You can calculate the fiscal LIFO value for internal and final reports that are based on average inventory value or normal value. You can also include the work in progress (WIP) of production items in the calculation.
Basis for the
calculation of the average value of the inventory
The calculation of the average inventory value includes purchased and produced items, and is based on the financial cost amount of the items.
The financial cost amount is the total of the fields and in the form.
If the cost of an item has not yet been updated against a vendor invoice, the physical cost amount as stated in the field is used instead of the cost amount.
Note
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In addition to purchased and produced items, the final report also includes received but not-yet- invoiced goods. |
Purchased items
The base for the calculation of purchased items is the acquisition cost minus VAT.
Produced items
The base for the calculation of produced items is the production cost posted in . In some cases, the cost of non-finished production orders (work in progress) must be included. For more information, see later in this topic.
Tip
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When working with credit lines, it is important to mark item transactions against specific purchase orders to make sure that a correct crediting amount is registered. For more information about how to set up marking, see Mark orders. |
Discounts
Discounts are included or excluded in your fiscal LIFO calculation depending on your costing profile setup. The inventory value always matches the value that has been posted as a transaction of the type in .
Normal
value
The inventory value is based on the average inventory value for the year. If the last period's price increase is negative, and the company experiences a depreciation of items in stock, it is allowed by law to calculate the value of the inventory according to the last period's average purchase price. This is referred to as the normal value.
If you change the inventory value to the normal value, the change applies to the current year and all previous years.
You can calculate the normal value automatically or you can set it manually. When calculated automatically, the normal value is set to the average purchase price of items for the calculation period (month, quarter, or half year) and not the average for the year.
You can calculate normal value for fiscal LIFO reporting groups or for individual items.
Normal value example
In the following example you can see how using normal value affects the calculation of the inventory value. Normal value is set to be applied if the average for the last month of the year is at least 5% less than the inventory average value of the year.
In the first table, you see the inventory values that are based on the year's average without using normal value.
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Grand total |
Year |
Remaining quantity |
Unit value by using the average method |
Total |
|---|---|---|---|---|
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1998 |
10 |
25 |
250 |
|
|
1999 |
5 |
30 |
150 |
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2000 |
1 |
35 |
35 |
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2001 |
0 |
0 |
0 |
|
|
2002 |
10 |
50 |
500 |
|
|
2003 |
2 |
35 |
70 |
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2003 |
28 |
35.90 |
1005 |
During the last month of 2003, the price of items in item group xyz drops significantly. This results in the average purchase price for the month to be 20. Because an average purchase price of 20 is more than 5% less than the average inventory value of 35.90, normal value is applied.
Normal value is 20 and the inventory value is set to 20 for all items in item group xyz for 2003 and previous years.
|
Grand total |
Year |
Remaining quantity |
Unit value by using the normal method |
Total |
|---|---|---|---|---|
|
1998 |
10 |
20 |
200 |
|
|
1999 |
5 |
20 |
100 |
|
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2000 |
1 |
20 |
20 |
|
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2001 |
0 |
0 |
0 |
|
|
2002 |
10 |
20 |
200 |
|
|
2003 |
2 |
20 |
40 |
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2003 |
28 |
20 |
560 |
Normal value calculation
When you start the calculation of fiscal LIFO from a fiscal LIFO journal, you can specify whether to apply normal value in the calculation. Options on the fiscal LIFO reporting group determine whether the calculation is automatic or manual. If you have items that are calculated individually, you can specify on the individual item if the calculation should be automatic or manual.
WIP in the
calculation of inventory value
If the production time is extraordinary long, WIP items have to be included when you calculate the inventory value.
To control if WIP items should be included in the calculation, you define the maximum number of days for a production period before WIP items are included. When you calculate fiscal LIFO from a fiscal LIFO journal, you can specify that you want to include WIP items. For more information about how to define the WIP period and request a WIP calculation in a journal, see (ITA) Calculate fiscal LIFO journal lines.
The status of a production line must be or to be included in the WIP calculation. You can check the status of a production in the field in the form.
