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:
Features
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: