuation category. If you give the valuation types meaningful
keys, each valuation type in some way represents the name of a sub-stock.

Fixed valuation types are defined in the system for each valuation category except valuation
category X.

Prerequisites
In Customizing, the system administrator can define as many valuation types as required.
Each valuation type must be assigned to a valuation category.

Features
The following graphic shows three examples of split valuation.
Financial Accounting – General Ledger Accounting (FI-GL)                                       68




Example 1:

You procure a material both from in-house production and from external vendors. You want to
valuate the stocks from each source separately. In this case, you select Procurement type
as the valuation category (B) and Internal and External as valuation types.

Example 2:

You procure a material from several countries. You want to valuate the stocks from each
country separately. In this case, you select Origin as the valuation category (H). As valuation
types, you define the relevant countries, for example, Italy and France.

Example 3:

You procure a material in different grades. You want to valuate the stocks of each class
separately. In this case, you select Quality as the valuation category (Q). As valuation types,
you could define A, B, C, and D.


 Creating Material Subject to Split Valuation
    1. First create a valuation header record for this material. This is where the individual
       stocks of a material are managed cumulatively.

        To do this, fill in the Valuation category field on the accounting screen when you
        create the material master record and leave the Valuation type field blank. In the
        Price control field, enter V (moving average price), since a moving average price is
        constructed in the valuation header record from the values and quantities of the
        individual stocks. When you save, the system creates the valuation header record.

    2. Then create the material for a valuation type.
Financial Accounting – General Ledger Accounting (FI-GL)                                      69

        To do this, call up the material in creation mode again. Due to the fact that a valuation
        header record exists, the system requires you to enter a valuation type for the
        valuation category.

    3. Repeat step two for every valuation type planned.

Stocks Subject to Split Valuation
The stocks of a material subject to split valuation are managed separately for each valuation
type. They are cumulated in the valuation header record: This is where all the individual stock
quantities and stock values are added together and managed. A moving average price is
calculated from the values of the various valuation types and the stock quantities.

The following graphic shows an example of split valuation:




Material 1 is managed separately according to origin (valuation category H). The valuation
types Italy and France have stocks. The fact that these stocks are in different storage
locations is not important for valuation.

In the valuation header record, the separate stocks are cumulated:

       The total stock in the plant is 100.
       The moving average price is calculated from valuation of the individual stocks:

        Average price = total value / total quantity




Value Italy:                                      40 x 4.00 = 160.00

Value France:                                     60 x 6.00 = 360.00
Financial Accounting – General Ledger Accounting (FI-GL)                                       70


Total value:                                      = 520.00

Average price:                                    520.00 / 100 = 5.20



 Revaluation
Changing Material Prices

Debiting and Crediting Materials

Postings Made When Revaluation Is Carried Out


 Price Changes
Use
Using this function, you can change prices, mark prices for change, and release prices for
material valuation.

If the material ledger is active, a price change for a material with price determination 3
(single- and multilevel material price determination) is only possible if there have been no
goods movements relevant to valuation and no incoming invoices for the material in the
period.

If the material ledger is not active, you can always change material prices regardless which
price control has been set for the material.

       If a material is valuated at the standard price, it is always valuated at the same price.
        The development of delivered prices is included in the material master for statistical
        purposes, but not used for material valuation. The price differences are posted to a
        price difference account.
       If a material is valuated at the moving average price, the price changes with every
        goods movement and incoming invoice if the purchase order price or invoice price
        varies from the moving average price. In other words, the price automatically reflects
        the delivered price.

You can make a price change in the following ways:

       In a processing step with immediate effect
        For more information, see Changing Material Prices.

       In a two-step procedure
        For more information, see Determining Future Prices and Releasing Planned Prices.

When making changes with immediate effect, you can post a price change to the previous
period or year. For more information, see Posting a Price Change to the Previous Period or
Year.




Features
Financial Accounting – General Ledger Accounting (FI-GL)                                         71

If you activated the material ledger, you can maintain valuation prices independent of one
another in up to three currencies and/or valuations. If the material ledger is not active, you
only maintain the valuation prices in company code currency with legal valuation. You can
perform the following functions:

Change Material Prices

You can change current material valuation prices retroactively or at the current date. To do
so, enter the posting date and company code in the selection screen.

Debit/Credit Materials

You can debit and credit materials retroactively and at the current date. To do so, enter the
posting date and company code in the selection screen.

Maintain Future Prices

You can maintain future price for materials as follows:

       Manually with a validity date in the material master.
       Through self-defined translation rules between currencies/valuations in the rule
        maintenance of the transaction Maintain Future Prices.
       Through manual individual maintenance in the transaction Maintain Future Prices.
        With rule maintenance, you determine the translation rules between currencies and
        valuations with which the future prices are calculated. If you are performing manual
        individual maintenance, you can manually overwrite the prices calculated by the
        system.

Release Planned Prices

You can release planned prices for material valuation in the following ways:

       Manually

        using the price release functions

       Automatically

        using the settings for Dynamic Price Release in Customizing
        Planned prices are released automatically upon the first goods movement or invoice
        receipt in a period. A manual price release is necessary for materials with no goods
        movements or invoice receipts.

Future planned prices are calculated in the standard cost estimate. The results of a standard
cost estimate take first priority as the valuation price for materials with price control S. For
more information, see Product Cost Planning.

If multiple planned prices exist for a material, the system selects a price according to the
following priorities:

    1. Marked standard cost estimate
Financial Accounting – General Ledger Accounting (FI-GL)                                     72




    2. Manually maintained future valuation price




Influence on Currency Translation

In order to simplify maintaining valuation prices independent of one another in the transaction
Maintain Future Prices; you can influence how the amounts in the different currencies and
valuations are translated from currency to currency and valuation to valuation. You can
overwrite the translated amounts manually if you activate manual individual maintenance in
the transaction.
Financial Accounting – General Ledger Accounting (FI-GL)                                     73




                Maintaining future valuation prices in the material master record is possible in
                all currencies set. Translation into further currencies is performed with the
                exchange rate set in Financial Accounting.

See also:

Debiting / Crediting Materials

Determining Future Prices

Releasing Planned Prices

Changing Material Prices

Displaying Price Change Documents

  Material Valuation in the SAP System


Debiting / Crediting Materials
If you have activated the material ledger, then all other currencies are also displayed with the
company code currency. If the material ledger is not active, then you will only see the
company code currency.

Procedure
    1. Choose Logistics  Materials Management  Valuation  Material Price Change 
       Debit/Credit Materials

        or

        Choose Accounting  Controlling  Product Cost Controlling  Actual
        Costing/Material Ledger  Material Ledger  Set Prices  Debit/Credit Materials.

    2. Enter the necessary data and choose Enter.

        The overview screen appears.

    3. Fill in the fields in the overview screen.
    4. Choose Save.

Result
The system makes the following postings:

       For materials whose price control indicator is set to S, the revaluation amount is
        posted to a price difference account.
Financial Accounting – General Ledger Accounting (FI-GL)                                         74

         For materials whose price control indicator is set to V, the revaluation amount is
          posted to a price difference account or a material stock account depending on the
          base quantity.

Example:

The base quantity of a material valuated at the moving price (V) is 100 units; the inventory
quantity is 50 units with an inventory value of USD 500. With an adjustment of USD 100, USD
50 is posted to the material stock account and USD 50 is posted to the price difference
account.


 Determining Future Prices (Automatically)
Procedure
     1. Choose Logistics  Materials Management  Valuation  Material Price Change 
        Maintain Future Prices

or

          Choose Accounting  Controlling  Product Cost Controlling  Actual
          Costing/Material Ledger  Material Ledger  Set Prices  Maintain Future Prices

     2. Enter the data for the material for which you want to maintain the future valuation
          price.
     3.   Enter the validity date of the marking.
     4.   If you want to maintain future valuation prices automatically, choose Rule
          Maintenance.

The Material Ledger Is Not Active

          Set the following criteria for determining future valuation prices:

                     i.    Which existing price (such as standard price or periodic unit price) is
                           to be used.
                    ii.    By what factor the result is to be multiplied (for example, with a factor
                           of 0.5 the price will be halved)

The Material Ledger Is Active

          Set the following criteria for determining future valuation prices in each currency and
          valuation:

                     i.    Which currency or valuation is to be used
                    ii.    Which existing price (such as standard price or periodic unit price) is
                           to be used.
                   iii.    The date from which the translation exchange rate is taken (only in
                           cases with different currencies)
                    iv.    The exchange rate type (average rate, for example) (only for differing
                           currencies)
                    v.     By what factor the result is to be multiplied (for example, with a factor
                           of 0.5 the price will be halved)
Financial Accounting – General Ledger Accounting (FI-GL)                                       75


    5. Maintain the values.
    6. Choose Execute.

Result
The new future valuation prices are updated in all currencies and valuations in the material
ledger data and also in the company code currency in the material master record.

If you have activated the actual cost component split, the cost component split data of the
reference price is transferred during automatic price maintenance.

You can release the new future valuation prices. For more information, see Releasing
Planned Prices.

See also:

Determining Future Prices (Manually)


 Releasing Planned Prices
Prerequisites
The planned prices must exist in the system and they must be valid (validity date). If no valid
planned prices exist in the system, the materials will continue to be valuated with the
valuation price used up to this point.

If the material ledger is active and you have set the price determination indicator in the
material master to 3, then the following prerequisites must be fulfilled:

        The status of the material ledger data for the current period is as follows: Period
         opened or Price change complete This means that there has been no goods
         movement, invoice, or order settlement posted for the material after execution of the
         period closing program.
        The closing entries for the previous period’s material price determination have not yet
         been made.

Procedure
    1. Choose Logistics  Materials Management  Valuation  Material Price Change 
       Release Planned Prices

         or

         Choose Accounting  Controlling  Product Cost Controlling  Actual
         Costing/Material Ledger  Material Ledger  Set Prices  Release Planned Prices.

    2.   Enter data as required.
    3.   Enter threshold values for the price changes, if necessary.
    4.   Specify whether the program should be run as a test run or an update run.
    5.   Choose Execute.

         A list with information about price changes and the corresponding revaluations
         appears.
Financial Accounting – General Ledger Accounting (FI-GL)                                        76


    6. To see the log, choose Message list.

Result
The system does the following:

       Updates the valid future prices (in the various currencies and valuations) as the
        current standard price or valuation price.
       Calculates a revaluation amount for the specific inventory quantity and revaluates the
        inventory value by this amount.

The offsetting entry takes place in the revaluation account in accordance with account
determination.

If no material stock exists, only the price is changed.

       Creates documents for the price change
       Creates change documents for the material master

See also:

Displaying Price Change Documents


 Dynamic Release of Planned Prices
Use
For each Plant, you can specify that a planned price is to be released as the valuation price
upon the first goods movement in a new period (as long as the validity date has been
reached). You do this in Customizing, under

Controlling  Product Cost Controlling  Actual Costing / Material Ledger  Activate
Valuation Areas for the Material Ledger

When using dynamic price release, the planned prices are handled by the system with the
following priority:

    1. Marked standard cost estimate
    2. Manually maintained future valuation price



                 It is a good idea to use dynamic price release if it would pose organizational
                 problems for you to release the planned prices between the program for
                 period closing and the first goods movement. In this case, use dynamic price
                 release so that the goods movements in this period are valuated with the new
                 price. Note that you must release the planned prices before the end of the
                 period for materials that are not moved in this time.

                 Dynamic price release occurs when an order is settled, an invoice is created,
                 or whenever a goods movement occurs for a material.

                 For more information, see Releasing Planned Prices.
Financial Accounting – General Ledger Accounting (FI-GL)                                       77


Integration
You can use this function even if you have not installed the material ledger. If you have
installed the material ledger, you can use this type of activation for both material price
determination settings.

Features
The first goods movement that triggers dynamic price release is valuated with the new price.

The existing inventory is revaluated by the system and the following documents are
generated:

       Material document for the goods movement
       Accounting document for price changes
       Material ledger document with the following items:

            o   Update (UP)
            o   Material price determination (CL) for materials whose prices were determined
                with transaction-based price determination
            o   Price change (PC) with the new and the old prices for the material as well as
                the revaluation amount

       Change document in the material master


 Changing Material Prices
Prerequisites
If the material ledger is active, the material prices of materials whose price determination
indicator is set to 3 can only be changed at the beginning of the period before all price-
relevant transactions.

If the material ledger is not active, you can change the material prices at any time.

Procedure
    1. Choose Logistics  Materials Management  Valuation  Material Price Change 
       Change Material Prices
       or
       Choose Accounting  Controlling  Product Cost Controlling  Actual
       Costing/Material Ledger  Material Ledger  Set Prices  Change Material Prices
    2. Enter data as required.
    3. An overview screen appears.
    4. Fill in the fields in the overview screen.
    5. Choose Save.

Result
Inventory is revaluated with all price controls, including valuation with standard price and
valuation with periodic unit price.


Sending Material Prices
Financial Accounting – General Ledger Accounting (FI-GL)                                          78


Use

If your system landscape includes several different distributed systems, you can use this
function to send material prices, according to the price control used, between different R/3
systems.

Prerequisites
       The Customizing settings are the same in both the sender and receiver systems.
       The material numbers are the same in all systems.
       You have made the settings required for sending material prices in Customizing for
        the receiver system under Materials management  Valuation and Account
        Assignment  Set up material Price Dispatch.
       You have set up the distribution model for sending material prices in Customizing.

Procedure
    1. In the sending system. choose Accounting

         Controlling  Product Cost Controlling  Actual Costing/Material Ledger 
        Material ledger  Send Material Prices.

    2. Enter the sending and receiving plants



                           The sending and receiving plants can be different as well as identical
                           plants.

    3. If you manually enter a logical system, the material prices are only sent to this
        system.

                   otherwise, the logical system is determined by the ALE distribution model.

    4. Choose the materials, that you want to send the prices for, in the material selection
        section.

                   Select a material type using the corresponding buttons: Stock material,
                   valuated sales order stock or valuated project stock and choose enter. This
                   allows you display or hide additional selection options.

    5. In the valuation view section, define the valuation for the prices to be sent.

                   If the material ledger is not active in the sending plant, you cannot make any
                   settings here and the material prices are sent in local currency for the legal
                   valuation method.

                   If the material ledger is active in the sending plant you can choose to send
                   the material prices according to any of the valuation methods maintained in
                   the material ledger.

    6. Choose the period from which the material prices should be sent.
    7. Specify the posting date for the revaluation posting in the receiver system.
Financial Accounting – General Ledger Accounting (FI-GL)                                      79


    8. Specify the output options and additional options as required.
    9. Choose Execute.



                         You can check the Idocs in the sending and receiving system using
                         transaction BD87.


Result
The prices are sent to the receiver system. If stock exists in the receiver system, it is
revaluated using the newly sent material prices.


Posting a Price Change to the Previous Period
or Previous Year
Use
In Customizing for Invoice Verification, your system administrator can configure the posting of
price changes to previous periods in two ways:

       The price change only applies to the previous period or to the previous year.

        If this setting is chosen, the system only changes the price in the previous period or in
        the previous year. The account movements that took place in the previous period or
        previous year are reversed again in the current period.

        See: example

       Price changes not only apply to the previous period or to the previous year but also to
        the current period.

        If this setting is chosen, the system changes the price not only in the previous period
        or previous year, but also in the current period. If the quantities and previous prices
        are the same in the previous period or year, account movements only occur in the
        previous period. If this is not the case, account movements also occur in the current
        period. These account movements reverse the postings in the previous period and
        result in the current price change.

        See: example

You post a price change to the previous period or year by entering a posting date from the
previous period or year on the initial screen for making price changes.


 Price Change in the Previous Period Only
Material Master Records


                                  Previous period                   Current period

Quantity                          150                               200
Financial Accounting – General Ledger Accounting (FI-GL)                     80


Price                           10.00                       11.00

Value                           1500                        2200


Price change valid in previous period only:

New price: 12.00

Account Movements


                                Previous period             Current period

Stock account                   300 +                       300 -

Expenditure/income              300 -                       300 +




Material Master Record After Price Change


                                Previous period             Current period

Quantity                        150                         200

Price                           12.00                       11.00

Value                           1800                        2200



Price Change in the Previous and Current
Period
Material Master Record


                                Previous period             Current period

Quantity                        150                         200

Price                           10.00                       11.00

Value                           1500                        2200


Price change in the previous period and in the current period:

New price: 12.00

Account Movements
Financial Accounting – General Ledger Accounting (FI-GL)                               81


                                Previous period               Current period

Stock account                   300 +                         100 -

Expenditure/income              300 -                         100 +


Material Master Record After Price Change


                                Previous period               Current period

Quantity                        150                           200

Price                           12.00                         12.00

Value                           1800                          2400



 Price Change Document
Definition
Document created by the system with the following:

       Material debits and credits
       Price changes
       Price releases

            o   of a future price
            o   from a cost estimate

Use
The price change document documents price changes as well as material debits and credits.


 Displaying Price Change Documents


Procedure
    1. Choose Accounting

         Controlling  Product Cost Controlling  Actual Costing/Material Ledger 
        Information System  More Reports  Price Change Document.

    2. Enter data as required.
    3. To display the header data for the document, choose Header.

Result
Financial Accounting – General Ledger Accounting (FI-GL)                                          82

The price change document appears.


Postings Made When Revaluation Is Carried
Out
Price Change
When a price changes, the value of the stock changes, since the value is calculated from the
price:

Total value = total quantity x price

Consequently, a price change creates a posting to the stock account that amounts to total
quantity x price difference. The offsetting entry is made to an income or expense account.

Material Debit or Credit
Debiting or crediting a material account has the following effects: The stock quantity of the
material remains unchanged. The value of the material is increased or reduced. As a result, a
change of price occurs, but only for a material subject to moving average price control.
Consequently, the account movements for a material debit or credit differ depending on the
type of price control.

Material with Standard Price

For a material subject to standard price control, the material debit or credit is posted to a price
difference account. The offsetting entry is made to an income or expense account.
Consequently, a material debit or credit for a material subject to standard price control does
not lead to a revaluation.

Material with Moving Average Price

For a material subject to moving average price control, a material debit or credit results in a
posting to the stock account. The system checks whether stock coverage exists for the
quantity to be debited or credited, then acts accordingly:

       If the quantity to be debited or credited is equal to or smaller than the total stock
        quantity:

        The amount to be debited or credited is posted to the stock account. The offsetting
        entry is made to an income or expense account.

       If the quantity to be debited or credited is larger than the total stock quantity:

        The amount to be debited or credited is divided proportionally. Only a portion of the
        amount to be debited or credited is posted to the stock account, as the table below
        shows:


                                                   Total stock

Amount to be debited*                              --------------------------
Financial Accounting – General Ledger Accounting (FI-GL)                                           83


                                                   Quantity to be debited

or

                                                   Total stock

Amount to be credited*                             ---------------------------

                                                   Amount to be credited


         The rest is posted to a price difference account. The offsetting entry is made to an
         income or expense account.


Posting to a Previous Period
Use
At the end of every period, the system administrator runs a program that puts the data from
the current period to the previous period and the data from the previous period into the period
before that, and so on. This is known as the period closing program. The following data in
particular is affected:

        Stock quantities and values
        Prices and price units

Features
The final data of the previous period is taken over as the starting data for the new period.

If, after the period-end closing program has been run, you need to enter transactions with a
posting date in the previous period, data is updated in both the current period and the
previous period.

Goods movements can only be posted to the previous period; transactions in Invoice
Verification can be posted to the previous period or previous year, that is, the final period of
the previous year.

It is essential that the valid posting periods for the accounts to be posted to are correctly
defined in Financial Accounting.

You post to a previous period by entering a date from the previous period in the Posting date
field when you enter the transaction in the system.

