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).
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:
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: