Lowest Value Determination Based on Market Prices (SAP Library

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:

There are goods receipts or invoices with posting dates within the specified period.
There are goods receipts or invoices, for which the document type and movement type has been defined in Customizing as relevant for valuation.
The ratio of invoiced quantity to delivered quantity is within a specified range.

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:

Whether goods have been received for the purchase order
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.

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.