See also:

Posting Goods Movements to the Previous Period

Posting Invoices to the Previous Period

Postings Made When Posting to a Previous Period

Posting to a Previous Period after a Price Change
Financial Accounting – General Ledger Accounting (FI-GL)                                    84


Posting Goods Movements to the Previous
Period
Use
In the SAP System, you can post goods movements to the previous period. As a result, the
stock quantity and the stock value change in both the previous period and the current period.




Posting a Goods Receipt to a Previous Period for a Material Subject to Moving Average
Price Control (MAP).




The data from before the goods were received shows that goods receipts (400 pieces with a
value of 5,600) have already been posted in the current period.

Posting the goods receipt to the previous period leads to a change in stock quantity and stock
value in both the previous period and the current period. Since the purchase order price for
the goods receipt does not differ from the moving average price (MAP) in the previous period
in this example, the MAP does not change in the previous period. However, the MAP does
change in the current period.


Posting Invoices to the Previous Period
Use
In the SAP System, you can post invoices to the previous period or the previous year.
Changes in stock value only occur if there are price variances for a material subject to moving
average price control. In this case, the stock value changes in both the previous period and
the current period.
Financial Accounting – General Ledger Accounting (FI-GL)                                    85


Features

Posting an Invoice to the Previous Period for a Material Subject to
Moving Average Price Control




Since the invoice price exceeds the order price by $3.00, the stock is debited with the price
variance (200 x $3.00). Thus the stock value is increased in both the previous period and the
current period by $600. As a result, the moving average price increases in each case.

Posting to the Previous Year

You can post an invoice to the last period of the previous year. The procedure is the same as
for posting to the previous period.

You must note the following feature: If you post an invoice receipt before the goods receipt to
the previous year, a balance results on the GR/IR clearing account. Since you cannot post a
goods receipt to the previous year, this item cannot be cleared in the previous year. The open
item is carried over into the current fiscal year as a balance carried forward; it can then be
cleared by the goods receipt posting.


Postings Made When Posting to a Previous
Period
When you post a goods receipt and invoice receipt to a previous period, the same postings
occur as when you post in the current period:

       At goods receipt, the system makes postings to the stock account and the GR/IR
        clearing account.
Financial Accounting – General Ledger Accounting (FI-GL)                                    86

       At invoice receipt, the GR/IR clearing account is cleared by the posting to the vendor
        account.

Automatic Corrections when Posting to a Previous Period

There are two cases in which it is necessary to make adjustment postings for postings to the
previous period:

       Posting to previous period for material valuated at a standard price
       Stock shortage in the current period for material valuated at a moving average price

The system automatically carries out these adjustment postings when you post to a previous
period. In these cases, therefore, two documents are created when the goods receipt or
invoice receipt is posted to the previous period.


Posting to a Previous Period after a Price
Change
For a material subject to standard price control, the stock account can only be debited
with the value resulting from the product of goods receipt x standard price. When posting to a
previous period, the standard price from the previous period is used. If the standard price was
changed in the current period, the posting to the stock account must be corrected; to a certain
extent, the price is subsequently changed for the quantity received.

Postings for a Material for Which the Standard Price Was Changed at the Beginning of
the Current Period.
Financial Accounting – General Ledger Accounting (FI-GL)                                       87

At the beginning of the current period, the standard price was increased by $2/piece. Posting
the goods receipt to a previous period causes the stock quantity and the stock value to
change in both the previous period and the current period by 200 pieces and $2,000. So that
the standard price remains unchanged in the current period, the system automatically makes
a revaluation posting. This means that the price change at the start of the current period is
taken into account: The stock value in the current period is increased by 200 pieces x
$2/piece = $400.


 Stock Shortage in the Current Period
If price variances occur for an invoice for a material subject to moving average price
control, the resulting value is debited from the stock account, provided there is sufficient
stock coverage for the quantity invoiced. If there is stock coverage for the quantity invoiced in
the previous period, but not in the current period, you can post the entire invoice quantity to a
previous period, but you must make an adjustment posting for the current period.

Postings for a Material Valuated at a Moving Average Price for Which Stock Coverage
Exists in the Previous Period, But Not in the Current Period.




When you post to the previous period, the value resulting from the price variance (300 pieces
x $2/piece) is first debited to the stock account. The stock value changes in the previous
period accordingly. In the current period, there are only 100 pieces in stock, therefore the
stock account can only be debited $200 (100 pieces x $2/piece). The system automatically
posts the $400 difference to a revaluation account. Thus the stock value in the current period
increases by only $200.
Financial Accounting – General Ledger Accounting (FI-GL)                                        88


Balance Sheet Valuation (MM-IM-VP)
Purpose
The objective of balance sheet valuation is the calculation of material prices for subsequent
use in external or internal balance sheets, typically for valuation of the stocks of current
assets. Generally, the conditions include meeting legal requirements, complying with
corporate group guidelines, and implementing internal company objectives regarding
accounting policy. In this context, the company code is regarded as an independent
accounting unit

The SAP System provides the following techniques for balance sheet valuation:

       Lowest Value Determination
       LIFO Valuation
       FIFO Valuation

The procedure used depends first on country-specific tax and commercial laws. Use of
procedures that are legally permitted but not stipulated can be varied according to internal
company experiences and preferences. Objectives concerning company policy can lead to
different decisions on the use of individual procedures depending on the industry sector,
national inflation rate, or other criteria.

Generally, the Results of Balance Sheet Valuation are calculated in compliance with the
Lowest Value Principle. Alongside the prices from lowest value determination, LIFO
procedures, and FIFO procedures, the following prices are, in principle, possible as the
maximum value for the balance sheet price.

       Standard price
       Moving average price
       Period moving average price from the material ledger
       Average Receipt Price

See also:

  Material Price Change (MM-IV-MP)


 Lowest Value Determination
Use
To valuate a material for balance sheet purposes according to the lowest value principle, you
require various physical inventory prices. These prices are used to calculate the value for
balance sheet valuation. The R/3 System provides various procedures for lowest value
determination:

       Lowest Value Determination Based On Market Prices
       Lowest Value Determination Based On Range of Coverage
       Lowest Value Determination Based On Movement Rate
       Lowest Value Determination: Loss-Free Valuation

You can use any combination of these procedures. For example, you can first determine the
lowest value based on market prices and then devaluate the result of this procedure based on
lowest value determination based on the movement rate.
Financial Accounting – General Ledger Accounting (FI-GL)                                      89

Before you valuate materials according to the lowest value principle, you must consider the
following:

       How do you use the physical inventory price fields in the material master record?
       Do you want to carry out lowest value determination based on market prices?
       Do you want to carry out lowest value determination based on movement rate?
       Do you want to carry out lowest value determination based on range of coverage?
       Do you want to combine the individual procedures, and if so, how?
       Which period do you want the documents for analysis to be taken from?
       How do you want to compare the various prices determined?
       Do you want the materials to be revaluated in accounting based on the lowest value
        determination?

See also:

Devaluation

Valuation Level

Lowest Value Determination: Price Comparisons

Balance Sheet Values


 Lowest Value Principle
Definition
The lowest value principle is a method of valuating material stocks for balance sheet
purposes. The aim of this method is to valuate stocks as accurately as possible according to
the recognition-of-loss principle. It is based on the following:




       Profits that exist solely on the books as a result of changes in market prices are to be
        avoided. For example, if a material is procured at a price of $10 and the current
        market price is $15, a profit of $5 would therefore be expected for each unit of
        measure. However, this profit should not be included in the balance sheet until it has
        actually been made. Thus the material continues to be valuated at a price of $10.
       Expected losses are included in the balance sheet. For example, if a material is
        procured at a price of $10 and the current price is $7, the material is only valuated at
        $7.
       Material stocks that are no longer required lose their value. Therefore, you should
        check a material's movement rate or range of coverage. A slow movement rate or
        large range of coverage usually means that a material may no longer be required in
        the future. Instead of waiting to post the loss when you eventually scrap the material,
        you devaluate the material price when the material displays slow movement or a large
        range of coverage.


Valuation Level of Lowest Value
Determination
Each time you determine the lowest value, you can decide which valuation level it should be
carried out at:
Financial Accounting – General Ledger Accounting (FI-GL)                                      90

       Lowest Value Determination at Valuation Area Level

        In this case, the system only accesses data from the valuation area. Lowest market
        prices, ranges of coverage, and movement rates for the material in other valuation
        areas are not included in the calculation.

       Lowest Value Determination at Company Code Level

        In this case, the system accesses information from the entire company code. The
        lowest market price is formed using the prices in all valuation areas in this company
        code. The movement rate is calculated based on accumulated receipts and issues
        and stocks in all the valuation areas.




                To be able to carry out lowest value determination at company code level
                using current market prices, all materials in the valuation areas in this
                company code must be valuated in the same way. For example, if a material
                is subject to split valuation according to valuation category H in one valuation
                area and the same material is not subject to split valuation in another
                valuation area, the system cannot determine the lowest market price.

                Lowest value determination at company code level usually produces different
                results to those produced by lowest value determination at valuation area
                level.

                Valuation Levels
Financial Accounting – General Ledger Accounting (FI-GL)                                         91



                  If you set the dividing line between movement and non-movement at 10%
                  and determine the lowest value on multiple levels, this leads to the results
                  shown in the following table (with 20% devaluation and provided that the
                  market price determined is lower than the current valuation price).

Results of Lowest Value Determination on Multiple Levels


                          Company code             Valuation area 1          Valuation area 2

Tax price 1               13.50                    14.00                     13.50

Tax price 2               13.50                    14.00                     10.80

Stock                     500                      300                       200

Balance sheet value       6750                     4200                      2160


The total balance sheet value for the individual valuation areas is not necessarily smaller than
the balance sheet value at company code level. For example, if the dividing line between fast-
moving and slow-moving is 13%, material A would be classified as slow/non-moving at the
company code level. The tax price 2 is then reduced and the balance sheet value would also
decrease.


Lowest Value Determination Based on Market
Prices
Use
When determining the lowest value based on market prices, the system searches for the
lowest price (or alternatively the most recent price) among the various prices stored for each
material. It is recommended that you limit the period during which the system retrieves data to
the last three months, so the prices are as up-to-date as possible.

Features

Price Sources

The system can retrieve the following data when determining market prices:

       Receipts for Purchase Orders or Scheduling Agreements

                  All order transactions meeting the following criteria are included in the
                  calculation for each material:

              o   There are goods receipts or invoices with posting dates within the specified
                  period.
              o   There are goods receipts or invoices, for which the document type and
                  movement type has been defined in Customizing as relevant for valuation.
              o   The ratio of invoiced quantity to delivered quantity is within a specified range.
Financial Accounting – General Ledger Accounting (FI-GL)                                       92

                The system takes into account all costs incurred when calculating the receipt
                price, including delivery costs and subsequent debits/credits. If the order
                transactions concerned are in a foreign currency, you can configure via a
                parameter if the system is to compare this with the exchange rate on the
                balance sheet key date and how it is to do this.

                You use another parameter to determine which strategy is used to include the
                prices determined for a material in the procedure. Usually, the lowest price or
                the most recent of all the prices is included.

       Purchase Orders

                For each material, the system compares the order prices in all purchase
                orders whose order date is in the specified period. This is irrespective of:

            o   Whether goods have been received for the purchase order
            o   Whether an invoice that varies from the order price has been posted

                You use a parameter to determine which strategy is used to include the
                prices determined for a material in the procedure. Currently, two strategies
                are implemented: Either the lowest of all the prices or the latest price is
                transferred. For purchase orders in a foreign currency, you can choose from
                various types of exchange rate comparison.

       Contracts/Scheduling Agreements

                For each material, the system compares the prices in all contracts or
                scheduling agreements whose validity period ends after the starting date of
                the period under review or begins before the end of the period. This is
                irrespective of whether there are purchase orders for the contract or schedule
                lines for the scheduling agreement. For contracts or scheduling agreements
                in a foreign currency, you can choose from various types of exchange rate
                comparison.

       Purchasing Info Records

                For each material, the system compares the prices in all the purchasing info
                records in which the price has last changed in the specified period. For
                purchasing info records in a foreign currency, you can choose from various
                types of exchange rate comparison.

                If info records are used as a source for determining the lowest value, you
                need to ensure that they are properly maintained.

In addition to the price sources listed, you can include the standard price in the determination
of the market price. You should only use this option if you can justify interpreting the standard
price as the market price.

When materials are subject to split valuation, the system determines the lowest value for each
individual valuation type. The system calculates an average price for the valuation header
record based on these prices and the material stocks.

When determining the market price, the system compares the prices from the selected
sources in a pre-defined sequence.
Financial Accounting – General Ledger Accounting (FI-GL)                                      93

You can use the appropriate identification numbers to configure if results from one price
source are to be given preference over the results of other sources completely or if the
system compiles the results in such a way that a lower price is given preference.

The overall result is a ranking list of the individual prices determined. The market price
included in lowest value determination comes from the average of the individual prices with
the highest ranking. You can configure a parameter with the maximum number of individual
prices that can be included in this calculation.

Comparison Price

In lowest value determination based on market prices, the comparison price has the following
functions:

       If the system cannot determine a lowest market price, it uses the comparison price as
        the lowest price.
       If the system determines a lowest price, it compares this with the comparison price. If
        the price is to be updated with the lowest value, the system updates the lower of the
        lowest price determined and the comparison price.

Alternatively, you can determine the lowest market price independent of the comparison price
and update it by indicating during processing that you do not want the system to take the
comparison price into account.

The following prices can be used as the comparison price:

       Current material price
       Material price from the previous month or year
       Current standard price
       Standard price from the previous month or year
       Current moving average price
       Moving average price from the previous month or year
       Tax price 1, 2, or 3
       Commercial price 1, 2, or 3

Result

The system generates a list of materials with their lowest price. If the system cannot
determine a current market price, it enters the comparison price in the list.

You can also have the system update the results of lowest value determination in the material
master record. This can be:

       In a physical inventory price field in the material master record
       As a planned price used for lowest value determination in standard cost estimates

You can also generate a batch input session, which changes the material valuation prices to
the lowest prices determined when it runs, or you can change the material valuation prices
directly.

You can update valuation alternatives directly from the program.

See also:

Determining the Lowest Value Based on Market Prices
Financial Accounting – General Ledger Accounting (FI-GL)                                       94


Determining the Lowest Value Based On Market
Prices


                         Because of the volume of data involved, you should only determine
                         the lowest value using background processing.

Procedure
    1. Choose Valuation  Balance Sheet Valuation

          Determine Lowest Value  Market Prices. The system displays selection
         screen.

    2. Enter data as required: the company code in question, the key date, and the
       materials for which you want to determine the lowest value. Narrow down your
       selection using material numbers, valuation areas, valuation types, material types,
       valuation classes, and material groups.
    3. In the screen box Price Comparison, specify the prices that the lowest value
       comparison is to be performed for.




         Under Comparison Price, you can select one or more prices from the Phys. Inv.
         Prices and Valuation Alternatives tab pages. The method thus determines the
         comparison price as the minimum of all specified prices and valuation alternatives.

    4. Choose Market Price. The system displays a dialog containing the possible price
         sources.
    5.   Select the price sources to be used for lowest value determination.
    6.   For each price source that you select, check the period under review, the priority, and
         the exchange rate comparison indicator (which controls how the price sources are
         translated from foreign currency) and make any necessary changes. If you use
         Receipt Prices or Order Prices as sources, the strategy you select determines
         whether the system should determine the lowest or the last prices. Choose      to
         confirm your entries.
    7.   Choose Comparison Price. The system displays a dialog box in which you specify the
         Comparison Price.

                 The current material price is proposed as the Comparison Price in the
                 standard configuration. You can choose another comparison or No
                 Comparison Price. Choose        to confirm your entries.

    8. You can update the material master with the results of lowest value determination. To
         do this, select the field Database Update in the screen box Update Material Master.
         You can change the material prices or the physical inventory prices in the material
         master.

             o   If you want to change the material prices, select Change Material Prices. The
                 system displays a dialog box, in which you select if:
                       A batch input session should be generated for the price changes
                       The prices should be changed directly when valuation is carried out
Financial Accounting – General Ledger Accounting (FI-GL)                                      95

                        You do not want the material prices to be changed, in which case you
                         need to select No Update.

                         Choose     to confirm your entries.

            o    Choose Update Prices.

                         The system displays a screen with two tab pages. SAP recommends
                         that you only process one of these tab pages.

                        On the Phys. Inv. Prices tab page, select the price field of the lowest
                         value price in which the data is to be posted. If you want to delete
                         prices in other price fields when carrying out the update, select the
                         Reset field.
                        On the Valuation Alternatives tab page, select the price indicator that
                         indicates the valuation alternatives to be updated.

                         Choose     to confirm your entries.


                    You should only trigger the automatic price change function if you do not
                 want to carry out further lowest value determinations with price changes.

    9. Choose List format and specify the type of print list that you require.
    10. In the header on the initial screen, choose Valuation Level. You can select whether
        lowest value determination is to take place at Valuation Area Level or Company Code
        Level.


             If you carry out lowest value determination based on market prices at company
        code level, you can set individual valuation prices for a material in relation to one
        another on the Comparison Price screen. For example, you can use the lowest price
        in all valuation areas as the comparison price for the entire company code.

    11. Choose     Execute.

Result
A list of materials with the lowest market prices determined is generated.

A certain number of individual prices for each material and the document from which the
system retrieved the price information are specified. The lowest market price is also displayed
for each material. If this is larger than or equal to the comparison price or the lowest market
price could not be determined, the system enters the comparison price in the New Price
column.

If you set the automatic price change function, the name of the batch input session or the
numbers of the price change documents posted appear at the end of the list.

You can analyze the results using the Schedule Manager and the messages using the
application log.

See also:

Lowest Value Determination Based On Market Prices
Financial Accounting – General Ledger Accounting (FI-GL)                                     96

Determining Lowest Values

Balance Sheet Valuation (MM-IM-VP)


Lowest Value Determination Based On Range Of
Coverage
Use
When determining the lowest value by range of coverage, the system checks whether the
price for a material should be devaluated because it has a high range of coverage.

Features

Calculation

A material's range of coverage is calculated as follows:

Range of coverage = average stock / average consumption

Average stock and average consumption are calculated as follows:

       The average stock is a weighted average of several period stocks, minus
        reservations, and plus stock on order, depending on the entries you make. You can
        determine the relevant periods and weighting factors starting from the initial screen.

       You can calculate average consumption in two ways:

            o   Weighted average based on past consumption
            o   Weighted average of forecast values determined in the last forecast

       You can set all restrictions and weighting factors from the initial screen.

When calculating average stock and average consumption, note the following:

       When determining the stock level, you can specify a period under review. The system
        only includes the posting periods within this period in the calculation.

       When determining consumption using historical values, you can specify a period
        under review. The system only includes the past months within this period in the
        calculation.

       When determining consumption using forecast values, you can specify a period under
        review. The system only includes the months within this period in the calculation.

       If there is no recorded consumption, the range of coverage is set to:

            o   Maximum, if there is stock
            o   Zero, if there is no stock

       If no forecast data is available for a material when determining consumption based on
        forecast values, the system sets the range of coverage to zero. The devaluation
        percentage is also zero.
Financial Accounting – General Ledger Accounting (FI-GL)                                       97

       If the options for consumption determination using historical values and forecast
        values do not meet your requirements, you can use customer exit
        EXIT_SAPLNIWE_004 to link in your own consumption determination procedure.

In the case of materials subject to split valuation, the system calculates the range of coverage
at valuation header record level, rather than separately for each valuation type.

Devaluation

You can specify a percentage discount for devaluating materials depending on the company
code or valuation area and the material type. Depending on the range of coverage, you do
this in Customizing for Valuation and Account Assignment or from the initial screen.

Possible Settings for Devaluation


Company code             Material Type           Range of coverage in        Percentage
                                                 months                      Devaluation

0001                                             2                           5%

0001                                             4                           10 %

0001                                             6                           15 %

0001                                             10                          20 %

0001                     ROH                     2                           3%

0001                     ROH                     3                           5%

0001                     ROH                     4                           7%

0001                     ROH                     5                           10 %

0001                     ROH                     8                           15 %

0001                     ROH                     12                          25 %


For example, if a range of coverage of four months is determined for a material of type ROH,
the percentage discount is 7%. If the range of coverage is not specified, the system looks for
the next range of coverage smaller than that required, thus for a material of type ROH with a
range of coverage of 11 months, the devaluation percentage for the eight month range of
coverage is used (15%). Entries without a material type apply to materials for which no
specific devaluation percentages are defined.


     It can be that a material must not be devaluated, despite having a large range of
coverage. For example, if the stock of a material was received for the most part during the
settled period or if the material master record was created only recently. You can configure
the system so that devaluation cannot happen in such instances.

Base Price
Financial Accounting – General Ledger Accounting (FI-GL)                                     98

When determining the lowest value based on the range of coverage, the base price is the
price from which the devaluation calculated is to be deducted. The following prices can be
used as the base price:

       Current material price
       Material price from the previous month or year
       Current standard price
       Standard price from the previous month or year
       Current moving average price
       Moving average price from the previous month or year
       Tax price 1, 2, or 3
       Commercial price 1, 2, or 3

Result

When you determine the lowest value based on the range of coverage, you specify the base
price.

The lowest price is calculated as follows:

Lowest price = base price - devaluation

The system generates a list of materials with their devaluation percentages and lowest prices.

You can have the system update the results of lowest value determination in one (or more) of
the physical inventory price fields in the material master record.

You can generate a batch input session, which changes the material valuation prices to the
lowest prices determined when it runs, or you can change the material valuation prices
directly.

You can update valuation alternatives directly from the program.

See also:

Determining the Lowest Value Based On Range of Coverage


Determining the Lowest Value Based On Range
of Coverage


                         Because of the volume of data involved, you should only determine
                         the lowest value using background processing.

Procedure
    1. Choose Valuation  Balance Sheet Valuation

         Determine Lowest Value  Range of Coverage. The system displays selection
        screen.
Financial Accounting – General Ledger Accounting (FI-GL)                                    99

    2. Enter data as required: the company code in question, the key date, and the
       materials for which you want to determine the lowest value. You can narrow down
       your selection using material numbers, valuation areas, valuation types, valuation
       classes, material types, and material groups.
    3. Specify how the system should determine the range of coverage.

            o   The system can determine the stock used to calculate the range of coverage
                from the closing stock of various periods.
                     Select Material Stocks.
                     Specify the period from which the system should determine the
                        material stocks.
                     Choose Weighting Factors. This is where you need to set up the
                        weighting factors for the closing stock balance.
                     Specify whether the system should include reservations and open
                        order stock in determining the stock level.

                        Choose      to confirm your entries.

            o   The system can determine the average material consumption used to
                calculate the range of coverage from various types of individual consumption.
                     Select Material Consumption.
                     Select whether the consumption is to be determined From Cons.
                        Statistics, From Cons. Forecast, or via the customer exit.
                     Enter the period for which consumption is to be determined.
                     Choose Weighting Factors. You can weight the determination of
                        consumption.
                     In the weighting factors table, entry number one is always used for
                        the month or period in which the running date lies. All other entries
                        are used for the corresponding periods in the past or the future,
                        according to the data used as the basis for the determination.

                        Choose      to confirm your entries.

    4. Select Base Price.

                You can select one or more prices from the Phys. Inv. Prices and Valuation
                Alternatives tab pages. The method thus determines the basis price as the
                minimum of all specified prices and valuation alternatives. Choose  to
                confirm your entries.

    5. Select Deval. Percentages to check or change the devaluation percentages.

                The system displays a dialog box where you specify whether the devaluation
                rates are to be defined at Company Code Level or Valuation Area Level. This
                dialog box takes you straight to Customizing.

                If you make changes, save them. Choose Back. The dialog box is displayed.
                Choose to confirm your entries.

    6. You can update the material master with the results of lowest value determination. If
        you want to do this, select the Database Update field under Update Material Master.
        You can change the material prices or the physical inventory prices in the material
        master.

            o   If you want to change the material prices, select Change Material Prices. The
                system displays a dialog box, in which you select if:
                      A batch input session should be generated for the price changes
Financial Accounting – General Ledger Accounting (FI-GL)                                     100

                        The prices should be changed directly when valuation is carried out
                        You do not want the material prices to be changed, in which case you
                         need to select No Update.

                         Choose     to confirm your entries.

            o    Choose Update Prices.

                         The system displays a screen with two tab pages. SAP recommends
                         that you only process one of these tab pages.

                        On the Phys. Inv. Prices tab page, select the price field of the range
                         of coverage price in which the data is to be posted. If you want to
                         delete prices in other price fields when carrying out the update, select
                         the Reset field.

       On the Valuation Alternatives tab page, select the price indicator that indicates the
        valuation alternatives to be updated.

                         Choose     to confirm your entries.


                    You should only trigger the automatic price change function if you do not
                 want to carry out further lowest value determinations with price changes.

    7. Choose List format and specify the type of print list that you require.
    8. Choose Exception rules to define when devaluation is not allowed.
    9. Choose Valuation level, to specify whether the procedure is to be done at valuation
        area level or company code level.
    10. Choose      Execute.

Result

The system generates a list of the materials with their percentage devaluation and lowest
prices determined.

If you set the automatic price change function, the name of the batch input session or the
numbers of the price change documents posted appear at the end of the list.

You can analyze the results using the Schedule Manager and the messages using the
application log.

See also:

Lowest Value Determination Based On Range of Coverage

Determining Lowest Values

Balance Sheet Valuation (MM-IM-VP)


Lowest Value Determination Based On
Movement Rate
Financial Accounting – General Ledger Accounting (FI-GL)                                    101


Use
When determining the lowest value based on movement rate, the system checks whether a
material's price should be devaluated on the basis of slow/non-movement.

Features

Calculation

A material's movement rate is determined on the basis of receipts and issues for the material
and the average stock of the material:

Movement rate = total quantity of receipts/issues / material stock x 100

The movement rate for a material is identified by the percentage rate that specifies how many
units of measure have been received or issued in relation to the material stock.

This percentage is compared to a preset threshold value: If the percentage rate for receipts or
issues is smaller than this percentage rate, the material is considered to be slow-moving or
non-moving; if it is larger, the material is considered to be fast-moving.

Movement rates can be determined in two ways:

       Using material documents

                In this case, you can monitor the movement rate for receipts and issues. If
                you take both receipts and issues into account, you obtain a movement rate
                for receipts and a movement rate for issues. A material is classified as slow-
                moving or non-moving if both values are smaller than the set percentage rate.

       Using material master records

                In this case, the system only considers the issues. This procedure takes
                considerably less time than determining the movement rate using material
                documents.

The material stock that is used for calculating the moving rate can be defined as the average
of the closing stock balance from previous posting periods. You need to specify weighting
factors for material stocks and movements. You can maintain these in Customizing or on the
initial screen.

When the system determines movement rates, it only uses material movements from the
period under review. To make sure that slow/non-movements from previous years are not
included in the devaluation, a devaluation indicator is used:

       If a material is classified as slow-moving or non-moving in the period currently under
        review, its devaluation indicator is increased by 1.
       If a material is classified as fast-moving in the period currently under review, its
        devaluation indicator is set to zero.

Therefore, if you carry out lowest value determination annually, the devaluation indicator is
the equivalent of the number of years that the material has been slow-moving.

In the case of materials subject to split valuation, lowest value determination based on
movement rate differs as follows:
Financial Accounting – General Ledger Accounting (FI-GL)                                         102

       The system determines a separate movement rate for each valuation type when you
        determine rates from material documents. For the valuation header record, the
        system calculates an average price from the devalued prices and the stocks for the
        individual valuation types.
       When you use material master data to determine the movement rate, the system
        determines the movement rate at valuation record header level.

Devaluation

In Customizing for Valuation and Account Assignment, or from the initial screen, you assign a
devaluation percentage to each devaluation indicator depending on the company code or
valuation area and the material type.

For example, if a material of type ROH has a devaluation indicator of 2, the devaluation is
30%. Entries without a material type apply to materials for which no specific devaluation
percentages are defined. If a devaluation indicator is calculated that is not specified in the
table, the system takes the entry for the next lowest number in the table.

Assigning the Percentage Devaluation to the Devaluation Indicator


Company code              Material Type             Devaluation ID            Devaluation
                                                                              percentage

0001                                                1                         15 %

0001                                                2                         20 %

0001                                                3                         30 %

0001                                                4                         40 %

0001                                                5                         60 %

0001                      ROH                       1                         20 %

0001                      ROH                       2                         30 %

0001                      ROH                       3                         40 %

0001                      ROH                       4                         50 %




Base Price

When determining the lowest value based on the movement rate, the base price is the price
from which the devaluation calculated is to be deducted. The following prices can be used as
the base price:

       Current material price
       Material price from the previous month or year
       Current standard price
       Standard price from the previous month or year
       Current moving average price
Financial Accounting – General Ledger Accounting (FI-GL)                                   103

       Moving average price from the previous month or year
       Tax price 1, 2, or 3
       Commercial price 1, 2, or 3

Result

When you determine the lowest value based on the movement rate, you specify the base
price. The lowest price is calculated as follows:

Lowest price = base price - devaluation

The system generates a list of materials with their devaluation percentages and lowest prices.

You can also have the system update the results of lowest value determination based on the
movement rate in the physical inventory price fields in the material master record.

You can also generate a batch input session, which changes the material valuation prices to
the lowest prices determined when it runs, or you can change the material valuation prices
directly.

You can update valuation alternatives directly from the program.

See also:

Determining the Lowest Value Based On Movement Rate


Determining the Lowest Value Based On
Movement Rate

                            Because of the volume of data involved, you should only
                        determine the lowest value using background processing.

Procedure
    1. Choose Valuation  Balance Sheet Valuation

         Determine Lowest Value  Movement Rate. The system displays selection
        screen.

    2. Enter data as required: the company code in question, the key date, and the
       materials for which you want to determine the lowest value. You can narrow down
       your selection using material numbers, valuation areas, valuation types, valuation
       classes, material types, material groups, and creation date.
    3. Define the criteria for the movement rate. Choose Material Movements and select
       how you want the movement rate to be determined. You have the following options:

            o   From Material Documents

                        In this case, you must select at least one of the fields Receipts and
                        Consumption.
Financial Accounting – General Ledger Accounting (FI-GL)                                    104


                            Note that determination using material documents can be very
                        time-consuming.

            o   From Material Master Data

                        In this case, the issues recorded in the material master record are
                        automatically used.

            o   In the fields Threshold Values, you enter the percentage rate up to which the
                materials are regarded as non-moving for receipts and consumption. If the
                movement rate is smaller than this percentage, the devaluation indicator is
                increased.
            o   You can weight receipts and issues across the period under review. This
                allows you to give greater significance to more recent movements than to
                older movements when determining the movement rate.
            o   Define the Period Under Review:

    4. The system can determine the stock used to calculate the movement rate from the
        closing stock of various periods. Select Material Stocks. Specify the period from
        which the system should determine the material stocks. You can use Weighting
        Factors to weight the determination of the closing stocks. Choose      to confirm your
        entries.

    5. Select Base Price.

                You can select one or more prices from the Phys. Inv. Prices and Valuation
                Alternatives tab pages. The method thus determines the basis price as the
                minimum of all specified prices and valuation alternatives. Choose  to
                confirm your entries.

    6. Select Deval. Percentages to check or change the devaluation percentages.

                The system displays a dialog box where you specify whether the devaluation
                rates are to be defined at Valuation Area Level or Company Code Level. This
                dialog box takes you straight to Customizing. If you make changes, save
                them. Choose Back. The dialog box is displayed. Choose      to confirm your
                entries.

    7. You can update the material master with the results of lowest value determination. If
        you want to do this, select the field Database Update in the screen box Update
        Material Master. You can change the material prices or the physical inventory prices
        in the material master.

            o   If you want to change the material prices, select Change Material Prices. The
                system displays a dialog box, in which you select if:
                      A batch input session should be generated for the price changes
                      The prices should be changed directly when valuation is carried out
                      You do not want the material prices to be changed, in which case you
                        need to select No Update.

                        Choose      to confirm your entries.

            o   Choose Update Prices.
Financial Accounting – General Ledger Accounting (FI-GL)                                      105

                          The system displays a screen with two tab pages. SAP recommends
                          that you only process one of these tab pages.

                         On the Phys. Inv. Prices tab page, select the price field of the
                          movement price in which the data is to be posted. If you want to
                          delete prices in other price fields when carrying out the update, select
                          the Reset field.

         On the Valuation Alternatives tab page, select the price indicator that indicates the
          valuation alternatives to be updated.

                          Choose      to confirm your entries.


                     You should only trigger the automatic price change function if you do not
                  want to carry out further lowest value determinations with price changes.

    8. Choose List Format and specify the type of print list that you require.
    9. Choose Valuation Level. Select whether the procedure is to be performed at valuation
          area level or company code level.
    10.   Choose      Execute.

Result
The system generates a list of the materials with their percentage devaluation and lowest
prices determined.

If you set the automatic price change function, the name of the batch input session or the
numbers of the price change documents posted appear at the end of the list.

You can analyze the results using the Schedule Manager and the messages using the
application log.

See also:

Lowest Value Determination Based on Movement Rate

Determining Lowest Values

Balance Sheet Valuation (MM-IM-VP)


Lowest Value Determination: Loss-Free
Valuation
Use
You may need to devaluate materials sold by your company if they will probably not fetch the
material price when they are sold. For example, if the demand for a material diminishes
because it is no longer the latest technology, you can only sell this material at a loss
compared to the material price.

Prerequisites
Financial Accounting – General Ledger Accounting (FI-GL)                                      106

In the R/3 System, there is currently no procedure within this function for automatically
determining a realistic selling price for a material. Enhancement NIWE0003 is provided for
this purpose. In the customer exits in this enhancement, you can define how the system is to
determine the sales prices.

Features
When the system carries out lowest value determination for loss-free valuation, it compares a
selling price according to its own rules with one of the inventory prices in the material master
record.

The lowest of these can be updated in the material master as the material price, one of the
inventory prices, or as a valuation alternative.


Carrying Out Loss-Free Valuation


                         Because of the volume of data involved, you should only determine
                         the lowest value using background processing.

Prerequisites
In enhancement NIWE0003, you need to define how the system is to determine the sales
prices of individual materials.

Procedure
    1. Choose Valuation  Balance Sheet Valuation

         Determination of Lowest Value  Loss-Free Valuation. The system displays
        selection screen.

    2. Enter data as required: the company code in question, the key date, and the
       materials for which you want to determine the lowest value. You can narrow down
       your selection using material numbers, valuation areas, valuation types, valuation
       classes, material types, and material groups.
    3. Select Comparis. price. You can select one or more prices from the Phys. Inv. Prices
       and Valuation Alternatives tab pages. The method thus determines the comparison
       price as the minimum of all specified prices and valuation alternatives. Choose    to
       confirm your entries.

    4. To do this, select the Database Update field under Update Material Master. You can
        change the material prices or the physical inventory prices in the material master.

            o   If you want to change the material prices, select Change Material Prices. The
                system displays a dialog box, in which you select if:
                      A batch input session should be generated for the price changes
                      The prices should be changed directly when valuation is carried out
                      You do not want the material prices to be changed, in which case you
                        need to select No Update.

                         Choose     to confirm your entries.
Financial Accounting – General Ledger Accounting (FI-GL)                                     107

            o   Choose Update Prices.

                         The system displays a screen with two tab pages. SAP recommends
                         that you only process one of these tab pages.

                        On the Phys. Inv. Prices tab page, select the price field of the lower
                         price in which the data is to be updated. If you want to delete prices
                         in other price fields when carrying out the update, select the Reset
                         field.

       On the Valuation Alternatives tab page, select the price indicator that indicates the
        valuation alternatives to be updated.

                         Choose     to confirm your entries.

    5. Choose List format and configure the type of print list that you require.

    6. Choose Valuation Level. Indicate whether the procedure is to be done at valuation
        area level or company code level.

    7. Choose      Execute.

Result
The system generates a list of the materials with their percentage devaluation and lowest
prices determined.

You can analyze the results using the Schedule Manager and the messages using the
application log.


 LIFO Valuation
Use
LIFO valuation allows you to separately valuate the increase in stock of a material for various
settlement periods (fiscal year or month). You can use various procedures to valuate the
increase for each settlement period, for example, the average delivered prices.

Prerequisites
Before you carry out LIFO valuation, you have to make certain settings in the system. These
are:

       Determination of the Valuation Level
       Material Master Record Maintenance
       Creation of Base Layers
    

        Determination of Basis for Comparison

Features
Financial Accounting – General Ledger Accounting (FI-GL)                                       108

LIFO (last in first out) is based on the assumption that the last stocks of a material to be
received are the first to be consumed. Thus, no value change occurs for older stock when
new stock is received or consumed. This ensures that increasing prices do not lead to an
overvaluation of older stocks, thus preventing the buildup of fictitious profits.

       If an increase in stock is recorded for a material in a settlement period, a layer is
        created for the material for this settlement period, recording the value of the stock
        increase.
       If a reduction in stock is recorded for a material, the layer for the previous settlement
        period is reduced. If that layer is not sufficient, layers from preceding settlement
        periods are reduced (see example).

See also:

LIFO Methods

Quantity LIFO Procedure

Index LIFO Procedure

Pool LIFO Valuation

Lowest Value Comparison


 LIFO Valuation: Example




The graphic shows an example of annual LIFO valuation.
Financial Accounting – General Ledger Accounting (FI-GL)                                    109

(*) You can calculate the value of a layer in various ways: For more information, see
Determining the Layer Value: Example. In the example, the values for the 1998 layer are
calculated using the moving average price of the goods receipts:

        Layer quantity x total value of goods received / total quantity of goods received

Material with an Increase in Stock

For the year 1998, the year-end stock balance exceeds the year's initial stock balance by 50
pieces. Thus, when LIFO valuation is carried out at the end of 1998, a layer is created for
1998 with a quantity of 50 pieces. In this example, the value of the layer is calculated using
the average price of the goods receipts:


Total receipt quantities for 1998                100 pieces + 30 pieces = 130 pieces

Total receipt values for 1998                    100 pieces x $1.10/piece +30 pieces x
                                                 $1.20/piece = $146

Process                                          50 pieces x $146/130 pieces = $56.15


Material with a Reduction in Stock

No new layer is created when LIFO valuation is carried out at the end of 1999, since there
were more goods issues than receipts. Instead, the 1998 layer is reduced by 30 pieces to 20
pieces, and the value is reduced proportionally:

        20 pieces/50 pieces x $56.15 = $22.46

The above graphic shows that if you carry out LIFO valuation when prices are increasing, this
leads to a lower value than if you valuate stocks using the moving average price.


 LIFO Methods
Use
In the R/3 System, LIFO valuation is based on a set of parameters, which are described as
the LIFO method in all relevant transactions. The LIFO method is a six-character
alphanumeric field that you can define in Customizing or from any initial screen during
processing in the application. Some attributes of a LIFO method can be freely combined,
while others may only be used in certain combinations. These combinations are referred to as
models.

Features
A model answers the following questions:

       Which consumption tracking method is being implemented?
       Which period does an individual layer refer to?
       Are the valuated materials grouped together (see Pool LIFO Valuation)?
       Are you carrying out valuation with reference to stock quantities ( Quantity LIFO
        Procedure) or price indexes ( Index LIFO Procedure)?

