LIFO Methods (SAP Library - Balance Sheet Valuation (MM-IM-VP))

LIFO Methods

Use

In the R/3 System, LIFO valuation is based on a set of parameters, which are described as the LIFO method in all relevant transactions. The LIFO method is a six-character alphanumeric field that you can define in Customizing or from any initial screen during processing in the application. Some attributes of a LIFO method can be freely combined, while others may only be used in certain combinations. These combinations are referred to as models.

Features

A model answers the following questions:

Which consumption tracking method is being implemented?

Which period does an individual layer refer to?

Are the valuated materials grouped together (see Pool LIFO Valuation)?

Are you carrying out valuation with reference to stock quantities ( Quantity LIFO Procedure) or price indexes ( Index LIFO Procedure)?

The following models are allowed:

02 – LIFO, annual layers, individual materials
03 – LIFO, monthly layers, individual materials
04 – LIFO, annual layers, pools on quantity basis
05 – LIFO, monthly layers, pools on quantity basis
06 – LIFO, annual layers, pools with value indexes

The part of a LIFO method that you can freely define consists of the following aspects:

Is the value to be determined on the basis of receipts aggregated on a monthly basis or on the basis of single receipts?

The differences are explained in an example. If you are determining values on the basis of single receipts, you must generate a document extract prior to LIFO valuation.

When you carry out LIFO valuation, you define two timepoints between which the stock situation or the layer value (Index LIFO procedure) is compared. Which timepoints are to be used?

The first timepoint is indicated by the last LIFO valuation performed. The total of the existing layer quantities or values (Index LIFO) represents the corresponding stock.

The second point depends on the LIFO method used in this instance. You have the following options:

GJE – End of the last fiscal year
VVM – End of the posting period before last
VOM – End of the last posting period
CUR – Present

Example

If the last LIFO valuation was performed for the fiscal year before last and you have chosen the setting GJE, the system compares the stock or value situation between the end of the fiscal year before last and the end of the last fiscal year.

See also:

Determination of Basis for Comparison