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.

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

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

• Using material master records

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:

• 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.

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.

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

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

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.