When you use the quantity LIFO procedure, all stock changes of a material or pool in each settlement period (fiscal year or month) are considered separately. The stock quantity of a particular material or pool at the end of the settlement period is compared with the sum of the quantities contained in the existing layers.

If the stock is greater at the end of the settlement period, a new layer is created for that settlement period, illustrating the increase in quantity and value of the material or pool.

If the stock is smaller at the end of the settlement period, the preceding layers are reduced, starting with the most recent layer.

There are various ways of valuating a layer. In the R/3 System, the following valuation bases have been set up:

• Average delivered prices for the settlement period
• Prices for a partial year (this only makes sense if the settlement period is the fiscal year)
• Process
• Material master price