The following models are allowed:
Financial Accounting – General Ledger Accounting (FI-GL)                                       110

       02 – LIFO, annual layers, individual materials
       03 – LIFO, monthly layers, individual materials
       04 – LIFO, annual layers, pools on quantity basis
       05 – LIFO, monthly layers, pools on quantity basis
       06 – LIFO, annual layers, pools with value indexes

The part of a LIFO method that you can freely define consists of the following aspects:

       Is the value to be determined on the basis of receipts aggregated on a monthly basis
        or on the basis of single receipts?

        The differences are explained in an example. If you are determining values on the
        basis of single receipts, you must generate a document extract prior to LIFO
        valuation.

       When you carry out LIFO valuation, you define two timepoints between which the
        stock situation or the layer value (Index LIFO procedure) is compared. Which
        timepoints are to be used?

        The first timepoint is indicated by the last LIFO valuation performed. The total of the
        existing layer quantities or values (Index LIFO) represents the corresponding stock.

        The second point depends on the LIFO method used in this instance. You have the
        following options:

            o   GJE – End of the last fiscal year
            o   VVM – End of the posting period before last
            o   VOM – End of the last posting period
            o   CUR – Present




                If the last LIFO valuation was performed for the fiscal year before last and
                you have chosen the setting GJE, the system compares the stock or value
                situation between the end of the fiscal year before last and the end of the last
                fiscal year.

See also:

Determination of Basis for Comparison


 Determination of Basis for Comparison
Use
When you use the LIFO valuation method, you compare the stocks at a particular point in
time with the total of the layer quantities. In the R/3 System, you can define the following
periods under review.

Features
       The stock at the end of the previous fiscal year is compared with the total quantities in
        the existing layers (GJE). This is the usual option chosen for LIFO valuation based on
        annual layers.
Financial Accounting – General Ledger Accounting (FI-GL)                                      111

       The stock at the end of the previous period is compared with the total quantities in the
        existing layers (VOM). This is the usual option chosen for LIFO valuation based on
        monthly layers, but you can use in combination with annual layers, for example for
        internal stocktaking purposes (see Layer Versions).

       The stock at the end of the period before last is compared with the total quantities in
        the existing layers (VVM). This option can be used for LIFO valuation based on
        monthly layers, if you can only run valuation with some delay after the end of a
        posting period for certain reasons. For annual layers, the same applies as for the
        VOM option.

       The current stock is compared with the total quantities in the existing layers (CUR).
        You can use this option if LIFO valuation is not linked to specific posting periods or if
        you run it shortly before the end of a posting period.

Once you have selected a suitable basis for comparison for your application, you can assign
this to one of the LIFO methods (see LIFO Methods) in Customizing or from the selection
screen before running one of the LIFO valuation programs. All you need to do in the following
steps involving LIFO is enter the LIFO method.


 Layer Versions
Use
In Material Valuation, it often makes sense to run LIFO valuation for test purposes or for
internal stocktaking purposes without reducing existing layers or creating new layers for
balance sheet valuation. For this reason, the R/3 System allows you to set up layer versions
for LIFO valuation.

Prerequisites
If layers already exist in the system, you should first copy each layer version from an existing
version. For more information, see Copying Layer Versions.

After that, you can run valuation for this layer version.

Examples
Layer Versions: Example of Value Comparison

Layer Versions: Example of Interim Results


Layer Versions: Example of Value Comparison
You run LIFO valuation using layer version E once a year for balance sheet valuation
purposes.

To compare the different approaches you can take in LIFO valuation, you create the following
layer versions by copying the existing version:


Layer version                                      Valuation base

g                                                  Price for total year
Financial Accounting – General Ledger Accounting (FI-GL)                                    112


m                                                  Material master price

a                                                  Price on a progressive fill-up basis

1                                                  Partial year upper limit 1st period

...                                                ...

9                                                  Partial year upper limit 9th period

x                                                  Partial year upper limit 10th period

y                                                  Partial year upper limit 11th period


You then run LIFO valuation for the individual layer versions.


Layer Versions: Example of Interim Results
You run LIFO valuation using layer version E once a year for balance sheet valuation
purposes.

To create quarterly results, you can create the following layer versions by copying version E:


Layer version

1                                                  1st quarter

2                                                  2nd quarter

3                                                  3rd quarter


You then run LIFO valuation for the individual layer versions at the end of each quarter.


    Creating Copies of Layer Versions


                  When large volumes of data are involved, you should only update LIFO data
                  using background processing.

Procedure
To copy an existing version, proceed as follows:

      1. Choose Valuation  Bal. sheet valuation  LIFO valuation  Tools  Create
          version. The selection screen appears.
      2. Enter the materials and pools for which the system is to create a new layer version.

          Enter the ID of the reference and the ID of the new version.
Financial Accounting – General Ledger Accounting (FI-GL)                                       113


    3. Select the data to be copied. Depending on the reference used, the following options
        are available:

            a.   Material annual layer
            b.   Pool annual layer
            c.   Material monthly layer
            d.   Pool monthly layer

        You can also copy annual layer versions or material layer versions for individual
        materials or pools. In this case, the system takes the final posting period for fiscal
        years that are already closed. In the current fiscal year, the current posting period is
        used.

    4. If you want to update the changes, select Create layer for new version.
    5. Choose Execute.

Result
The system displays a list of the data created for the new version.


Quantity LIFO Procedure
Use
When you use the quantity LIFO procedure, all stock changes of a material or pool in each
settlement period (fiscal year or month) are considered separately. The stock quantity of a
particular material or pool at the end of the settlement period is compared with the sum of the
quantities contained in the existing layers.

If the stock is greater at the end of the settlement period, a new layer is created for that
settlement period, illustrating the increase in quantity and value of the material or pool.

If the stock is smaller at the end of the settlement period, the preceding layers are reduced,
starting with the most recent layer.

Features

Determining the Layer Value

There are various ways of valuating a layer. In the R/3 System, the following valuation bases
have been set up:

       Average delivered prices for the settlement period
       Prices for a partial year (this only makes sense if the settlement period is the fiscal
        year)
       Process
       Material master price

For more information, see the following example.


 Determining the Layer Value: Example
Financial Accounting – General Ledger Accounting (FI-GL)                                         114

Receipt Quantities and Values for the Individual Periods of a Fiscal Year




When stock are valuated at the end of the fiscal year 1999, a layer containing 1000 pieces is
created. Its value depends on the valuation base:

       Price for Total Year

        An average price is calculated from the LIFO receipts for the fiscal year. This price is
        used as the basis for valuation. Thus the value of the layer is calculated as:

        Layer quantity x total value of goods received / total quantity of goods received

        In the above example, the resulting value for the 1999 layer is: 1000 x 26400/2400 =
        11000

       Price for Partial Year

        An average price is calculated from the goods received during a part of the fiscal
        year. This price is used as the basis for valuation. The partial year must start at the
        beginning of the fiscal year. Thus the value of the layer is calculated as:

        Layer quantity x total value of goods received in the partial year / total quantity of
        goods received in the partial year

        In the above example, the value of the layer depends on the definition of the partial
        year. For example, if the partial year consists of the first four periods, the resulting
        value for the layer 1999 is: 1000 x 5300/500 =10600

       Price on a Progressive Fill-Up Basis

        The values of goods received in individual periods are used, starting at the beginning
        of the year and added up until the layer stock is reached.
Financial Accounting – General Ledger Accounting (FI-GL)                                       115

         In the above example, the value would be calculated as follows:

Period                   Quantity                 Value                    Remaining quantity
01                       100                      1000                     900
02                       200                      2100                     700
03                       50                       600                      650
04                       150                      1600                     500
05                       100                      1050                     400
06                       250                      2600                     150
07                       150                      1600                     0
Total                    1000                     10550


         In period 07, only a part of the quantity is used for value formation; the value is
         calculated in proportion to the quantity.

         (Instead of using receipt values for a period, you can calculate the value based on
         individual receipts. You can configure this in the LIFO Method, provided that you
         created a document extract beforehand).

        Material Master Price

         An average price is calculated from the closing stock quantity and the corresponding
         value. This price is used as the basis for valuation. With individual LIFO valuation, this
         price corresponds exactly to the moving average price.

         Layer value = layer quantity x value of the closing stock / closing stock quantity


 Index LIFO Procedure
Use
Some countries only allow you to manage layers in pool LIFO valuation on a value basis. This
procedure allows you to combine materials in a pool without having to first convert the
materials to a single unit of measure. This is particularly advantageous for the formation of
very large pools. The index LIFO procedure is used for valuation of layers managed on a
value basis only.

Features
With the index LIFO procedure, the value of a pool is considered separately for each
settlement period. The value of the pool at the end of the settlement period is converted to the
price level of the base year using a price index and compared to the base value of the current
layer.

If the converted value is greater than the base value for the current layer, a layer is created
for this settlement period.

If the converted value is smaller than the base value, the preceding layers are reduced,
starting with the most recent (see the example).

With the index LIFO procedure, you can determine the price index as follows:
Financial Accounting – General Ledger Accounting (FI-GL)                                     116

       Manually

        Before carrying out pool valuation, you must manually enter a price index for each
        pool in the annual data for the layer.

       Automatically

        When carrying out pool valuation, the system calculates the price index automatically.
        For each material in the pool, the price at the end of the previous settlement period is
        divided by the price at the end of the previous year. An average price index is formed
        for each pool from these material-specific price indexes. This is used when valuating
        the pool.


 Index LIFO Procedure: Example




The graphic shows the movements for one pool in three fiscal years and the index LIFO
valuation at the end of each fiscal year.

The layer valuations are calculated as follows:

       Base year is 1996; the base layer has a value of 7000.

       Valuation 1997


Value at the end of the year                      10300

Conversion using price index (1.03) to 1996       10000
value

Minus base value of layer 1996                    7000
Financial Accounting – General Ledger Accounting (FI-GL)                                    117


Base value of new layer                          3000

Layer for 1997 with price index (1.03)           3090


       Valuation 1998


Value at the end of the year                     15015

Conversion using price index (1.0815) to         13883.50
1996 value

Less base value of layer 1997                    3000

Minus base value of layer 1996                   7000

Base value of new layer                          3883.50

Layer for 1998 with price index (1.0815)         4200


       Valuation 1999


Value at the end of the year                     10400

Conversion using price index (1.1248) to         9246.09
1996 value

Minus base value of layer 1998                   3883.50

Minus base value of layer 1997                   3000

Minus base value of layer 1996                   7000

                                                 -4637.41

Reduction layer 1998 (base value)                3883.50

Still to be reduced                              - 753.91

Reduction layer 1997 (base value)                3000

Remainder layer 1997 (base value)                2246.09

Layer for 1997 with price index (1.03)           2313.47


When a layer is calculated, the system always converts the value back to that of the base
year, in this example to that of 1996.

In the 1997 valuation, the value at the end of the fiscal year was converted to the 1996 price
using the price index:

10300 / 1.03 = 10000. This value is then reduced by the base value of the existing layers:
10000 - 7000 = 3000. Therefore the value has increased by 3000. This value is projected to
Financial Accounting – General Ledger Accounting (FI-GL)                                       118

the period end for 1997 using the price index: 3000 x 1.03 = 3090. Thus, a layer with a value
of 3090 must be created for 1998.

In the 1998 valuation, the value was converted as follows:

15015 / 1.0815 = 13883.50. This value is reduced by the base value of the existing layers, the
difference amounts to: 13883.50 - 10000 = 3883.50. After taking the price index into account,
a layer with a value of 3883.50 x 1.0815 = 4200 must be created for 1998.

In the 1999 valuation, the value is converted to the 1996 value as follows: 10400 / 1.1248 =
9246.09. This value is reduced by the base value of the existing layers, the difference
amounts to 9246.09 - 13883.50 = - 4637.41; therefore there is a reduction in value. The 1998
layer must be reduced due to the reduction in value. Since the base value of this layer only
has a value of 3883.50, the value 753.91 remains to be reduced. The 1997 layer is reduced
by the remaining amount, leaving it with a base value of 3000 - 753.91 = 2246.09. Using the
price index, this results in a value of 2246.09 x 1.03 = 2313.47 for the 1997 layer.


 Pool LIFO Valuation
Use
Similar materials or materials with the same function can be grouped together into pools and
valuated together.

Pool LIFO valuation has certain advantages over individual LIFO valuation, since stock
fluctuations of some materials can be balanced by other materials and therefore longer-term
pools can be formed. On the other hand, it can be difficult to set up useful pools that fulfill the
requirements of local tax authorities.


 Changing the Pool Structure
Use
If you have run LIFO valuation and then discover that the pool allocation could be improved,
you can change the allocation (and thus the value of individual pools).

Features
You have the following options:

       Splitting

        With this option, you remove a material from one pool and allocate it to another pool
        (or valuate it at individual level). You can choose from various procedures to
        determine the value:

             o   Proportional allocation

                 In this case, the current stock quantity of the material removed is allocated
                 proportionally among the layer of the old pool. The layer of the existing pool is
                 reduced by the partial quantities determined (and their values). The layer of
                 the new pool is increased by the same quantity and value.

             o   Dissolve according to the LIFO principle
Financial Accounting – General Ledger Accounting (FI-GL)                                   119

                In this case, the layers of the old pool are reduced, beginning with the most
                recent, until the stock quantity of the material removed is reached. The layers
                of the new pool are increased by the quantities and values removed.

        See Changing the Pool Allocation.

       Merging

        With this option, you group together several pools in a new pool. The quantities and
        values of the individual layers in the pools are added together.

        See Grouping Together Pools.




When you split and merge pools, all existing layer versions are processed in the same way.
You can use the appropriate window to link certain layer versions. This allows you to dissolve
an individual material from its pool and handle it without specifying a new pool. In this case,
the system would create individual material layers with the assigned layer version.


 Pool Creation
Purpose
You want to valuate various materials together in pools.

Prerequisites
Maintain the following settings in Customizing:

       You must give every pool an alphanumeric identifier, and, for the quantity LIFO
        procedure, you must specify the unit of measure in which the pool should be
        managed.

        You can also define a guide price and tolerances for the possible variances from this
        guide price. Using these settings, you can list the pools in which the price range of
        the individual materials is too high.

       To create pools automatically, you have to specify the criteria according to which the
        pools should be created. You can make the assignments automatically based on the
        valuation level, material type and unit of measure.

Process Flow
You can change pool allocations after running valuation. The system changes existing pool
layers and, if necessary, creates new ones.

See also:

Changing the Pool Structure


 Changing the Allocation of Materials to Pools
Financial Accounting – General Ledger Accounting (FI-GL)                                    120


Procedure
    1. Choose Valuation  Bal. sheet valuation

         LIFO valuation  Pool formation  Change. The selection screen appears.

    2. Choose Splitting criteria.

        A window appears in which you enter the material and the new pool.

        Enter the new allocations. Save your entries.

        Choose Back to return to the selection screen.

    3. You set the splitting method in the Splitting method screen box. Choose one of the
        following:

        – Proportional allocation

        – Dissolve as per LIFO

    4. If you want to update the changes, select Layer and material master in the Update
        screen box.
    5. Choose     Execute.

Result
The system displays a list of the pools in question, along with the old and new values.


Displaying the Allocation of Materials to
Pools
Use
If you work with pool LIFO valuation, you may occasionally need to display a list of the
allocation of materials to pools. To see which materials belong to which pool, proceed as
follows:

Procedure
    1. Choose Valuation  Bal. sheet valuation

         LIFO valuation  Pool formation  Display. The selection screen appears.

    2. Enter the valuation area and the pool number(s).

        In the screen box Settings, you can specify whether you want to display materials by
        pool with the values from the previous year, the values from the previous month or
        the current values.

    3. Choose        Execute.
Financial Accounting – General Ledger Accounting (FI-GL)                                      121


Result
The system displays a list of the pools in question, along with the materials they contain.

Statistics are displayed for each pool allowing you to check if you want to change the
composition of the pools.


 Grouping Together Pools
Procedure
    1. Choose Valuation  Bal. sheet valuation

          LIFO valuation  Pool formation  Change. The selection screen appears.

    2. Choose Merging criteria.

         A window appears in which you enter the old pools and the new pools.

         Enter the pools that are to be grouped together. Save your entries.

         Choose Back to return to the selection screen.

    3. If you want to update the changes, select Layer and material master in the Update
         screen box.
    4. Choose      Execute.

Result

The system displays a list of the pools in question, along with the old and new values.


 Implementing LIFO Valuation
Purpose
The materials that you want to make subject to LIFO valuation must be flagged as being
relevant for LIFO on the accounting screen of the material master record.

There are two ways to select a material for LIFO valuation:

        Individual Maintenance of the material master record

        Collective Maintenance(automatic pool allocation)

The system offers the following monitoring functions:

        Checking Material Master Records

        Displaying the Pool Allocation


LIFO Indicators: Individual Maintenance
Financial Accounting – General Ledger Accounting (FI-GL)                                      122

When you create a material master record, you can select the LIFO-relevant field on the
accounting screen. If the material is to be allocated to a pool, you enter the pool number in
the field LIFO pool and the system checks whether the LIFO pool has been defined.

You can change the material master record for an existing material and maintain the LIFO
data on the accounting screen.


LIFO Indicator: Collective Maintenance
You can select a number of materials together for LIFO valuation and assign them to certain
pools.




                         When large volumes of data are involved, you should only update
                         LIFO data using background processing.

Selecting Materials for Individual Valuation
To select materials as being relevant for LIFO or to delete existing indicators, proceed as
follows:

    1. Choose Valuation  Balance Sheet Valuation  LIFO Valuation  Prepare 
         Select Materials.

         The system displays selection screen.

    2. Enter the materials. You can narrow down the selection of materials by using the
         company code, valuation area, material numbers, material types, material groups and
         creation dates.

         Specify whether you want to set or delete the indicator.

    3. Select Material Master and LIFO File in the Update screen box, if you want to update
         the database.
    4.   Choose Execute.

                 The system issues a log listing all the materials involved.

Selecting Materials for Pool Valuation
    1. Choose Valuation  Balance Sheet Valuation

          LIFO Valuation  Pool Formation  Execute.

         The system displays selection screen.

    2. Enter the materials. You can narrow down the selection of materials by using the
         company code, valuation area, material numbers, material types, material groups and
         creation dates.
    3.   You can select the following fields:

             a. Set Indicator
Financial Accounting – General Ledger Accounting (FI-GL)                                       123

                  , if you want the LIFO indicator to be set for the materials.

             b. Set pool if initial

                  , if you want the pool number for the materials to be set as per the
                  Customizing assignment in the material master record.

             c.   Overwrite Pool

                  , if you want the existing pool number for the materials to be overwritten, if
                  necessary.

                          (If you do not select Set Pool, but select Overwrite Pool, the system
                          resets all pool numbers for the materials.)

    4. Select Material Master and LIFO File in the Update screen box, if you want to update
         the database.
    5. Choose      Execute.

                  The system issues a log listing all the materials involved and the pool
                  numbers assigned.

See also:

LIFO Valuation

Balance Sheet Valuation (MM-IM-VP)


 Checking Material Master Records
Use
To check if there are still material master records to be maintained for LIFO valuation, you
can generate the following lists:

        Materials not flagged as LIFO-relevant
        Materials without pool allocation

Procedure
    1. Choose Valuation  Bal. sheet valuation

          LIFO valuation  Pool formation  Check. The selection screen appears.

    2. Enter data as required.
    3. Choose Execute.

Result

The system displays a list of the materials concerned.


Preparation of LIFO Valuation
Financial Accounting – General Ledger Accounting (FI-GL)                                    124

When you implement LIFO valuation in the R/3 System, you generally want to create layers
for earlier settlement periods. You have the following options:

       If you have previously carried out LIFO valuation in another system, your system
        administrators can copy the layers from that system to the R/3 System.

        See Adopting External Data

       If you use LIFO valuation for the first time with the R/3 System, you can derive the so-
        called base layer from old stock data in the material master record.

