Inflation Accounting 

Use

In Colombia, companies are required by law (Decree 416, February 2003) to use inflation accounting for Materials Management (MM), to adjust inventories for inflation effects.

You adjust materials for inflation for a period as follows:

1. You do period closing.
2. You run the Inflation Index Adjustment program.

The program uses the replacement cost total value (RCTV) calculated by the last run of the Replacement Cost Valuation (Colombia) program, and adjusts this value with an inflation index.

3. You run the Replacement Cost Valuation (Colombia) program.

The program starts with the index-adjusted RCTV and evaluates all relevant goods movements in the period.

To implement this solution for the first time to fulfill reporting requirements as of 1 January 2003, SAP provides utility programs to initialize data as required. For more details, refer to SAP Note 633220.