A standard cost conversion refers to changing an item's inventory valuation method from an actual costing approach to a standard costing approach. Use the form to convert the inventory model for a batch of selected items from an actual costing basis to standard cost. The conversion process involves performing a prerequisite inventory close, performing several steps during a transition period (defined by a transition start date and a planned conversion date), and performing the conversion and an associated inventory close.
Inventory close before the transition period - An inventory close represents a prerequisite step, because it settles an item's open transactions under the old valuation method. You can enter and post back-dated transactions, such as invoices, during the transition period so that you can close the prior period. The inventory close date must be one day before the transition start date, thereby ensuring a clean break with the old inventory valuation method.
Conversion steps during the transition period - Use the form to create a conversion record that also contains a user-defined identifier for a new costing version. You identify the items that require conversion and enter the item's pending standard costs (within the newly created costing version). You perform a check of the selected items to identify issues that would prevent conversion, and then resolve the issues before performing another check. After the items have successfully passed the checks, you change the status (of the conversion record) to . On the planned conversion date, perform the conversion and optionally include an inventory close.
An item's inventory movements during the transition period are posted and valued according to the old inventory model, and they are revalued to standard cost after successfully performing the conversion.
Inventory close before the conversion - The inventory close can be included as part of performing the conversion on the planned conversion date, or it can be performed as a separate step beforehand.
After successful completion of the conversion process, each item will have a standard cost inventory model and the item's standard costs will be enabled. Subsequent inventory transactions will be valued at the item's standard cost. In addition, the system converts the item's physical inventory transactions for receipts and issues to standard cost as per the conversion date. The system also converts the item's financial on-hand inventory to standard costs, and it posts the value difference as an inventory revaluation.
Any transactions after the conversion are valued at the item's standard cost. You cannot enter back-dated transactions before the conversion date, because an inventory close must be performed one day prior to the conversion date. That is, a conversion can only be performed when an inventory close has been performed one day earlier. This inventory close cannot be cancelled.