        See Creating a Base Layer


 Transferring External Data

                            When large volumes of data are involved, you should only update
                         LIFO data using background processing.

Prerequisites
You have created a file for the structure SMLAY on the file server or on a workstation.

Procedure
To transfer existing layers from a third-party system, proceed as follows:

    1. Choose Valuation  Balance Sheet Valuation  LIFO Valuation  Prepare 
        Transfer External Data{>.
    2. Enter the input file name
    3. Define whether the data should be loaded from the dataset or from the workstation.
    4. Define whether, in the R/3 System:

        – New layers are to be created and existing ones overwritten if necessary

        – Only new layers are to be created

        – A simulation is to be run.

    5. Choose      Execute.

Result
The system displays a list of the layers created.


 Creating a Base Layer


                         When large volumes of data are involved, you should only update
                         LIFO data using background processing.
Financial Accounting – General Ledger Accounting (FI-GL)                                      125


Procedure
To create base layers, proceed as follows:

    1. Choose Valuation  Balance Sheet Valuation  LIFO Valuation  Prepare 
         Create Base Layer. The system displays the selection screen.
    2. Enter the materials and pools for which the system is to create a base layer.

             o   Enter the LIFO method that you want to use.
             o   If you work with more than one version, enter the version number.

    3. Select the values that are to be used to determine the layer value. You can choose
         from previous month, month before last, previous year, and year before last.
    4.   Select Create Base Layer if you want to update the database.
    5.   Select Archive if you want to have the list of base layers optically archived.
    6.   Choose     Execute.

Result
The system displays a list of materials and pools along with the quantities and values.

See also:

Preparation of LIFO Valuation

LIFO Valuation

Balance Sheet Valuation (MM-IM-VP)


 Movements Relevant for LIFO
Definition
Movements relevant for LIFO are movements that are taken into account during LIFO
valuation.

Use
Layers are created on the basis of goods receipts and goods issues for a particular material.

For calculating values, however, this is not sufficient. If, for example, in the case of a goods
receipt for a purchase order, the invoice that follows contains a different price, the difference
is debited from the material. Consequently, this price variance must be taken into account
during valuation.

However, there is no point in including all the goods receipts for a particular material in LIFO
valuation. A goods issue to a cost center, for example, does not lead to a change in value and
therefore should not be selected as relevant for LIFO valuation.

This is why your system administrator has to flag all goods movement types that are to be
included in LIFO valuation in Customizing for Material Valuation.

Integration
Financial Accounting – General Ledger Accounting (FI-GL)                                        126

These settings are valid for both FIFO and LIFO valuation.


Document Extract: Transferring Posted Data
Use
Usually the receipt data relevant for LIFO valuation, that is, the quantities and values from
goods receipts and value differences from invoices, is updated by the applications. The
system creates a data record for each valuation level, material and posting period. This
process allows you to subsequently include documents posted in the R/3 System in the
receipt data relevant for LIFO valuation. You can create single receipts or receipts in
aggregated form for each posting period.




                         You do not have to create LIFO relevant receipt data if new layers
                         are always valuated at the price in the material master.

You need to transfer data that has already been posted in the following circumstances:

       If you want to implement LIFO valuation in the middle of a settlement period

                In this case, no LIFO receipt data exists yet.

       If you want to run LIFO valuation based on single receipts

                LIFO data records that are automatically created when LIFO valuation is
                active are aggregated on a posting period basis. If you run valuation based
                on single receipts, you must create new LIFO data records. The differences
                between receipts on a posting period basis and single receipts are illustrated
                in an example.

Procedure
After you have created a base layer or imported old layers into the system, you must then
copy over the receipts relevant for LIFO valuation that have been posted since the start of the
current settlement period. This is the only way that you can ensure that all relevant receipts
are included in the next valuation run.




                         When large volumes of data are involved, you should only update
                         LIFO data using background processing.

To transfer posted data, proceed as follows:

    1. Choose Valuation  Balance Sheet Valuation  LIFO Valuation  Prepare 
        Create Document Extract.

        The system displays the selection screen.

    2. Specify for which materials the LIFO-relevant goods movement should be transferred.
    3. In the screen box Update, select Receipt Data if you want the data to be updated.
Financial Accounting – General Ledger Accounting (FI-GL)                                         127


    4. Choose       Execute.

Result
The system displays a list of the documents.

See also:

Preparation of LIFO Valuation

LIFO Valuation

Balance Sheet Valuation (MM-IM-VP)


 Periodic Receipts – Single Receipts: Example
Business Transactions for Material A in a Period


                                    Quantity                Price           Stock posting

Starting stock                                   0 pieces

Purchase order                                 100 pieces   10.00

1st goods receipt for purchase                  20 pieces                   200.00
order

2nd goods receipt for purchase                  80 pieces                   800.00
order

Invoice                                         50 pieces   12.00           100.00

Goods issue                                     70 pieces

Closing stock                                   30 pieces


LIFO Valuation Based on Period Receipts
When you use period receipts as a basis, the value of the receipts for the period is 1100.00
for a receipt quantity of 100 pieces.

A layer is created for 30 pieces. If the value is determined on a progressive quantity fill-up
basis, the value of the layer is 30 x 1100.00 / 100 pieces = 330.00.

LIFO Valuation Based on Single Receipts
When you use single receipts as a basis, the system splits up the values from the invoice
among the goods receipts in chronological order on a progressive quantity fill-up basis.


                         Quantity                 Value                     LIFO receipt value
Financial Accounting – General Ledger Accounting (FI-GL)                                         128


1st goods receipt        20 pieces                 200.00                   240.00

2nd goods receipt        80 pieces                 800.00                   860.00


The LIFO value of the two goods receipts is calculated as follows:

200.00 + (20 pieces x 100.00 / 50 pieces) = 240.00 or

800.00 + (30 pieces x 100.00 / 50 pieces) = 860.00

A layer is created for 30 pieces. If the value is determined on a progressive quantity fill-up
basis, the value of the layer is 240.00 + 10 x 860.00 / 80 pieces = 347.50.


 Carrying Out LIFO Valuation


                          When large volumes of data are involved, you should only update
                          LIFO data using background processing.

Procedure
    1. Choose Valuation  Balance Sheet Valuation

          LIFO Valuation  Execute ...

         ... ...  On Individual Level, if you want to carry out individual LIFO valuation

         ... ...  On Pool Level, if you want to carry out pool LIFO valuation

         The system displays selection screen.

    2. Enter the Layer Version and LIFO Method. Specify which materials or pools are to be
         valuated.
    3. Choose the method that is to be used to calculate the values.
          a. Total settlement period
          b. Partial year
          c. Fill-up quantity
          d. Material master price

         When you have selected Material Master Price, choose Selection. You can select one
         or more prices from the Phys. Inv. Prices and Valuation Alternatives tab pages. The
         method thus determines the material price as the maximum of all specified prices and
         valuation alternatives.

    4. Under Update Results, select Layer if the LIFO valuation is to be updated. The
         following updates can occur:
              a. New layers are created.
              b. Current layers are changed (for comparison type CUR, or VOM or VVM in
                 conjunction with annual layers).
              c. Previous years' layers are reduced or dissolved.
    5.   Choose List format and maintain the output format for the print list.
Financial Accounting – General Ledger Accounting (FI-GL)                                     129


    6. Choose      .

Result
The system displays a list of the changes made to the layers.

You can analyze the results via the Schedule Manager and the messages.


LIFO Lowest Value Comparison
Definition
Lowest value comparison links LIFO valuation to lowest value determination. The gross value
in the layer is compared to the value that would be the result of the prices generated during
lowest value determination. The lowest of these can be stored in the layer as the net value.

Use
You can carry out valuation on individual or pool level. This affects how the system compares
the lowest values.

See also:

Lowest Value Comparison: Individual LIFO Valuation

Lowest Value Comparison: Pool LIFO Valuation

Comparing the Lowest Values


LIFO Lowest Value Comparison: Individual
Materials
Use
When comparing the lowest values, the system calculates the net value for each existing
layer. The system selects the lowest price from various prices. This price is multiplied by the
layer quantity to form the net value for the current layer.

Features
To compare the lowest values, you can retrieve the following prices:

       From the material master record

            o   Tax prices 1, 2 and 3
            o   Commercial prices 1, 2 and 3

       From the layer

            o   Prices 1, 2 and 3
Financial Accounting – General Ledger Accounting (FI-GL)                                    130

       The material price

You can compare the lowest values either layer by layer or for all layers together:

       If you compare the lowest values layer by layer, the system compares the layer value
        for each layer with the lowest value determined. The lower of these is the net value of
        the relevant layer.
       If you compare the lowest values for all layers together, the system compares the
        lowest value determined with the average value of all layers. The system calculates
        this average layer value from the gross value of the current layer and the net values
        of the old layers.

        If the lowest value is smaller than the average value, the existing layers are dissolved.
        A current layer is formed at the same time, which is valuated gross using the average
        value of all layers and net using the lowest value determined.


LIFO Lowest Value Comparison: Pools
Use
When comparing the lowest values, the system calculates the net value for each existing
layer.

Features
In the R/3 System, there are two ways to compare the lowest values in pool LIFO valuation:

       Material devaluation
       Pool devaluation

Material Devaluation

When comparing the lowest values, the system determines an average price from various
different prices. The system can use the following price fields for this:

       The tax prices
       The commercial prices
       The layer prices
       The material prices

The average can be formed in two ways:

       Single-item prices

        The system first determines the lowest price for each material in the pool. The
        weighted average of these lowest values is the lowest price in the pool.

       Material prices on a pool basis

        For each price field used in the lowest value comparison, the system finds the
        average of the weighted prices of all materials in the layer. The lowest of these
        average prices is the lowest price.

Pool Devaluation
Financial Accounting – General Ledger Accounting (FI-GL)                                  131

In the annual data for a pool layer you can enter three deductions. When comparing the
lowest values, the system adds these deductions together. The difference between the gross
value and total deduction is then the net value.

Comparing the lowest values with pool deductions does not affect data in layers from
previous years.

Devaluation Rule

You can compare the lowest values either layer by layer or for all layers together:

       If you compare the lowest values layer by layer, the system compares the layer value
        for each layer with the lowest value determined. The lower of these gives the net
        value of the relevant layer (see example).
       If you compare the lowest values for all layers together, the system compares the
        lowest value determined with the average value of all layers. The system calculates
        this average layer value from the gross value of the current layer and the net values
        of the old layers. If the lowest value is smaller than the average value, the existing
        layers are dissolved. At the same time, the system creates a current layer, which is
        valuated gross using the average value of all layers and net using the lowest value
        determined.


 LIFO Lowest Value Comparison: Pools
(Example)
The following graphic shows how the lowest values are compared for Pool A using material
discounts. The tax and commercial prices from price level 2 are used as sources.




 Adjusting Lowest LIFO Values
Financial Accounting – General Ledger Accounting (FI-GL)                                        132

                         When large volumes of data are involved, you should only update
                         LIFO data using background processing.

Procedure
    1. Choose Valuation  Balance Sheet Valuation

         LIFO Valuation  Perform Check  Adjust Lowest Values. The system displays
        selection screen.

    2. Enter the Layer Version and LIFO Method. Define for which materials or pools you
       want to compare the lowest values.
    3. Select Adjustmt Rule and define whether the adjustment should be done net layer by
       layer, gross layer by layer, or net for all layers together.
    4. Select Price Sel. in the screen box Settings.

                On the Phys. Inv. Prices tab page, select the fields that should be taken into
                account in the lowest value comparison. You can choose different settings for
                current and old layers.

                On the Valuation Alternatives tab page, you can select one or more price
                indicators for new and old layers. Choose    to confirm your entries.

                If you are comparing the lowest values for pool LIFO valuation or at company
                code level, choose Procedure in the screen box Settings. The system
                displays a dialog box containing the possible procedures. Select the required
                procedure. Choose      to confirm your entries.

    5. In the Update Results screen box, select Layer with Net Values if the net values
        determined in the layers should be updated.

    6. Choose List format and specify the type of print list that you require.
    7. Choose Execute.

Result
The system displays a list containing the results of the lowest value comparison.

You can analyze the results using the Schedule Manager and the messages using the
application log.


 Displaying LIFO Valuation


                         When large volumes of data are involved, you should only update
                         LIFO data using background processing.

Procedure
If you want to display the LIFO valuation for certain materials or pools, proceed as follows:

    1. Choose Valuation  Bal. sheet valuation  LIFO valuation  Display ...
Financial Accounting – General Ledger Accounting (FI-GL)                                        133

         ... ...  On individual level, if you have carried out individual LIFO valuation

         ... ...  On pool level, if you have carried out pool LIFO valuation

         The system displays selection screen.

    2. Enter the Layer Version and LIFO Method. Enter the materials or LIFO pools that you
         want to display.
    3. You can update the material master record with the results of LIFO valuation by
         selecting the field Database update in the screen box Update results. You can
         change the material prices or the physical inventory prices in the material master.
    4.   Specify in the Settings screen box whether you want to display the net or gross
         values.

             o    If you want to change the material prices, choose Change Material Prices.
                  The system displays a dialog box, in which you select if:

                           A batch input session should be generated for the price changes
                           The prices should be changed directly when valuation is carried out
                           You do not want the material prices to be changed, in which case you
                            must select No update.

                            Choose         to confirm your entries.

             o    Choose Update Prices.

                            The system displays a screen with two tab pages. SAP recommends
                            that you only process one of these tab pages.

                           On the Phys. Inv. Prices tab page, select the price field of the LIFO
                            price in which the data is to be updated. If you want to delete prices
                            in other price fields when carrying out the update, select the Reset
                            field.

        On the Valuation Alternatives tab page, select the price indicator that indicates the
         valuation alternatives to be updated.

                            Choose         to confirm your entries.

    5. Choose List format and the system displays a dialog box where you specify the type
         of print list that you require.
    6. Enter data as required.
    7. Choose Execute.

Result
The display screen shows the material values according to inventory accounting and those
based on the LIFO method.

If you intended to update the database, the system updates the physical inventory prices
selected in the material master record. If you specified that the prices should be changed, the
system either generates a batch input session to make the price changes, or – in the case of
a direct update – makes the price changes immediately.
Financial Accounting – General Ledger Accounting (FI-GL)                                      134

You can analyze the results using the Schedule Manager and the messages using the
application log.


 Layer Maintenance
Use
You can process each layer manually. The following functions are available for this:

        Displaying Layers
        Changing Layers
        Deleting Layers


 Displaying Layers
To display a layer, proceed as follows:

    1. Choose Valuation  Bal. sheet valuation  LIFO valuation  Layer  Display. The
         initial screen appears.
    2. Enter the Layer version and LIFO method.

         Specify the valuation area or company code that the layer belongs to.

    3. If you want to display a material layer, go to Material number and enter the material
         number.

         If you want to display a pool layer, go to Pool number and enter the pool number.

    4. To display the layer data, choose Layer overview.

         The layer data screen appears. The layer quantity, net value and gross value are
         displayed here.

    5. To display the receipts, choose Receipts overview.

         The list of receipt data appears. The receipt quantities and values are displayed.


 Changing Layers
To change a layer, proceed as follows:

    1. Choose Valuation  Bal. sheet valuation  LIFO valuation  Layer  Change. The
         initial screen appears.
    2.   Enter the Layer version and LIFO method.

         Enter the valuation area that the layer belongs to.

    3. If you want to change a material layer, go to Material number and enter the material
         number.

         If you want to change a pool layer, go to Pool number and enter the pool number.
Financial Accounting – General Ledger Accounting (FI-GL)                                       135


    4. To change the layer data, choose Layer overview.

         The layer data screen appears. You can change the layer quantity, net value and
         gross value here. Save your changes.

    5. To change goods receipts for test purposes, choose Receipts overview.

         The list of receipt data appears. You can change the receipt quantities and values
         here. Save your changes.

Displaying Change Documents
A document is created for every layer change. By choosing Bal. sheet valuation  LIFO
valuation  Layer  Display change docs., you can display all changes made to a layer.


 Deleting Layers


                 When large volumes of data are involved, you should only update LIFO data
                 using background processing.

Use
In a test installation, it is frequently necessary to delete layers created for testing purposes.
Or, after a certain period of time, you no longer need the receipt records for LIFO valuation.

It is possible to delete several layers or receipt records in a single step.

Procedure
    1. Choose Valuation  Bal. sheet valuation

          LIFO valuation  Tools  Delete layer.

         The selection screen appears.

    2. On the selection screen, specify the criteria for deletion: you can enter intervals for
         the layer version, company code, valuation area, material, pool, fiscal year and
         posting period.
    3.   Select the data to be deleted. You have the following options:
              a. Monthly receipts
              b. Single receipts
              c. Material annual layer
              d. Pool annual layer
              e. Material monthly layer
              f. Pool monthly layer
    4.   Select Delete data if you want the data to be deleted.
    5.   Choose . The system first issues the warning:

         CAUTION: Records will be physically deleted
Financial Accounting – General Ledger Accounting (FI-GL)                                   136


    6. Choose       .

Result
A list of the deleted data is generated.


Aggregating Layers
Use
To reduce the number of layers, you have the option of aggregating older layers of a material
or pool to a single layer. The value of the new layer is calculated from the average value of
the aggregated layers.


   When large volumes of data are involved, you should only update LIFO data using
background processing.

Procedure
    1. Choose Valuation  Bal. sheet valuation

         LIFO valuation  Tools  Aggregate layer.

        The selection screen appears.

    2. Enter the Version and Method.
    3. Enter the valuation area that the layers belong to.

        If you want to aggregate material layers, enter the material numbers.

        If you want to aggregate pool layers, enter the pool numbers.

    4. Enter the fiscal year and, if necessary, the period up to which you want the layers to
        be aggregated.
    5. If you want to update the aggregation, select the field Aggregate layer in the screen
        box Update.

Result
A list of the aggregated layers appears.


Reassigning Layers
Use
You might have to reassign material layers in the following cases:

       The material is transferred to another material and should no longer exist in its own
        right.
       The material is transferred to another valuation level.
Financial Accounting – General Ledger Accounting (FI-GL)                                       137


Procedure
    1. Choose Bal. sheet valuation

         LIFO valuation  Tools  Reassign layer.

        The selection screen appears.

    2. Choose Allocation.

        A table appears containing the rule type for reassignment of material layers.

    3. Select New entries and enter the valuation level and the material for which you want
        the layer to be reassigned. Then enter the valuation level and the material to which
        you want the layer to be assigned.

        If you enter only the valuation levels without specifying a material, the system carries
        out reassignment for the layers of all materials in the valuation level.

    4. Save your entries.
    5. To return to the selection screen, choose Back.
    6. If you want to update the reassignment, select Reassign layer.

Result
A list of the old and new layers is generated.

If the system could not make certain assignments, the list contains an appropriate error entry.


Adjusting Units of Measure
Use

If the unit of measure for a material is changed in the material master record, the units of
measure are not automatically changed for existing layers.

If the unit of measure for a pool is changed in Customizing, the units of measure are not
automatically changed for existing layers.

In such cases, you can check the units of measure used for the pools and subsequently
change them.

Procedure

    1. Choose Bal. sheet valuation

         LIFO valuation  Tools  Check unit of measure.

        The selection screen appears.

    2. Specify which materials or pools you want to check the units of measure for.
Financial Accounting – General Ledger Accounting (FI-GL)                                         138

        Select the data to be checked:

        – For material layers, you can check the material annual layers and the material
        monthly layers.

        – For pools, you can check the pool annual layers and the pool monthly layers.

        – You can check the monthly receipts.

    3. If you want to adjust the units of measure, select Change data in the Update screen
        box.

Result

A list appears of the layers in which differences in the units of measure were found.


 FIFO Valuation
Definition
FIFO valuation is a method that enables you to valuate the stocks of a material as realistically
as possible. FIFO (first in, first out) stands for the assumption that the first stocks of a material
to be received are the first to be consumed. The value of the stock is therefore calculated
based on the last stocks received.

Use
FIFO valuation has a number of uses:

       Listing the FIFO values of certain materials.

        When you run FIFO valuation, the system calculates the FIFO values of the materials
        concerned. The results are displayed in the form of a list that contains the following
        information:

        The closing stock quantity and closing stock value for each material for the period in
        question as well as the FIFO value and the difference between that and the stock
        value

        The net value based on lowest value determination (if you carry out FIFO valuation
        with lowest value comparison)

        The totals for each valuation area or company code by material stock account

        The totals by valuation area or company code

       Lowest value comparison of the FIFO value after determining the lowest price.

        When you run FIFO valuation, you specify whether the system should also carry out a
        lowest price comparison.

       Updating the FIFO price (possibly after carrying out lowest value comparison) in the
        material master record.
Financial Accounting – General Ledger Accounting (FI-GL)                                      139

         When you run FIFO valuation, you specify whether the FIFO price should be updated
         in the material master record. You can use the tax and commercial price fields for
         this.

        Revaluating the material, that is, replacing the current value of the material with the
         FIFO value.

         When you run FIFO valuation, you can change the material price directly or generate
         a batch input session to effect price changes.

See also:

FIFO Value Determination

Data Update During FIFO Valuation

Introducing FIFO Valuation

Carrying Out FIFO Valuation

FIFO Valuation: List of Results

Displaying FIFO Valuation Data

Changing FIFO Valuation Data

Deleting FIFO Valuation Data


FIFO Value Determination
Use
The FIFO value is determined from all FIFO-relevant goods receipts.

You use the FIFO method to define the stock that is to be valuated again, for example, the
closing stock from the previous month or previous year. Beginning with the appropriate
period, the system adds up all the quantities of goods received for each period until the
closing stock is reached. Then the system adds up the value of the goods received. The last
value to be added is determined in relation to the last quantity added.

The sum of the values of the goods received is the FIFO value.




                 At the end of the fiscal year, there are 1,500 pieces of a material in stock. The
                 following FIFO-relevant goods receipts were posted in the individual periods
                 of the fiscal year:


Period                   Quantity of goods         Value of goods           Price of goods
                         received                  received                 received

01                       100                       1000                     10.00
Financial Accounting – General Ledger Accounting (FI-GL)                                   140


02                      200                      2050                    10.25

03                      50                       525                     10.50

04                      150                      1525                    10.17

05                      100                      1050                    10.50

06                      250                      2600                    10.40

07                      300                      3300                    11.00

08                      200                      2250                    11.25

09                      150                      1650                    11.00

10                      200                      2350                    11.75

11                      400                      4600                    11.50

12                      300                      3500                    11.67

Total                   2400                     26400




The following table shows how the FIFO value is calculated:


Period                  Quantity                 Value                   Totaled quantity

12                      300                      3500                    300

11                      400                      4600                    700

10                      200                      2350                    900

9                       150                      1650                    1050

8                       200                      2250                    1250

7                       250                      2750                    1500

Total                   1500                     17100




Thus the price of the material according to the FIFO valuation is 17100 / 1500 = $11.40.

As a comparison: If the closing stock of the previous year was zero and no goods issues were
posted for the material in the current fiscal year, the moving average price of the material at
the end of the year would be 26400 / 2400 = $11.00.

Alternatively, the system can determine the FIFO value based on single receipts. You
configure this using the FIFO method as well.
Financial Accounting – General Ledger Accounting (FI-GL)                                     141


Tolerances
In exceptional circumstances, it can be that the stock to be valuated for a material is greater
than the total of the receipt quantities. Reasons for this can be that not all goods receipts
were relevant for FIFO or that part of the material was received a long time ago.

You can configure how the system is to react to this type of exceptional situation:

            o   The FIFO price calculated is applied to the entire stock to be valuated.
            o   The system searches for an alternative value. You have the following options:
                    Material price
                    Price of last FIFO valuation
                    Recalculation of the FIFO price with the assumption that the
                       difference between the stock level and the total of the receipt
                       quantities is valuated at the price of the oldest available receipts
                       (base value).
                    The system does not carry out valuation. An error message is
                       created for the material concerned.

Define the tolerance interval by entering the appropriate percentage rates.


 Data Update During FIFO Valuation
Use
When carrying out FIFO valuation, you determine whether the results are to be saved to the
database.

The results of FIFO valuation can be saved in two objects:

       In the FIFO results table, which contains the following information:

            o   Material
            o   FIFO methods
            o   Valuation date
            o   Valuated stock
            o   Gross FIFO value
            o   Net FIFO value, if you carry out FIFO valuation with lowest value comparison.
            o   Stock values

       In the material master record

        In the material master record, you can have the system update the results in the price
        fields Tax price 1, 2 or 3, or Commercial price 1, 2 or 3.

            o   If you carry out FIFO valuation with lowest value comparison, the system
                enters the net FIFO price in the field you select.
            o   If you carry out FIFO valuation without lowest value comparison, the system
                enters the gross FIFO price in the field you select.
            o   In the case of materials subject to split valuation, the system splits the FIFO
                price proportionally among the valuation types.


 Introducing FIFO Valuation
Before you run FIFO valuation, you must make the following settings in the system:
Financial Accounting – General Ledger Accounting (FI-GL)                                      142

       Determination of the FIFO Valuation Level
       Determination of FIFO Valuation Areas
       Definition of a FIFO Method
       Selection of Movements Relevant to FIFO (x)
       Selection of Materials Relevant to FIFO (x)
       Adopting Data Posted in a Posting Period (x)




                The settings for the steps marked with (x) are identical to those carried out for
                LIFO valuation. If you already work with LIFO valuation, you do not have to
                change any settings. The only thing you may need to do is define other
                materials as being subject to FIFO valuation.


 Determination of the FIFO Valuation Level
Use

Function                                          Settings in Customizing for Valuation and
                                                  Account Assignment

Define the level at which FIFO valuation is to    Balance Sheet Valuation Procedures 
be carried out.                                   Configure LIFO/FIFO Methods  General
                                                  Information  Define LIFO/FIFO Valuation
                                                  Levels


If you carry out Material Valuation in your company at plant level (valuation area = plant), you
have two options:

       FIFO valuation at company code level

        You valuate all the stocks of a particular material in all of the valuation areas of the
        company code together (joint valuation). This means that there is only one FIFO price
        for a material in all of the valuation areas.

       FIFO valuation at valuation area level

        You valuate all the stocks of a particular material separately in the individual valuation
        areas of the company code. This means that there can be different FIFO prices for a
        material in the individual valuation areas of the same company code.

If you carry out Material Valuation in your company at company code level (valuation area =
company code), FIFO valuation is also carried out at company code level.




                If you have flagged materials as relevant for FIFO, you can no longer change
                the settings for the FIFO valuation level.


Determination of FIFO Valuation Areas
Financial Accounting – General Ledger Accounting (FI-GL)                                    143


Use

Function                                         Settings in Customizing for Valuation and
                                                 Account Assignment

Define the FIFO valuation areas.                 Balance Sheet Valuation Procedures 
                                                 Configure LIFO/FIFO Methods  FIFO 
                                                 Configure FIFO Valuation Areas


The system only runs FIFO valuation for valuation areas that have been maintained. Assign
the year of the first FIFO valuation in the R/3 System to each FIFO valuation area as the base
year for that valuation area.


 Definition of a FIFO Method
Use
In the R/3 System, FIFO valuation is based on a set of parameters, which are described as
the FIFO method in all relevant transactions. The method is a six-character alphanumeric
field that you can define in Customizing or from any initial screen during processing in the
application. Some attributes of a FIFO method can be freely combined, while others may only
be used in certain combinations. These combinations are referred to as models. Model 01 is
currently the only one defined for FIFO valuation.

The part of a FIFO method that you can freely define consists of the following aspects:

       Is the value to be determined on the basis of receipts aggregated on a monthly basis
        or on the basis of single receipts?

        The differences are explained in an example. If you are determining values on the
        basis of single receipts, you must generate a document extract prior to FIFO
        valuation.

       Which stock do you want to valuate using the FIFO method? You have the following
        options:

                       GJE – End of the last fiscal year
                       VVM – End of the posting period before last
                       VOM – End of the last posting period
                       CUR – Present


 Selection of Movements Relevant to FIFO
Definition
Movements relevant to FIFO are movements that are taken into account during FIFO
valuation.

Use
The system calculates the FIFO value based on the quantities and values of goods receipts.
However, there is no point in including all goods receipts for a particular material in FIFO
Financial Accounting – General Ledger Accounting (FI-GL)                                       144

valuation, as a stock transfer from one material to another, for example, is not necessarily
valuated at market prices and therefore should not be relevant for FIFO valuation.

This is why your system administrator has to flag all goods movement types that should be
included in FIFO valuation in Customizing for Material Valuation.

Integration
These settings are valid for both FIFO and LIFO valuation.


Selection of Materials Relevant to FIFO
Use
In the case of all materials relevant for FIFO valuation, you must select the field LIFO/FIFO
relevant on the accounting screen of the material master.

Activities

Individual Maintenance

When you create a material master record, you can select the field LIFO/FIFO relevant on the
accounting screen.

You can change the material master record for an existing material and select the indicator on
the accounting screen.

Collective Maintenance

You can select a number of materials together for FIFO valuation or delete existing
selections.




                         When large volumes of data are involved, you should only update
                         FIFO data using background processing.

To carry out collective maintenance, proceed as follows:

    1. Choose Logistics  Materials Management  Valuation  Valuation  Balance
         Sheet Valuation  FIFO Valuation  Prepare  Select Materials.

         The system displays the Select Materials screen.

    2. Enter data as required. You can narrow down the selection of materials by using the
         company code, valuation area, material numbers, material types, material groups and
         creation dates.
    3.   Select whether you want to Set or Remove the LIFO/FIFO indicator.
    4.   Select Material Master and FIFO File if you want the data to be updated.
    5.   Choose     Execute.

                The system issues a log listing all the materials involved.
Financial Accounting – General Ledger Accounting (FI-GL)                                      145

See also:

FIFO Valuation

Balance Sheet Valuation (MM-IM-VP)


Transferring Data Posted in a Posting Period
Use
The applications normally update the receipt data relevant for FIFO valuation (the quantities
and values from goods receipts and value differences from invoices). The system creates a
data record for each valuation level, material and posting period. You can use a document
extract to then include documents posted in the R/3 System in the receipt data relevant for
FIFO valuation. You can aggregate receipts for each posting period or store them as single
receipts.

You need to transfer data that has already been posted in the following circumstances:

        If you want to implement FIFO valuation in the middle of a settlement period

                 In this case, no FIFO receipt data exists yet.

        If you want to run FIFO valuation based on single receipts

                 FIFO data records that are automatically created when FIFO valuation is
                 active are aggregated on a posting period basis. If you run valuation based
                 on single receipts, you must create new FIFO data records.

                 For more information about receipts by posting period and single receipts,
                 see the following example.

Activities



                         When large volumes of data are involved, you should only update
                         FIFO data using background processing.

To subsequently create FIFO data, proceed as follows:

    1. Choose Valuation  Balance Sheet Valuation  FIFO Valuation  Prepare 
         Create Doc. Extract.

         The system displays selection screen.

    2. Enter the FIFO method and specify the materials for which the system should transfer
         the FIFO-relevant movements.
    3.   Specify whether the data is to be retrieved from a particular posting period or as
         required for each material. In the last case, the system only retrieves those receipts in
         the past that together result in the stock to be valuated.
    4.   In the screen box Update, select Receipt data if you want the data to be updated.
    5.   Choose     Execute.
Financial Accounting – General Ledger Accounting (FI-GL)                                   146

                 The system displays a list of the documents in question.

See also:

FIFO Valuation

Balance Sheet Valuation (MM-IM-VP)


Periodic Receipts – Single Receipts: Example
Business Transactions for Material A in a Period


                                         Quantity           Price        Stock posting

Purchase order                           100 pieces         $10.00

1st goods receipt for purchase           20 pieces                       = $200.00
order

2nd goods receipt for purchase           80 pieces                       = $800.00
order

Invoice                                  50 pieces          $12.00       = $100.00

Goods issue                              70 pieces

Closing stock                            30 pieces


FIFO Valuation Based on Period Receipts
When you use period receipts as a basis, the value of the receipts for the period is $1100.00
for a receipt quantity of 100 pieces.

The FIFO value of the closing stock is thus 30 pieces x $1100.00 / 100 pieces = $330.00.

FIFO Valuation Based on Single Receipts
When you use single receipts as a basis, the system splits up the values from invoices among
the goods receipts in chronological order on a progressive quantity fill-up basis.


                              Quantity              Value            FIFO receipt value

1st goods receipt             20 pieces             200.00           = $240.00

2nd goods receipt             80 pieces             800.00           = $860.00


The FIFO value of the two goods receipts is calculated as follows:

$200.00 + (20 pieces x $100.00 / 50 pieces) = $240.00 or

$800.00 + (30 pieces x $100.00 / 50 pieces) = $860.00
Financial Accounting – General Ledger Accounting (FI-GL)                                       147

The FIFO value of the closing stock is thus 30 pieces x $860.00 / 80 pieces = $322.50.


 Carrying Out FIFO Valuation


                          When large volumes of data are involved, you should only update
                          FIFO data using background processing.

Procedure
    1. Choose Valuation  Balance Sheet Valuation

          FIFO Valuation  Execute.

         The system displays selection screen.

    2. Enter the FIFO method and specify the materials for which you want to carry out FIFO
         valuation.
    3.   If you want the FIFO values to be compared with the lowest value, select the field
         Execute in the screen box Comp. Lowest Values.

         Choose Price Sel. Select one or more prices or price indicators on the Phys. Inv.
         Prices and Valuation Alternatives tab pages.

    4. If you run FIFO valuation at company code level, you can define how the lowest
         prices for the individual valuation areas are to be set in relation to one another.
         Choose Procedure.

         A dialog box is displayed, in which you can enter possible options.

    5. The results of the FIFO valuation can be updated.

             o   If you want to update the FIFO results table, select the FIFO Price Table field
                 under Update Results.
             o   If you want to update the material master with the results of the FIFO
                 valuation, select the Material Master field under Update Results. You can
                 change the material prices or the physical inventory prices in the material
                 master.

                         If you want to change the material prices, select Change Material
                          Prices. A dialog box is displayed, in which you select if:

                                 A batch input session should be generated for the price
                                  changes
                                 The prices should be changed directly when valuation is
                                  carried out
                                 You do not want the material prices to be changed, in which
                                  case you need to select No Update.

                         Choose Update Prices.

                          The system displays a screen with two tab pages.
Financial Accounting – General Ledger Accounting (FI-GL)                                       148

                                 On the Phys. Inv. Prices tab page, select the price field of the
                                  FIFO price in which the data is to be updated. If you want to
                                  delete prices in other price fields when carrying out the
                                  update, select the Reset field.
                                 On the Valuation Alternatives tab page, select the price
                                  indicator that indicates the valuation alternatives to be
                                  updated.

                                 Choose      to confirm your entries.

    8. Choose List format and specify the information that the print list is to contain.
    9. Choose Execute.

                 The system displays the results list.

For more information about the list of results, see:

       Schedule Manager
       Messages
       FIFO Valuation: Results List


 FIFO Valuation: List of Results
List Format: Output Details
If you select Output details on the List Format screen, a list of results containing the following
information for each material appears:

       Closing stock

       Value of the closing stock

       Gross FIFO value (without lowest value comparison)

       The difference between the values – both absolute difference and percentage
        difference

       Gross FIFO price (without lowest value comparison)

       How far back or to which material document the system had to go to determine the
        FIFO value

If you have carried out FIFO valuation with a lowest value comparison, the following
information is also displayed:

       The net FIFO value based on the lowest value comparison

       The difference between the values – both absolute difference and percentage
        difference

       The net FIFO price

List Format: Output Totals
Financial Accounting – General Ledger Accounting (FI-GL)                                     149

If you select Output totals on the List Format screen, the system displays the FIFO results for
each FIFO valuation area and G/L account.

The gross and net FIFO values are each displayed alongside the book value on this totals
display.


 Displaying FIFO Valuation Data
To display FIFO valuation data on a material, proceed as follows:

    1. Choose Bal. sheet valuation  FIFO valuation  Valuation data  Display.

        The initial screen appears.

    2. Enter data as required.
    3. To display the FIFO data for the material, choose Overview of results.

        The FIFO data screen appears. The valuated quantity, net value and gross value are
        displayed here.

    4. To display the receipts, choose Receipts overview.

        The list of receipt data appears. The receipt quantities and values are displayed.


 Changing FIFO Valuation Data
You may want to change the FIFO valuation data of a material for test purposes. Proceed as
follows:

    1. Choose Bal. sheet valuation  FIFO valuation  Valuation data  Change.

        The initial screen appears.

    2. Enter data as required.
    3. To change the FIFO results for the material, choose Overview of results.

        The FIFO data screen appears.

    4. Enter your changes and save them.
    5. To change the receipts, choose Receipts overview.

        The list of receipt data appears.

    6. Enter your changes and save them.

Displaying Change Documents
For every change made to the FIFO valuation data, the system creates a change document.
To obtain a list of the changes, proceed as follows:

    1. Choose Bal. sheet valuation  FIFO valuation  Valuation data  Display change
        docs.
Financial Accounting – General Ledger Accounting (FI-GL)                                    150

         The initial screen appears.

    2. Enter the FIFO method, the material, and the period of time for which you want to list
         the changes. Select whether you want to see the changes to the FIFO results or the
         changes to the receipt data.
    3.   Assign the relevant valuation levels.
    4.   Choose Execute.

         A list of the change documents appears. The system displays when each change was
         made and by whom.

    5. To see which fields were changed, position the cursor on the desired line and choose
         Edit  Display details.

         A window appears with the changed fields. The system displays the entry in each
         changed field before and after the change was made.


 Deleting FIFO Valuation Data


                  When large volumes of data are involved, you should only update FIFO data
                  using background processing.

Procedure
To delete FIFO valuation data, proceed as follows:

    1. Choose Bal. sheet valuation  FIFO valuation  Tools  Delete val. data.
    2. Enter the valuation level, the materials, the fiscal year and the periods for which you
         want to delete the FIFO valuation data.
    3.   Specify which data is to be deleted. You can select from the following:
             a. Monthly receipts
             b. Single receipts (if you have compiled them)
             c. FIFO results
    4.   Select Delete data if you want the data to be deleted.
    5.   Choose Execute.

         The system first issues the warning:

         CAUTION: Records will be physically deleted

         Choose     .

         A list of the materials for which the FIFO data was deleted appears.


 Results of Balance Sheet Valuation
Use
Financial Accounting – General Ledger Accounting (FI-GL)                                    151

In Balance Sheet Valuation, material prices are calculated. These material prices are updated in
various ways and can be displayed. In each procedure, there are two fundamentally different
options for saving the resulting prices:

       Changing material prices

The prices can be adopted as the new valuation prices for the materials using the price
change transaction. Accounting documents containing postings to the stock account and an
expense account are created when this happens. The prices can be changed using a batch
input session or by means of a direct update.

       Updating physical inventory prices

The prices can be written to the physical inventory fields in the material master. The physical
inventory prices have a temporary nature only, this means that the system cannot determine
their validity as of a certain point in time. Once their contents have been analyzed, you can
reset the physical inventory prices using various programs in balance sheet valuation. No
documents are posted when the physical inventory prices are updated.

Features
You can use the physical inventory prices in various ways:

Generally, each balance sheet valuation procedure writes the results in a certain physical
inventory field. The logical assignment of the fields to the respective procedure must currently
be made outside the SAP System.

In principle, you can combine the procedures in any way you wish, by providing the interim
results in each case via the physical inventory prices. The existing dependencies between the
procedures and their sequence can be different according to the installation. The organization
of balance sheet valuation should be carried out outside the SAP System before you start to
use it.




If you link balance sheet valuation procedures together, it does not generally make sense to
adopt interim results as the material price at the same time.

Before the final analysis of the results, you can compare physical inventory prices.
Conspicuously high price variances may lead to the conclusion that individual physical
inventory prices have not been calculated correctly and must be corrected manually.

The results of the individual procedures can be compared with one another using the analysis
Balance Sheet Values by Account. The same program calculated the final balance sheet price to
be set, which can in turn be adopted as the new material price or as another physical
inventory price.

In addition, you can take balances displays with reference to the stock accounts from the list.
On the basis of these balances, you can make manual postings to the balance sheet account
and the expense account.




Basically, you need to decide whether the results of balance sheet valuation are adopted as
the material price or whether manual postings are to be made according to the analysis of
Financial Accounting – General Ledger Accounting (FI-GL)                                        152

balance sheet values by account. You should weigh up the advantages and disadvantage of
both procedures carefully.

In addition, there is the option of storing individual physical inventory prices as valuation
alternatives in the SAP System, for example, to create a history of the balance sheet
valuation results.


Results of Balance Sheet Valuation: Price
Variances
Use
After executing different procedures in balance sheet valuation, you often have to compare
the resulting prices.

Usually the aim of such an investigation is to determine those prices for which the variance
from the book price is noticeably high.

For example, this is how you can uncover unrealistic purchase order prices that are collected
by the lowest value determination for market prices.

Features
The system always determines the difference between a physical inventory price and a
comparison price and generates a list. You can narrow down the list using material numbers,
valuation areas, valuation types, valuation classes, material types and material groups.

The physical inventory price can be one of the following prices:

       One of the price fields updated in the material master record

       The lowest of several of the price fields updated in the material master record

The comparison price can be one of the following prices:

       Current material price
       Material price from the previous month or year
       Current standard price
       Standard price from the previous month or year
       Current moving average price
       Moving average price from the previous month or year
       Tax price 1, 2, or 3
       Commercial price 1, 2, or 3

See also:

Balance Sheet Valuation: Listing Price Variances


Balance Sheet Valuation: Listing Price
Variances
    1. Choose Valuation  Bal. sheet valuation
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         Evaluations  Price variances. The selection screen appears.

    2. Specify the materials that are to be included in the list. You can narrow down your
       selection using material numbers, valuation areas, valuation types, valuation classes,
       material types, and material groups.
    3. Choose Phys. inv. price.

        The dialog box appears in which you specify the physical inventory price. Select one
        or more of the tax and commercial price options. If you select more than one price,
        the system compares the base price with the lowest of these prices. You can define
        the title of the column heading in a text field. Choose  to confirm your entries.

    4. Choose Comparison price.

        The dialog box appears in which you specify the comparison price. The current
        material price is used as the comparison price in the standard system. You can
        change this price. Choose      to confirm your entries.

    5. Choose whether the list is to check devaluations or revaluations.
    6. Enter a minimum variance, so that only variances larger than the percentage entered
        are listed.
    7. Choose Valuation level. Select whether the price comparison is to be performed at
        valuation area level or company code level.
    8. Choose      Execute.

Result
A list of the price variances appears. You can use the ABAP List Viewer functions to process
the list.

This list shows the physical inventory price and the comparison price for each material and
the percentage variance.


Displaying Results of Balance Sheet
Valuation
Use
To transfer the results of balance sheet valuation to Financial Accounting, you can proceed as
follows:

       You first list the results of lowest value determination and then decide which stock
        accounts are to be taken into account for devaluation. You carry out the
        corresponding balance sheet posting manually.
       You change the price directly when you determine the balance sheet values.

Features
To establish the balance sheet value of the stock, you can list side by side the values
resulting from the previous update to the physical inventory prices in the material master
record. You have the option of grouping several prices together as a price level. The system
automatically calculates the value of a price level from the lowest of the prices assigned (see
Example).
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You generate a list in which the values resulting from the price levels defined and the actual
stock value (current, from the previous month, from the month before last, or from the
previous year) are shown for each material. The total stock values by stock account are also
displayed.

This list allows you to decide on the stock accounts that are to be taken into account during
devaluation. The list specifies the values that are to be transferred.

At the same time as you generate this list, you can have the system change the prices.
Changing the balance sheet price determined causes the system to devalue the stock
accounts.


                     If you use the price change function to transfer the balance sheet values
                to the stock accounts, it can lead to problems if you are later required to
                reinstate the original values.

See also:

Balance Sheet Values by Account: Generating a List


 Price Levels: Example
You determined the lowest price based on market prices, range of coverage and rate of
movement. For some materials, you also entered physical inventory prices derived from data
not available in the R/3 System.

You also carried out LIFO valuation and inventory costing in the R/3 System and updated the
results in the material master record.

Material Master Record


Tax price 1                           Lowest value determination based on market prices

Tax price 2                           Lowest value determination based on range of
                                      coverage

Tax price 3                           Lowest value determination based on movement rate

Commercial price 1                    Externally determined market prices

Commercial price 2                    LIFO valuation

Commercial price 3                    Inventory costing


To display the values of lowest value determination based on market price in the list of
results, you assign tax price 1, commercial price 1 and commercial price 3 to price level 1.

You assign the results of lowest value determination based on range of coverage and
movement rate to price level 2.

Level 3 is based on the results of LIFO valuation.
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Balance Sheet Values by Account: Generating a
List
Procedure
    1. Choose Valuation  Balance Sheet Valuation

         Results  Balance Sheet Valuation Per Account. The system displays selection
        screen.

    2. Enter data as required: the company code, the key date, and the materials for which
       you want the system to create the list. You can narrow down your selection using
       material numbers, valuation areas, valuation types, valuation classes, material types,
       and material groups.
    3. Select the current stock value, that of the previous month, or that of the previous year
       for the list display.
    4. Choose Prices/Levels.

                Specify the following on the Phys. Inv. Price tab page:

            o   Which physical inventory price fields in the material master are to be taken
                into account
            o   The level to which the price fields are to be grouped together (see Price
                Levels: Example)
            o   What the levels in the list are called
            o   If a revaluation between two levels should be excluded
            o   The level from which a possible replacement value is to be taken
            o   The levels from which the balance sheet value is to be calculated

                On the Valuation Alternatives tab page, you can select one or more prices
                and assign as many as required to a level. You can define up to a maximum
                of six levels.

                Choose     to confirm your entries.

    5. The balance sheet prices determined can be updated in the material master record. If
        you want to do this, select the field Database Update in the screen box Update
        Balance Sheet Price. You can change the material prices or the physical inventory
        prices in the material master.

            o   If you want to change the material prices, select Change Material Prices. A
                dialog box is displayed, in which you select if:
                      A batch input session should be generated for the price changes
                      The prices should be changed directly when valuation is carried out
                      You do not want the material prices to be changed, in which case you
                        need to select No Update.

                         Choose     to confirm your entries.

            o   Choose Update Prices.

                         The system displays a screen with two tab pages. SAP recommends
                         that you only process one of these tab pages.
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                        On the Phys. Inv. Prices tab page, select the price field of the
                         balance price in which the data is to be posted. If you want to delete
                         prices in other price fields when carrying out the update, select the
                         Reset field.

       On the Valuation Alternatives tab page, select the price indicator that indicates the
        valuation alternatives to be updated.

                         Choose     to confirm your entries.

    6. Choose List format and specify the type of print list that you require.
    7. Choose Valuation Level. You can configure whether the balance sheet values are to
        be displayed at Valuation area level or Company code level.
    8. Choose      Execute.

Result
A list is displayed with the stock values for the materials entered. The individual columns
show the stock value and the values on the individual levels for each material.

The values in the columns are added together for each valuation level and for each stock
account. The difference between the sum of the values and the individual price levels is
displayed in the Difference line. The respective Difference at Lower Level and Devaluation
are listed underneath for each level.

If you intended to update the database, the system updates the physical inventory prices
selected in the material master record. If you specified that the prices should be changed, the
system either generates a batch input session to make the price changes, or – in the case of
a direct update – makes the price changes immediately.

You can analyze the results using the Schedule Manager and the messages using the
application log.


Transferring Physical Inventory Prices to
Valuation Alternatives
    1. Choose Valuation -> Balance Sheet Valuation -> Results -> Transfer Physical
       Inventory Prices.

        The selection screen appears.

    2. Maintain or check the indicators stored in the system for valuation alternatives. Go to
       the header row of the selection screen and choose Valuation alternatives.
    3. Enter the company code and specify

        the materials for which the physical inventory prices are to be transferred.

    4. In the screen area Physical inventory price assignment, specify the fiscal year and the
       posting period that the physical inventory prices refer to. Select the physical inventory
       prices that are to be transferred to valuation alternatives and

        assign the appropriate indicators.
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    5. If you want to have the valuation alternatives affected updated in the database, select
       the indicator Database update in the area Options. Choose whether you want to have
       Only new records created or also Existing records overwritten.

Result
A list containing the physical inventory prices transferred appears.


 Replacement Cost Valuation (Inflation)
Use

The Inflation Accounting solution for Materials Management (MM) enables you to
carry out replacement cost valuation for your materials.



This solution is currently used in the following countries only: Argentina, Chile,
Colombia, Mexico, Turkey, and Venezuela.

Depending on your business and legal requirements, you can revaluate materials –
based on their market price, an inflation index, or both – and subsequently adjust your
stock. Using the replacement costs, you can also revaluate goods issues for these
materials. If you run the replacement-cost valuation programs in update mode, the
system calculates the specific inflation effect and posts the specific gain or loss at the
material G/L account level.

If you want to calculate the general effect of inflation for your materials at the G/L
account level, you must run the Inflation Adjustment of G/L Accounts program in
Financial Accounting (FI).

Prerequisites

If you require that all relevant invoices and credit memos are included in the inflation
adjustment processes, you must post them using Logistics Invoice Verification
(MM-IV-LIV).

Due to legal requirements, some functions are applied differently in         Chile and
Colombia.

Activities

Customizing
In order to be able to work with the solution, you make the appropriate settings in
Customizing for MM, by choosing Valuation and Account Assignment  Balance
Sheet Valuation Procedures  Configure Replacement Cost Procedure (Inflation).
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Master Data
Once you have defined material inflation classes in Customizing, you assign them to
your materials in the material master records.

Closing

When the time comes to adjust your materials, typically at period end, you run the
appropriate programs:

    Market Price Determination

    Inflation Index Adjustment

    Goods Issue Revaluation

An additional program, Display Warehouse Stock, enables you to display the total
quantity and value of your stock at plant, storage location, and valuation type level –
and to valuate your stock based on its material price. It has been designed for use in
Argentina.

See also:

    Inflation Accounting for Financial Accounting (FI)

    Inflation Accounting for Asset Accounting (FI-AA)

Inflation Index
Definition
See inflation index.

Use

Customizing

You maintain inflation indexes in Customizing for Materials Management (MM), by choosing
Valuation and Account Assignment  Balance Sheet Valuation Procedures  Configure
Replacement Cost Procedure (Inflation) Maintain Inflation Indexes.

As the inflation figures (known in the system as inflation index values) are published, you
must continue to enter this data in the inflation index. In most countries, inflation indexes are
published on a monthly basis, but there are exceptions.

When you maintain the inflation index values, you enter them in the format that they are
published in: The system allows for indexes published in three different formats.
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In MM, the system allows for specific indexes. You assign indexes to materials through the
material inflation class. Each material requires an inflation class and each inflation class
requires an index.

Closing

When you run the Inflation Index Adjustment program, the system adjusts each material using
the inflation index that you have entered in that material's inflation class, unless you have
specified a different one in the material master.

Structure
The inflation index consists of header data and values. In addition, you can define multiple
versions of each index, although you normally need only define one.

See also:

  Inflation Index in Financial Accounting (FI)

  Inflation Index in Asset Accounting (FI-AA)


Time Base and Exposure to Inflation Variant
Definition
See time base and exposure to inflation variant (TBE variant).

Use

Customizing

When you first install the SAP System, you have to define TBE variants you need, in
Customizing for Materials Management (MM), by choosing Valuation and Account
Assignment  Balance Sheet Valuation Procedures  Configure Replacement Cost
Procedure (Inflation)  Maintain Time Base and Exposure to Inflation Variants.

In MM, you have to assign each material its own material inflation class with its own TBE
variant.

Closing

When you run the Inflation Index Adjustment program, the system adjusts each material using
the TBE variant that you have entered in that material's inflation class, unless you have
specified a different one in the material master.

The Inflation Index Adjustment program uses the TBE variant differently, depending on the
currency specified for your materials.

       If you specify a local currency for your materials, the TBE variant determines which
        inflation index applies.

        In many cases, inflation is calculated at the end of each month using the inflation
        index published for the last day of the month. That means, for example, that you
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          adjust your materials for inflation on 31 January using the inflation index for January,
          on 28 February using the index for February, and so on.

          However, there are exceptions. For example, in Chile, some materials are adjusted
          every half year using the inflation index from the penultimate month in that period.
          Assuming that the fiscal year runs concurrently to the calendar year, the materials
          would be adjusted on 30 June, using the index published for 31 May, and again on 31
          December, using the index from 30 November.

         If you specify a foreign currency for your materials, the TBE variant determines which
          dates are used for a double currency conversion.

For more information, see Replacement Cost Calculation via Inflation Index.

See also:

  TBE Variant in Financial Accounting (FI)

  TBE Variant in Asset Accounting (FI-AA)


 Inflation Method
Definition
See inflation method.

Use

Customizing

You maintain inflation methods in Customizing for Materials Management (MM), by choosing
Valuation and Account Assignment  Balance Sheet Valuation Procedures  Configure
Replacement Cost Procedure (Inflation)  Inflation Methods.

Closing

When you come to run the various replacement-cost valuation programs, the system uses the
settings in the inflation method assigned to your company code to determine, for example,
whether a price change is to be posted, or whether a manual replacement cost change is to
be taken into account.

See also:

  Inflation Method in Financial Accounting (FI)

  Inflation Method in Asset Accounting (FI-AA)


Inflation Data in the Material Master Record
Definition

See       Material Master Records.
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Use
The material master record contains a number of fields for replacement-cost valuation
purposes, provided the Inflation Accounting solution has been activated for Materials
Management (MM) in your inflation method.

The system automatically updates certain fields when you run the replacement-cost valuation
programs in update mode. Others you can maintain manually, such as the replacement cost.

Structure
If the material is relevant to inflation revaluation and appropriate Customizing settings have
been made, you access inflation information by choosing Inflation data on the Accounting 2
view of the material master.

The inflation data in the material master is structured as follows:

       Material

        The material is displayed, along with any relevant organizational data (valuation area
        and valuation type).

       General data

        Here the currency in which the material is managed is displayed. In most cases, this
        is the local currency, but it can also be a foreign currency. In addition, the current
        period is displayed.

       Control data

        Here you assign the material inflation class to the material.

       Revaluation data

        This is displayed for both the current and previous period, and includes, for example,
        the replacement cost, revaluation date, and the material moving average price and/or
        standard price.


Material Inflation Class
Definition
See material inflation class.

Use
You define material inflation classes in Customizing for Materials Management, and then
assign a material inflation class to each material relevant for inflation in material master
records. You must define a material inflation class for each of your valuation areas.

Structure
The material inflation class consists of the following components:
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         Revaluation method
         Inflation index
         Time base and exposure to inflation variant
         Price tolerance

          You define a price tolerance to prevent the Market Price Determination program from
          determining an unrealistic replacement cost. The system calculates the acceptable
          price range from the material's standard or moving average price. Any replacement
          cost that falls outside of this range will be rejected as the new replacement cost.

You can also define any of these values directly in the material master record. When you run
the replacement-cost valuation programs for a material, this value then overrides the value
defined in the material inflation class.


Revaluation Method
Definition
A setting that controls how the system revaluates a material – on the basis of its market price
or using an inflation index. If you want stock to be adjusted by its market price, you must
specify which price is to apply – the lowest, highest, or latest price found in the price sources.
This value is taken into account when you execute the replacement-cost valuation programs
Market Price Determination and Inflation Index Adjustment, as described below.

Integration

Market Price Determination

If the system is to revaluate a material using the latest price, it looks at the following dates;
they must fall within the date range entered on the selection screen for the price sources:


Document                                                Date Used

Invoice                                                 Posting date

Purchase order                                          Document date

Contract                                                Start or end of the validity period

Info record                                             Price condition date

Manual replacement cost change (if the                  Date of change
appropriate setting is defined in the inflation
method)


If the system finds more than one document with the same date, it uses the documents in the
following order:

    1.    Manual entries
    2.    Invoices
    3.    Purchase records
    4.    Info records
    5.    Contracts
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If the system determines more than one document of the same type (two invoices with the
same posting date, for example), it uses the document with the highest document number.

Inflation Index Adjustment

This program covers materials that are to be revaluated by an inflation index and those for
which a market price could not be found.

See also:

Market Price Determination

Inflation Index Adjustment


Replacement Cost
Definition
The value of replacing a material at a given point in time. The system calculates a material's
replacement cost by means of its market price or by adjusting the material price with an
inflation index. You can also change a replacement cost manually.

Use
When you create a material, you manually enter an initial replacement cost. If the material is
to be revaluated by inflation index only (as specified in the revaluation method), or if the
Market Price Determination program does not find a valid market price, then the Inflation
Index Adjustment program uses this initial replacement cost the first time you run it.

If you run a replacement-cost valuation program in update mode and it determines a
replacement cost, the system automatically updates this value as the replacement cost in the
material master.

Structure
The material master contains fields for the replacement cost for the current period and the
previous period. The system fills these fields according to the period for which you run the
programs – either under Current period or Previous period (see Market Price Determination
and Inflation Index Adjustment).

Integration
The original currency of the replacement cost is displayed in the Orig. currency field.




                The original currency refers only to the currency of the replacement cost
                before any conversion that the system carries out when it determines the
                replacement cost. The replacement cost itself, however, is always displayed
                in your local currency. If the Orig. currency field is blank, then the
                replacement cost was originally found in your local currency.

You can also set the original currency manually.
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Revaluation Date
Definition
When you run the Market Price Determination program or the Inflation Index Adjustment
program in update mode and the system determines a replacement cost, the revaluation date
refers to the date from which the new replacement cost is valid.

If you post the replacement cost as a price change, the revaluation date additionally refers to
the date up to which your materials have been revaluated.

Use
The revaluation date in the material master enables you to see at a glance the last date on
which you have adjusted your materials (with or without a price change posting). In addition,
the system uses this date in conjunction with the processing date to ensure that materials are
adjusted consistently.

Structure
The system sets the revaluation date in the material master as follows, when you run these
programs:

       Market Price Determination

        The system sets the revaluation date to the end date you specified on the program
        selection screen. Depending on the dates you run the program for, the system enters
        this value under either the current period or the previous period.

       Inflation Index Adjustment

        The system sets the last day of the previous posting period as the revaluation date
        under the previous period.

In addition, the system resets the revaluation date if you change the replacement cost
manually. If you do this in the current period, the revaluation date is reset to the system date
of the change; in the previous period, the revaluation date is reset to the system date of the
change or, if the system date is after the last day of the period, the date is reset to the last day
of the previous period.


Replacement-Cost Valuation Programs
Use
In the Inflation Accounting solution for Materials Management (MM), the replacement-cost
valuation programs enable you to revaluate materials for inflation, as follows:

       Market Price Determination

        The system searches through various system documents to determine a replacement
        cost based on real market prices.

       Inflation Index Adjustment
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        The system revaluates materials on the basis of an inflation index.

       Goods Issue Revaluation

        Once you have revaluated your materials with a replacement cost determined via the
        market price or the inflation index, you can revaluate goods issues for these
        materials.

Prerequisites
       You have made the appropriate Customizing settings for MM, under Valuation and
        Account Assignment

         Balance Sheet Valuation Procedures  Configure Replacement Cost Procedure
        (Inflation).

       Inflation Accounting

        must be activated for MM in the inflation method assigned to your company code.

       If the system is to post a replacement cost resulting from Market Price Determination
        or Inflation Index Adjustment as a

        price change, the appropriate indicator must be set in the inflation method and you
        must select Update run on the selection screen of the individual program.


Market Price Determination
Use
You use this program to revaluate materials that you have procured externally or those
produced in-house for which you have a valid price. The system searches through various
system documents to determine material replacement costs based on real market prices. In
most cases, you adjust materials for the previous period only and carry over price changes to
the current period.

The program determines replacement costs of materials for which a market price revaluation
method is specified. If the system does not find a valid market price, then inflation adjustment
by means of an index is necessary. In this case, you must run the Inflation Index Adjustment
program.

Prerequisites
If you want the system to include delivery costs and credit memos when it calculates the
material's replacement cost, they must be entered in Logistics Invoice Verification (MM-IV-
LIV) with reference to the original material invoice. In addition, in the inflation method, you
must specify which delivery costs are to be taken into account when the Market Price
Determination program is run.

Features
To access the program, from the SAP Easy Access screen, choose Logistics  Materials
Management  Valuation  Balance Sheet Valuation  Replacement Cost Valuation 
Market Price Determination.
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Selection

On the selection screen, you specify:

       Which materials you want to revaluate

        If you require it, this program enables you to revaluate materials that are subject to
        split valuation. To do so, enter the corresponding valuation types.

        You cannot revaluate materials that are handled in batches.

       Which price sources are to be used in determining the market price
       The time frame from which the price sources are to be taken

        You can enter dates in the current or previous posting period, as described below.
        Both the start date and the end date must fall within a single period. If you enter dates
        in the current period, the end date must be before the current date.

       Whether an update is to occur

        If you select Update run, the system updates material master fields and logs all
        changes. Otherwise, you simulate the results of the program; in this case, you can
        generate a log if you select Create log.

Running the Program in Update Mode

In most cases, you run the Market Price Determination program for the previous period. If you
run it in update mode and a valid market price is found, the system updates the material
master as follows, under Previous period:

       Replacement cost

        The replacement cost is always shown in the local currency. If a currency
        conversion takes place during replacement cost calculation, the original currency of
        the price source is filled in the Orig. currency (Original currency - previous period)
        field.

       Revaluation date

        The system sets the end date that you specified on the program selection screen.

       Processing date

        Likewise, the system sets the end date – regardless of whether or not a valid price is
        found.

In addition, if the appropriate Customizing settings are made, the system posts a price
change in Financial Accounting, and updates the material's valuation price.

If you need to run the Market Price Determination program for statistical purposes, you can
also run it for the current period.
Financial Accounting – General Ledger Accounting (FI-GL)                                      167

                If you manually change a material's replacement cost in the current period
                and you want to subsequently adjust the material, we recommend that you
                first close the current period and then run the Market Price Determination
                program for the previous period. Then carry over the price change to the
                current period.


Replacement Cost Calculation via Market
Price
Purpose
When you run the Market Price Determination program, the system calculates the
replacement cost of specified materials and displays this information in the output list.

Process Flow
    1. You run the Market Price Determination program.
    2. The system searches through the price sources you specified on the selection screen
       to find market prices.
    3. Based on the revaluation method specified in the material inflation class, the system
       checks the determined prices to find the highest, lowest, or latest price.




                If the system cannot find a valid market price in any of these sources, you
                must adjust the material by means of the inflation index.

    4. The system checks that the determined price falls within the price tolerance range
        that is defined in the material's inflation class.
    5. The system converts any prices in foreign currencies to your local currency, based on
        the Exchange rate type indicator in the inflation method.

Result
If you run the program in update mode, the system automatically updates the replacement
cost in the material master – under either Current period or Previous period, depending on the
dates specified for the report.

In simulation mode, the program generates an output list. If you choose Create log, the
system additionally logs all activities. The system does not update any data in simulation
mode.


 Price Sources
When you run the Market Price Determination program, the system checks the price sources
you have specified on the program selection screen to determine the market price. The price
sources and their conditions for being considered, if any, are as follows:

    1. Invoices

        For invoices to be considered, they must be entered in Logistics Invoice Verification
        (MM-IV-LIV).
Financial Accounting – General Ledger Accounting (FI-GL)                                    168

        Including Delivery Costs

        Delivery costs that are invoiced separately are only included in market price
        determination if this invoice is referenced to the original material invoice. During
        invoice entry, you enter the number of your original invoice in the Reference field, and
        the system automatically links the delivery costs to the original invoice.




                You can only enter an invoice reference number when you create an invoice
                for delivery costs. The system does not take any later change of reference
                into account when it calculates the material's market price.

        In addition, in your inflation method – in the Del.costs MP (Delivery costs in market
        price determination) field – you must specify which delivery costs are to be taken into
        account.

        Including Credit Memos

        Similar to delivery costs, the system includes credit memos in the invoice price only if
        they were linked to the original material invoice. Again, you can only establish this
        reference when you create a credit memo, by entering the original invoice number in
        the Reference field.

    2. Purchase orders
    3. Contracts
    4. Info records

        The system does not check info records for materials subject to split valuation.

    5. Material master records

        If manual changes of the material's replacement cost are to be taken into account as
        a valid market price, that is, if the Man. RC change (Manual change of replacement
        cost relevant) indicator is set in the inflation method, then the system checks the
        replacement cost in the material master record.


 Exchange Rate Strategy
Definition
In Market Price Determination, determines which exchange rate is to be used when
converting the price of a material originally denominated in a foreign currency.

Use
The exchange rate strategies are as follows:


Value    Exchange rate used

A        Original exchange rate

B        The lower of the average rate and the original exchange rate
Financial Accounting – General Ledger Accounting (FI-GL)                                     169


C         The lower of the bank selling rate, the bank buying rate, and the average rate

D         The exchange rate valid on the document date (see also the information about the
          country version for Chile)

E         The exchange rate valid on the date you run the program



 Inflation Index Adjustment
Use
In many cases, you use this program to revaluate your materials by means of a predefined
inflation index. If your local currency is specified for your materials, the program determines
each material's replacement cost by means of the inflation index you have maintained in
Customizing.

The program also enables you to revaluate materials specified in a foreign currency on the
basis of exchange rate differences – for imported materials, for example. In this case, the
system adjusts each material price based on a foreign currency according to the exchange
rate difference between the dates entered in your time base and exposure to inflation variant
(TBE variant) (see Replacement Cost Calculation via Inflation Index).

You execute the Inflation Index Adjustment program for materials with the revaluation method
only index revaluation (no market price). The report also covers materials for which no valid
market price was determined using the Market Price Determination program. You can only
run the Inflation Index Adjustment program for the previous period.

Prerequisites
To run the Inflation Index Adjustment program:

       All the prerequisites for the Replacement Cost Valuation programs have been
        fulfilled.
       You have maintained the inflation data in material master records for materials you
        want to adjust.

        Before you run the program for the first time, make sure that values are entered for
        the replacement cost and the revaluation date (for the previous period). The program
        cannot run if either of these fields are empty.

        If you want to adjust your materials on the basis of exchange rate differences, before
        you run the report you must enter the foreign currency in the Orig. currency (Original
        currency - previous period) field, under Previous period.

       You have already run the Market Price Determination program – provided the
        materials to be adjusted have revaluation methods related to the market price.

Features
To access the report, from the SAP Easy Access screen, choose Logistics  Materials
Management  Valuation  Balance Sheet Valuation  Replacement Cost Valuation 
Inflation Index Adjustment.
Financial Accounting – General Ledger Accounting (FI-GL)                                   170


Selection

On the selection screen, you can specify:

       The posting period you want materials to be adjusted for

        This must be the previous period.

       Which materials you want to revaluate
       Whether a provisional index is to be used in the material revaluation

        If you select Provisional run, the system uses provisional index values to determine
        the material's replacement cost. Otherwise, it uses a definitive inflation index.




                If you use a provisional index, we recommend that you do not post a price
                change.

       Whether an update is to occur

        If you select Update run, the system updates material master fields and logs all
        changes. Otherwise, the results of the program are simulated; in this case, you can
        generate a log if you select Create log.

Running the Program in Update Mode

If you run the program in update mode, the system updates the material master as follows
(under Previous period):

       Replacement cost

        The replacement cost is always shown in the local currency. If the system performed
        a double currency conversion for your material, it enters the foreign currency in the
        Orig. currency field.

       Revaluation date

        The system sets this to the last day of the previous period.

       Processing date for definitive or provisional index adjustment

        Again, the system sets this to the last day of the previous period.

If addition, if the appropriate Customizing settings are made, the system posts a price change
in Financial Accounting, and updates the material's valuation price.


Replacement Cost Calculation via Inflation
Index
Purpose
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When you execute the Inflation Index Adjustment program, the system calculates the
replacement cost of the materials and displays this information in the output list.

Process Flow
    1. You run the Inflation Index Adjustment program.
    2. For each material, the system checks the material inflation class for each of the
       following values. However, if you have assigned different values directly in the
       material master, the system uses these instead.

            o   Revaluation method

                If the revaluation method is one of the market price methods (lowest, highest,
                or latest price), the system checks if the materials were already adjusted with
                the Market Price Determination program. If not, then it revaluates materials
                using the inflation index.

            o   Time base and exposure to inflation variant (TBE variant)
            o   Inflation index

                If you select Provisional run on the program selection screen, the system
                uses a provisional inflation index. Otherwise, it uses a definitive inflation
                index.

    3. The system checks the inflation method to determine which indexing method applies.
    4. The system determines the replacement cost. The procedure varies, depending on
        the original currency of the material:

            o   Local currency

                The system checks the TBE variant to determine which inflation indexes are
                to be applied. Typically, you use the index published for the last day of the
                month being revaluated. For example, you revaluate your materials for May,
                and the report accesses index values from 31 May.

            o   Foreign currency

                For materials specified in a foreign currency, the system uses the inflation-
                index dates (defined on the right-hand side) in the TBE variant differently: It
                converts your local currency to the foreign currency, using the exchange rate
                on the inflation-index date for the month previous to the revaluation month.
                Then, it converts the foreign currency to your local currency, using the
                exchange rate on the inflation-index date for the revaluation month. Finally,
                the system calculates your material's replacement cost on the basis of the
                exchange rate difference.




                Example 1

                You run the Inflation Index Adjustment program for period 5. Your fiscal year
                runs concurrently to the calendar year, so your revaluation month is May.
                Your TBE variant (shown only partially) looks like this:
Financial Accounting – General Ledger Accounting (FI-GL)                                      172


Year          Month           Day            Post          Month         Day           Prev. year

9999          4               30                           1             31

9999          5               31                           5             31


                  When you run the program:

                                   First, the system converts your local currency to the foreign
                                    currency, using the exchange rate on the inflation-index date
                                    for April: The TBE variant states that for April, we use the
                                    exchange rate on 31 January.
                                   Secondly, the system converts the foreign currency to your
                                    local currency, using the exchange rate on the inflation-index
                                    date for May.
                                   Finally, the system determines your material's replacement
                                    cost by calculating the exchange rate difference between 31
                                    January and 31 May.

                  Example 2

                  In most cases, your TBE variant is defined for inflation adjustments at regular
                  monthly intervals, with inflation-index dates that correspond directly to the
                  revaluation month. Your TBE variant would look like this (again, shown
                  partially):


Year          Month           Day            Post          Month         Day           Prev. year

9999          4               30                           4             30

9999          5               31                           5             31


                  In this case, the system determines your material's replacement cost by
                  calculating the exchange rate difference between 30 April and 31 May.

Result
If you run the program in update mode, the system automatically updates the replacement
cost in the material master, under Previous period.

In simulation mode, the program only generates an output list. If you choose Create log, the
system additionally logs all activities. The system does not update any data in simulation
mode.


 Goods Issue Revaluation
Use
You use this program to revaluate all goods issues for the previous period for movement
types that are relevant to revaluation.
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You have adjusted your materials for inflation via either the market price or inflation index.
However, to additionally revaluate the goods issues for these materials in the previous period,
you must run the Goods Issue Revaluation program. The system checks the goods issue
price against the replacement cost. If you run the program in update mode, the system posts
inflation adjustments for the difference.

Prerequisites
To run the Goods Issue Revaluation program:

       Materials have already been revaluated by either the market price or the inflation
        index.
       All the prerequisites for the Replacement Cost Valuation programs have been
        fulfilled.
       In Customizing for MM, under Valuation and Account Assignment Balance Sheet
        Valuation Procedures Configure Replacement Cost Procedure (Inflation) 

            o   Maintain Movement Types for Goods Issue Revaluation

                : Movement types must be defined as being relevant to revaluation.

            o   Define Attributes of Material Types

                : Value updating must be selected for material types.

            o   Configure Automatic Postings

                : Account determination must be maintained for revaluation postings from
                goods issue revaluation or goods receipt revaluation.

Features

To access the program, from the SAP Easy Access screen, choose Logistics  Materials
Management  Valuation  Balance Sheet Valuation  Replacement Cost Valuation 
Goods Issue Revaluation.

Selection

On the selection screen, you specify:

       The valuation period you want goods issues to be adjusted for
       Which materials you want the goods issues to be taken into account for
       Whether an update is to occur

        If you select Update run, the system posts inflation adjustments for the difference
        between the goods issue price and the replacement cost with which your materials
        were already revaluated.

Difference Calculation

Once you have revaluated your materials with a replacement cost, you can revaluate the
goods issues (GI) for all your revaluated materials. The system checks the goods issue price
against the replacement cost as follows:
Financial Accounting – General Ledger Accounting (FI-GL)                                      174


    1. The system calculates the stock values at the time of the GI (a):

        GI amount (a) = quantity x price (a)

    2. Using the replacement cost, the system calculates the GI value at the period end (b):

        GI amount (b) = quantity  price (b)

    3. It then calculates the difference between the two GI amounts:

        Difference = quantity  (price (b) - price (a))

The system then posts this difference to the following accounts for each GI in the relevant
period:




       Separate adjustment account for inventory account A (1)

        This parallel account to your material G/L account contains the increase or decrease
        in inventory due to the inflation effect. The system determines the account by the
        transaction key WGI (wrongly valuated goods issue), which you define in
        Customizing.

       Specific inflation adjustment account (2)

        This account contains the offsetting entry. The system determines the account from
        the inflation adjustment information of the original material account.

The system creates inflation adjustment documents only, no material documents.

The system posts the difference in the previous period only; you cannot carry forward the
difference to the current period.

Output

The system generates an output list that contains all materials that were revaluated. In update
mode, it provides the GI amount, the price applied to the revaluation, the quantity, and the
adjustments that were posted with references to the inflation adjustment documents that were
created. In simulation mode, the output list contains the simulated results.

The system ensures that no more than one posting is made for the same material in the
specified period.


 Goods Issue Revaluation for Transfers
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Use
The system handles goods issue (GI) revaluation differently for transfers because two plants
must be taken into account – the issuing plant and the receiving plant.

Features
For transfers, the system posts differences resulting from GI revaluation as follows:

       Issuing plant

            o   Separate adjustment account to inventory account A, determined by the
                transaction key WGI (wrongly valuated goods issue) (1)
            o   Specific inflation adjustment account (for definitive adjustments only),
                determined from the inflation adjustment information of the original material
                account (2)

       Receiving plant

            o   Separate adjustment account to inventory account B, determined by the
                transaction key WGR (wrongly valuated goods receipt) (3)
            o   Specific inflation adjustment account (for definitive adjustments only),
                determined from the inflation adjustment information of the original material
                account (4)




 Posting Price Changes
Use
In the Market Price Determination and Inflation Index Adjustment programs, the system can
post a price change directly to Financial Accounting (FI), and update the material valuation
price in the material master.
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Prerequisites
For the system to post a price change:

       You must run the program in update mode.
       The Post replacement cost indicator must be set in the inflation method assigned to
        your company code.
       Stock must be available.

Features
The system posts the price change resulting from replacement cost valuation to the material
G/L account and the offsetting entry to the inflation adjustment account that you have defined
in Customizing. In MM, the inflation adjustment account is defined as a specific inflation gain
or loss account for definitive adjustments.

The system creates a material document and an inflation adjustment document.

If you run the program for the previous period, the system posts a price change on the last
day of the previous period (1). In Customizing for MM, you can also define that the new
material price is carried forward to the current period, by choosing Valuation and Account
Assignment  Balance Sheet Valuation Procedures  Configure Replacement Cost
Procedure (Inflation)  Configure Price Change in Previous Period/Previous Year. If you
carry the price forward, the system also posts the price change on the first day of the current
period (2).




See also:

  Posting a Price Change to the Previous Period or Previous Year


Log File
Definition
File that the system generates during Market Price Determination (MPD) and Inflation Index
Adjustment (IIA). A log file is created if you run the program in update mode, or if you have
selected Create log.

Structure
The log file is structured as follows:
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Field                   Content

J_1AMMANDT (K)          (MPD + IIA): Client

J_1AMVALTY (K)          (MPD + IIA): Revaluation process

                        1 = Market price revaluation

                        2 = Inflation index revaluation

                        3 = Manual revaluation

                        4 = Goods issue revaluation

J_1AMBUKRS (K)          (MPD + IIA): Company code

J_1AMBWKEY (K)          (MPD + IIA): Valuation area

J_1AMBWTAR (K)          (MPD + IIA): Valuation type

J_1AMMATNR (K)          (MPD + IIA): Material

J_1AMCDATE (K)          (MPD + IIA): Creation date of log record

J_1AMCTIME (K)          (MPD + IIA): Creation time of log record

J_1AMPBDAT              (MPD + IIA): Begin date of selection period

J_1AMPYEAR              (MPD + IIA): Year of posting period

J_1AMPERID              (MPD + IIA): Posting period

J_1AMPMETH              (MPD + IIA): Revaluation method

J_1AMMETYP              (MPD + IIA): Revaluation type (1 = global, 2 = local)

J_1AMVALMD              (MPD + IIA): Valuation mode

                        0 = No revaluation

                        1 = Normal revaluation (via price change)

                        2 = Material ledger revaluation

J_1AMOLDPR              (MPD + IIA): Old (not revaluated) price

J_1AMNEWPR              (MPD + IIA): New (revaluated) price

J_1AMPDONE              (MPD + IIA): Revaluation in update mode -> material master updated

J_1AMCURRP              (MPD + IIA): Revaluation currency

J_1AMDODAT              (MPD): Date of document, where market price was found

J_1AMDONUM              (MPD): Document number, where market price was found
Financial Accounting – General Ledger Accounting (FI-GL)                                       178


J_1AGJAHR               (MPD): Fiscal year of document, where market price was found

J_1AMDOITM              (MPD): Document item, where market price was found

J_1AMDOTYP              (MPD): Document type, where market price was found

                        PO = Purchase order

                        CO = Contract

                        IR = Info record

                        IV = Invoice receipt

                        GR = Goods receipt

                        M = Manual price change

J_1AMINDXP              (IIA): Inflation index used for revaluation (see J_1AINFT01)

J_1AMINDXV              (IIA): Version of inflation index used

J_1AMIXTYP              (IIA): Type of inflation index (1 = material inflation class, 2 = material
                        master)

J_1AMBEDEP              (IIA): Time base and exposure to inflation variant

J_1AMTBTYP              (IIA): Type of TBE (1 = material inflation class, 2 = material master)

J_1AMCNTRY              (IIA): Country for which index revaluation has been applied

J_1AMCUTY               (IIA): Exchange rate type for currency translation

J_1AMPVOVI              (IIA): Provisional inflation index used

J_1AERNAM               (MPD + IIA): Name of program that created the log record